Supermarkets 'encouraged to cap food prices' by government to help with cost of living crisis

The government has moved to distance itself from reported efforts to introduce price caps on key supermarket products, such as eggs, bread and milk, in return for the easing of some regulations.

The Treasury had proposed relaxing some new packaging rules, and possibly delaying changes to rules around healthy food, in exchange for help to ease essential household bills, two sources told the Reuters news agency.

But they added that the supermarkets had reacted with anger and were pushing back. The story was first reported by the Financial Times.

Sky News understands the idea of voluntary supermarket price caps is not now being pursued though the government is planning tougher powers for regulators to crack down on so-called price gouging.

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Treasury minister Dan Tomlinson said: "This isn't something we're looking at," when asked on Sky's Mornings with Ridge and Frost programme if there had been conversations with supermarkets about bringing in price caps.

"The Government is not looking at doing this. Instead, what we're doing is looking across the economy at what are the different ways that we can help households."

Former Sainsbury's boss, Justin King, told Sky News that price controls would amount to collusion, which is illegal under UK competition law.

"A good bit of the inflation we have at the moment has been caused directly by the government over the past 12 months, so they should start by holding their hands up for the inflation that they've caused and do something about that", he said.

"If this happened, nobody would invest in ⁠the UK," one of the sources told Reuters.

"If ⁠you want food price inflation to decline, you need to start looking at the cost of regulation on ‌business," they added, going on to highlight the government's moves to raise employer taxes, the national minimum wage, introduce new packaging levies and propose the reformulation of thousands of ‌food lines.

The Scottish National Party has proposed a mandatory price cap for "essential" foods in Scotland.

The boss of Marks and Spencer, Stuart Machin, described any idea of caps as "completely preposterous".

A spokesperson for the Treasury said: "The Chancellor [Rachel Reeves] has been clear we want to do more to help keep costs down for families, and will set out more detail in due course."

UK grocery inflation sat at 3.8% in the four weeks to 19 April, according to researcher Worldpanel by Numerator.

The Bank of England said businesses it had spoken to last month expected food price inflation to reach 6 or 7% later this year on the back of the economic fallout from the Iran war.

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The British Retail Consortium (BRC), which represents UK's major supermarket groups including Tesco and Sainsbury's, said it opposed price caps.

"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," BRC CEO Helen Dickinson ‌said.

Tesco shares were the biggest fallers when the FTSE 100 opened on Wednesday, down almost 3%, while those for Sainsbury's were more than 1.5% lower.

Separately, Ms Reeves announced plans to crack down on companies found to have unfairly raised prices during crises - a practice known as price gouging.

Under the proposed new "anti-profiteering" framework, the Competition and Markets Authority and other regulators would gain tools for faster action to investigate sharp price rises and scrutinise company margins during supply shocks.

"When global events drive up costs, working families feel it first," the chancellor said.

"I will not tolerate anyone exploiting a crisis to make a quick buck".

The plans would also allow the publication of data on how firms' margins change during crises - a "name and shame" approach the government said was designed to deter excessive pricing.

In more serious cases, ministers could grant time-limited powers to order companies to halt exploitative pricing and to impose penalties.

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