Retail chiefs warn Sunak plan to cap supermarket prices will 'lead to shortages and won't work'

28 May 2023, 23:29 | Updated: 28 May 2023, 23:34

Food inflation remains more than double the standard rate at 19.1%
Food inflation remains more than double the standard rate at 19.1%. Picture: Getty/ONS

By Chay Quinn

Rishi Sunak has been warned that his plan to cap food prices will lead to shortages and will not reduce food price inflation by retail chiefs and his own Cabinet ministers.

Cabinet ministers speaking to the Telegraph said that the caps last seen in the 1970s would not work "in this day and age".

The British Retail Consortium hit out at the plans in a statement backed by the chairs of Tesco, Sainsbury's, Morrisons and Waitrose and said that the plans would not make "one jot of difference" to food price inflation which is running above 19.9%.

One retail chief called the plans "hare-brained" and that it would be better for the Government to address the root causes of food inflation.

Downing Street has insisted the plans would be optional
Downing Street has insisted the plans would be optional. Picture: Getty

Rishi Sunak will ask supermarkets to introduce price caps on basic items such as bread and milk as food inflation continues to remain "worryingly high".

Aides inside Downing Street are drawing up policy plans similar to that which have been adopted in France, where supermarkets charge the "lowest possible amount" for basic food items.

The policy is not expected to be mandatory, with No10 saying that any proposals would be optional for UK supermarkets.

It comes as figures released this week showed inflation has fallen to single digits for the first time since August.

But food inflation remains "worryingly high" and at 19.1 per cent, it is close to reaching a record high.

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Jeremy Hunt said this week he would not mind the UK entering a recession if meant inflation coming down
Jeremy Hunt said this week he would not mind the UK entering a recession if meant inflation coming down. Picture: Getty

A Treasury source told The Telegraph: "Food inflation is much more resilient and difficult to get rid of than we anticipated."

The government originally believed inflation would fall faster, throwing Mr Sunak's plans to cut taxes before the next election into doubt.

A Cabinet source said: “If you haven’t got growth you haven’t got the money [for tax cuts], it’s as simple as that.”

Speaking after the latest inflation figures, Chancellor Jeremy Hunt said: “The IMF said yesterday we've acted decisively to tackle inflation but although it is positive that it is now in single digits, food prices are still rising too fast.

"So as well as helping families with around £3,000 of cost of living support this year and last, we must stick resolutely to the plan to get inflation down.”

Mr Hunt said this week that he would accept Britain entering a recession if it meant inflation was to come down.

Read More: Battle of Royal Lodge: Only Chancellor Jeremy Hunt and not King Charles can force Prince Andrew out of royal home

There is some concern, however, that plans to ask supermarkets to cap the price of basic food items would be "anti-market".

One source told the publication: "It’s very easy to point the finger at retailers and say they are making a fortune, but some of the margins they are operating at are not that big. It is quite tight."

Read More: Food inflation ‘is too high’, PM says, as SNP warn of ‘cost-of-greed crisis’

Read More: UK’s inflation rate drops to 8.7%, down from over 10% in March - but food prices still surging at 19%

With the overall rate of inflation falling to 8.7 per cent, the Office for National Statistics (ONS) said the decrease was mainly driven by gas and electricity costs remaining stable in April.

It is the first time the CPI has been below 10 per cent in eight months.

Food prices soar over last 12 months

Food inflation has soared in recent months
Food inflation has soared in recent months. Picture: ONS

Overall food prices are surging in price, though some staple products - such as bread and milk - are rising slightly less quickly.

Over the last 12 months, the average price of granulated sugar has increased by 47 per cent - now standing at an average price of £1.08 - while cheddar cheese prices have soared by 39 per cent (£3.77)

  • Eggs (12) - 37 per cent price increase (£3.29)
  • Milk (2 pints) - 33 per cent price increase (£1.30)
  • White bread (sliced) - 28 per cent increase (£1.39)
  • Chicken (whole) - 23 per cent increase (£3.79/kg)

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