Jeremy Hunt is stepping up pressure on the grocery sector to rein in soaring prices, in advance of data likely to show food is becoming a bigger factor than energy in driving high inflation.
The UK chancellor will meet food manufacturers on Tuesday to ask the industry to help ease pressure on household budgets, following a similar meeting between the chief secretary to the Treasury and big supermarkets earlier this month.
However, the UK government has rejected the case either for imposing price controls, as some European governments have done, or for following France’s example of a looser agreement aimed at getting supermarkets to cap the prices of certain essentials.
Instead, the Treasury said on Monday evening that the chancellor would “ask food manufacturers to do what they can to support consumers”, as well as look at reforms to pricing rules that would allow consumers to compare the prices of similar products more easily.
Hunt will meet later in the day with the independent Competition and Markets Authority, which is looking at unit pricing practices as part of work on the grocery sector that it began earlier in the year. The CMA is also close to concluding a study of supermarkets’ road fuel pricing.
“High food prices are proving stubborn so we need to understand what’s driving that . . . I’m asking industry to work with us as we halve inflation,” Hunt said.
Official figures for inflation, due on Wednesday, are likely to show a large drop in the headline rate of inflation — from 10.1 per cent to 8.4 per cent, if the Bank of England’s forecasts prove correct — as the big rise in energy prices that took effect in April 2022 drops out of the annual calculation.
But food prices, which have already risen by 19.1 per cent over the past year, are likely to continue rising for some time.
The Resolution Foundation said last week that this meant the food price shock would now overtake the energy price shock as the biggest source of pressure on family finances. The think-tank warned it was not clear “that the scale of the increase has been understood in Westminster”.
Supermarkets have been accused by some MPs and trade unions of “profiteering” and failing to lower their own even as the cost of raw materials starts to fall in world markets.
However, Bank of England officials do not believe such “greedflation” is the reason for the UK’s persistently high inflation, given that corporate profit margins outside the energy sector stand at their lowest as a share of GDP since 2009.
Both Tesco and Sainsbury’s reported lower profit for the past financial year, and some analysts point to supermarket price cuts on staples such as milk as evidence that food inflation could be starting to moderate.