CHANCELLOR Rachel Reeves abandoned a proposal to introduce voluntary price caps on essential groceries yesterday after a concerted backlash from supermarket executives and pressure from the Bank of England, dropping the measure from a planned speech on the cost of living crisis.
The proposal, which had been under discussion with retail bosses, would have seen supermarkets voluntarily limit prices on staples including bread, eggs and milk, in exchange for relaxation of packaging regulations and delays to rules on healthy food labelling.
It was abandoned before Reeves reached the podium.
The retreat came after leading retailers mounted fierce opposition.
Stuart Machin, chief executive of Marks and Spencer which reported adjusted pre-tax profits of £875.5m in its last financial year, its highest in more than 15 years ,called the plan ‘completely preposterous’, adding: ‘I don’t think the government should be trying to run business.’
Lord Rose, former chief executive of Asda, invoked Heath-era price controls to warn it would ‘backfire’, while Clive Black of Shore Capital dismissed the proposal as ‘lazy, populist scapegoating’.
Public polling has consistently found widespread belief that major supermarkets profiteered during the cost of living crisis, and critics have noted that the industry’s profit margins tell their own story.
A poll by the Institute of Economic Affairs of 3,000 individuals found that people believed supermarkets were making profit margins of up to 50 per cent, reflecting deep public suspicion of the sector’s conduct during years of rising prices.
Bank of England Governor Andrew Bailey reinforced the retailers’ position before the Treasury select committee, warning that price controls risked ‘artificially moving prices relative to costs’, and that this was ‘not a sustainable thing in the long run’.
Reeves had floated the proposal as part of a broader effort to respond to soaring inflation, itself partly a consequence of economic disruption stemming from the US Israeli war on Iran.
Official figures published this week showed food price inflation running at 3.4 per cent annually as of April.
