Major UK supermarkets have rejected Treasury proposals to introduce voluntary price caps on staple groceries, warning the plan could increase costs across the wider shopping basket.
The government is understood to have asked retailers to consider freezing prices on key products such as bread, milk, eggs and butter as it looks to ease pressure on households amid the ongoing cost-of-living squeeze.
Under the proposals, supermarkets would be encouraged to hold down prices on selected essentials in return for potential regulatory concessions, which could include easing packaging policies or delaying changes to rules around healthier food.
However, retailers have pushed back sharply against the plans, with one supermarket executive describing the idea as “completely mad”. Another industry source called it “an unnecessary, unwanted and unjustified intervention in the market”.
The Treasury is understood to want supermarkets to reinvest any savings from reduced policy costs into keeping grocery prices down.
However, sector sources warned that the policy could be complex to deliver and could lead to unintended consequences for shoppers.
One well-placed supermarket source said retailers had not been formally asked to control prices, but that discussions had taken place around stocking at least one version of basic items such as bread, milk and butter at a fixed low price.
“There has been lots of chat. I don’t think they have got far on the potential scope,” the source said.
“The idea is we would have to provide, say, butter at a price and make sure that is available at all times.”
The source warned that if cheaper products ran out, supermarkets could be forced to discount branded or more expensive alternatives to meet the agreed price.
“The cost of doing something like this is huge,” they said. “It would be a huge amount of work as we don’t sell every [version of a product] in every store.”
Retailers have argued that the government should focus instead on reducing cost pressures already feeding into food prices, including taxes, fuel, energy and regulatory costs.
One retail executive warned that while the plan might reduce prices on a small number of selected products, grocers could be forced to recover lost margins elsewhere.
The source said this could affect products “they might not consider essential but might be for some families”.
British Retail Consortium chief executive Helen Dickinson said the UK already had “the most affordable grocery prices in western Europe” because of “fierce competition between supermarkets”.
She added: “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.”
The talks come after Chancellor Rachel Reeves met supermarket bosses last month to discuss concerns over household costs and the impact of global instability on food prices.
Reeves is expected to announce further cost-of-living measures on Thursday, although people close to the talks said no agreement had yet been reached on grocery price caps.
A Treasury spokesperson said: “The chancellor has been clear we want to do more to help keep costs down for families, and will set out more detail in due course.”
The proposals follow a similar pledge from the SNP, which said it would use devolved public health powers to cap prices on between 20 and 50 staple items, including bread, milk, cheese, eggs, rice and chicken.
Retailers in Scotland dismissed that proposal as a “potty gimmick”, while the BRC warned against “1970s-style price controls”.
A UK government source has rejected suggestions that Reeves is seeking to impose a mandatory price cap, saying the Treasury is instead exploring a voluntary price freeze.
The government is also preparing to give regulators, including the Competition and Markets Authority, greater powers to tackle unfair price rises during periods of market disruption.
The new measures are expected to allow watchdogs to share intelligence more quickly and “name and shame” companies that unjustifiably increase profit margins during a crisis.
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