{"id":597817,"date":"2026-05-22T10:29:12","date_gmt":"2026-05-22T10:29:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/597817\/"},"modified":"2026-05-22T10:29:12","modified_gmt":"2026-05-22T10:29:12","slug":"rations-and-panic-buying-what-supermarket-price-caps-might-look-like","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/597817\/","title":{"rendered":"Rations and panic buying – what supermarket price caps might look like"},"content":{"rendered":"

Ministers are pressing supermarkets<\/a> to cut costs for shoppers by capping prices on essentials such as eggs, bread and milk.<\/p>\n

Chief Secretary to the Treasury Dan Tomlinson confirmed on Wednesday that talks with the sector had taken place \u201cabout the steps that they can take to support people with the cost of living\u201d.<\/p>\n

He said supermarkets would not be forced to cap prices,<\/a> but even a voluntary scheme has been described by Marks & Spencer\u2019s chief executive, Stuart Machin, as \u201ccompletely preposterous\u201d.<\/p>\n

The Treasury\u2019s proposals<\/p>\n

The Treasury has asked retailers to limit prices on certain products in exchange for an easing of packaging policies and a potential delay to rule changes around healthy food.<\/p>\n

One source close to the Treasury\u2019s discussions told The Guardian a plan had been discussed for retailers to stock at least one version of basic items such as bread, milk, eggs, butter and cheese at a set low price. The talks have reportedly centred on around 20 or so items.<\/p>\n

While it sounds simple, the source said it would cost retailers a lot of money as they do not sell every version of the product in every store.<\/p>\n

Ensuring such availability could lead to branded or more expensive lines being discounted if cheaper varieties run out.<\/p>\n

The Treasury has also reportedly told supermarkets it would like guarantees that British farmers would not lose income from price caps.<\/p>\n

The Scottish National Party pledged to introduce a similar but mandatory policy in Scotland last month, which would apply to up to 50 essential items. Supermarkets would be required to cap the cost of at least one variation of an item in a category, such as a particular loaf of bread.<\/p>\n

The proposal in Scotland may not be able to go ahead without approval from Westminster.<\/p>\n

It is similar to a scheme operating in Croatia, where there is a maximum price on 100 essential food and hygiene products and retailers must offer at least one product at a capped price within certain categories.<\/p>\n

Supermarkets profiting despite inflation <\/p>\n

UK food inflation rose to 3.7 per cent in April, and the Foreign Secretary has warned the world is \u201csleepwalking into a global food crisis\u201d due to the impact of the war in the Middle East on supply chains.<\/p>\n

As part of efforts to keep prices down, the UK Government said the Competition and Markets Authority (CMA) would be encouraged to \u201cname and shame\u201d companies that pump up profit margins with unjustifiable inflation.<\/p>\n

Supermarkets have said that competition keeps prices low and they already face tight profit margins.<\/p>\n

But Tesco, Britain\u2019s biggest supermarket, recently reported an increase in its annual pre-tax profits by 8.5 per cent to \u00a32.4bn.<\/p>\n

This is not the first time concerns have been raised about whether supermarkets are unfairly profiting from inflation.<\/p>\n

The CMA investigated in 2024 and did \u201cnot find evidence that groceries inflation is being driven at an aggregate level by weak competition between retailers\u201d.<\/p>\n

Aldi and Lidl are particularly known for driving down prices in the sector, leading to \u201cprice match\u201d policies at other retailers.<\/p>\n

Price controls in the 1970s<\/p>\n

The plans have drawn comparisons to the 1960s and 1970s, when the UK was in the grip of an even bigger inflation crisis than it is now. Energy was at its heart, fuelled by decisions made by Arab oil producers in 1973, which led to prices quadrupling within a few months.<\/p>\n

In 1965, former prime minister Harold Wilson\u2019s Labour government set up the National Board for Prices and Incomes, an agency that sought to link pay increases to productivity, so that companies wouldn\u2019t just pass on higher wage costs by raising prices.<\/p>\n

It didn\u2019t work \u2013 unions pushed up wages anyway, fuelling price rises and contributing to a fall in the value of the pound. The agency was abolished by former prime minister Edward Heath\u2019s Conservative government in 1970.<\/p>\n

But two years later, in 1972, the Conservatives brought in a three-month wage and price freeze, followed by a Pay Board and a Price Commission to administer limits to price increases.<\/p>\n

The commission had powers to investigate rising prices and concerns about excessive profit margins, and to place restrictions on companies if increases were considered unjustified. It continued to operate under the subsequent Labour administration.<\/p>\n

However, efforts to control prices failed. In 1974 and 1975, inflation in the UK hit 16 per cent and then 24.2 per cent. It peaked at 26.9 per cent in 1975. Controls were axed soon after the Conservatives took power under former prime minister Margaret Thatcher in 1979.<\/p>\n

How price controls backfire<\/p>\n

Economists have argued that price rises are a result of demand exceeding supply and are the market\u2019s way of bringing the two into balance.<\/p>\n

World-renowned economist Milton Friedman is among those who have said limiting prices leads to shortages.<\/p>\n

Lower prices tend to fuel consumer demand because the goods are artificially cheap, while producers reduce supply because it becomes less profitable or too expensive to sell the goods.<\/p>\n

Retailers have warned that their profits on household staples are already low and that they make most of their money from other items.<\/p>\n

Machin, of Marks & Spencer, said M&S doesn\u2019t make money on milk or bread, and its profit margins on eggs and sugar are thin.<\/p>\n

He said it makes a loss of about minus 7 per cent on its 85p pint of milk and its 75p loaf of bread was also sold at a loss.<\/p>\n

Daniel Smith, economist at the Centre for Economics and Business Research, told The i Paper the imposition of price caps on supermarket items would be \u201cmisguided\u201d.<\/p>\n

\u201cEven under a voluntary scheme, where food retailers agree to freeze prices in exchange for policy concessions, restrictions on price adjustments can create significant market distortions,\u201d he said.<\/p>\n

\u201cThese may lead to unintended consequences, such as significant price hikes to non-staple items in order to protect margins, which would only worsen any food inflation shock.<\/p>\n

\u201cThis is especially true for the grocery sector, a competitive market that has already been hit by shocks to energy prices, taxes, and labour costs.\u201d<\/p>\n

Supermarkets have faced increases in their operating costs due to higher energy prices following the outbreak of the Iran war, as well as increases in the minimum wage and employers\u2019 national insurance contributions under Labour.<\/p>\n

Another risk of price caps is that they could hurt business investment and damage the UK\u2019s economy.<\/p>\n

In Venezuela, price controls first implemented in 2003 severely backfired, leading to shortages, empty shelves, rationing and a black market.<\/p>\n

By forcing prices below the cost of production, producers stopped making basic goods, leading to widespread scarcity.<\/p>\n

To manage this, the Government had to implement rationing systems.<\/p>\n

Faced with an economic crisis and hyperinflation, price controls were eventually phased out in 2019.<\/p>\n

The country has become a poster child for how price controls can go wrong and ultimately hurt consumers.<\/p>\n","protected":false},"excerpt":{"rendered":"Ministers are pressing supermarkets to cut costs for shoppers by capping prices on essentials such as eggs, bread…\n","protected":false},"author":2,"featured_media":597818,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,1137,1431,719,56,54,55],"class_list":["post-597817","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-food-prices","tag-inflation","tag-supermarkets","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/597817","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=597817"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/597817\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/597818"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=597817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=597817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=597817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}