Supermarkets pressed by government to cut costs for shoppers

Government ministers are pressing supermarkets on cutting costs for shoppers but will not force them to cap prices on essentials such as eggs, bread and milk.

Multiple supermarket sources told the BBC that the government had urged them to voluntarily freeze the price of key groceries, in return for an easing of regulations.

On Wednesday, Treasury secretary Dam Tomlinson confirmed talks with the sector had taken place "about the steps that they can take to support people with the cost of living".

He said supermarkets would not be forced to cap prices, but even a voluntary scheme was described by former chairman of Ocado and Conservative peer Lord Rose as the "stuff of nonsense".

The BBC learnt on Tuesday that the Treasury had asked retailers to freeze price rises on certain products in exchange for an easing of packaging policies and a potential delay to rule changes around healthy food.

The proposals, first reported by the Financial Times, come after the Scottish National Party (SNP) pledged to introduce a similar policy in Scotland last month. However, its price cap would not be voluntary.

Tomlinson told BBC Radio 4's Today programme there were no plans to instil a mandatory price cap on food by the government in Westminster.

Pressed on a voluntary agreement to limit prices, Tomlinson highlighted the conflict in Iran and people's concerns over price rises.

"It's right that the government looks across the board at what more we can do - both government levers but also talking to industry about the steps that they can take to support people with the cost of living," he said.

Newly-published inflation figures show the annual rate of food price rises was 3% in April, which was higher than the overall rate of inflation of 2.8%.

Some industry groups have warned the rate of food price rises could hit nearly 10% by the end of the year.

'Idiotic' idea

The suggestion of a voluntarily freeze in the price of groceries was met with a furious response by key figures in the industry.

Lord Rose, a former Marks and Spencer chief executive, told the Today programme: "I think the whole idea is the stuff of nonsense and it will never fly."

"This smacks of state control, it's idiotic, it's dangerous and it'll never work."

The Conservative peer said there was "no better system than a free market economy", adding there could be "unintended consequences" of government intervention to limit prices.

The British Retail Consortium (BRC), which represents supermarkets, said the "1970s style price controls" would "force retailers to sell goods at a loss".

Helen Dickinson, the chief executive of the BRC, said: "Rather than introduce 1970s style price controls and trying to force retailers to sell goods at a loss, the government must focus on how it will reduce the public policy costs which are pushing up food prices in the first place."

She added: "The UK has the most affordable grocery prices in Western Europe thanks to the fierce competition between supermarkets," she also said.

One retailer told the BBC: "Ultimately what [the government] should do is stop all the other tax burdens and the prices will come down."

Another said government policies, including rises in the national living wage and employers' national insurance contributions, had increased costs in food supply chains.

Others say price rises are being caused by a surge in fertiliser and animal feed prices since the US-Israel war with Iran effectively blocked their transport through the key Strait of Hormuz waterway.

Tougher rules around price gouging

The groceries price cap row comes as the Chancellor brings forward measures to give the consumer protection watchdog more powers to tackle price gouging.

The Competition and Markets Authority (CMA) will be allowed to "name and shame" firms who have changed their margins in response to an economic shock.