The British government is exploring two approaches to curb food prices, both of which have been met with strong opposition from major retailers. The first, proposed by Scotland's SNP government, involves capping the price of a basket of essential items in supermarkets. The second, reportedly under consideration by the Treasury, would postpone certain new regulations in exchange for a freeze on everyday grocery prices. Supermarkets have rejected both ideas.
What does the UK government want to do?
The Treasury aims to combat inflation by asking retailers not to raise prices on selected products for a period. In return, retailers would receive relief from new "green" regulations on paper and packaging. The assumption is that this trade-off would encourage supermarkets, which have seen substantial profits, to support vulnerable families.
What's wrong with that?
Stuart Rose, a Conservative peer and former boss of Asda and Marks & Spencer, described the plans as "idiotic" and reminiscent of state control. Supermarkets operate on slim margins and compete on price, while major consumer goods brands generate higher profits. The British Retail Consortium highlights rising employment costs, business rates, and environmental levies. Defining specific products for a cap would be challenging, and policing such a scheme across all retailers would be difficult, disproportionately affecting smaller family-run stores. A cap set too low could lead to shortages as consumers snap up cheaper items. Many supermarkets already offer value ranges for basic goods like bread, pasta, and toothpaste.
Could it work?
To an extent, it could function if the cap remains above the retailer's cost. However, hoarding of price-controlled items would require daily purchase limits.
What about the Scottish policy?
The Scottish proposal suffers from similar drawbacks, especially if it becomes a statutory obligation. It could create internal market friction between England and Scotland, with potential arbitrage opportunities for goods priced differently across the border.
What about price gouging?
There is little evidence of widespread price gouging, but the Competition and Markets Authority is monitoring the situation. Historical experience suggests that inflation is driven more by supply and demand, external shocks, and monetary oversupply than by sudden greed.
Have we tried price controls in the past?
Yes, numerous times. Examples include taxes on tea and postwar rationing of food, petrol, and clothing. Large-scale price controls were last implemented in the 1970s, including state subsidies for butter and wage controls under the "prices and incomes policy." The Bread Prices (No. 2) Order 1976 specified maximum prices, weights, and ingredients for loaves, with different prices based on size, packaging, and location.
What other problems might occur?
Internal market rules within the UK could complicate pricing differences between England and Scotland, potentially leading to political friction between Westminster and Holyrood.
Will price caps be popular?
Popularity will depend on availability. If staple items like milk, eggs, bread, or toothpaste run out, public support could quickly wane.
