'Caps on food prices are at best a pointless gimmick and, at worst, harmful to the very people they are supposed to help,' he said. Julian Jessop of the Institute of Economic Affairs warned that price caps on basic food items might backfire.
'Rather than recreating 1970s-style price controls, the Government should focus on cutting red tape so that resources can be directed to keeping prices as low as possible.' 'As commodity prices drop, many of the costs keeping inflation high are now arising from the muddle of new regulation coming from Government.
'Even so, retailers continue to invest heavily in lower prices for the future, expanding their affordable food ranges, locking the price of many essentials, and raising pay for staff. 'Supermarkets have always run on very slim margins, especially when compared with other parts of the food supply chain, but profits have fallen significantly in the last year.
'Yet despite this, the fiercely competitive grocery market in the UK has helped to keep British food among the most affordable of all the large European economies. 'High food prices are a direct result of the soaring cost of energy, transport, and labour, as well as higher prices paid to food manufacturers and farmers. Industry figures claimed the introduction of price caps would make little difference in driving down food inflation.Īndrew Opie, director of food and sustainability at the British Retail Consortium, said: 'This will not make a jot of difference to prices. It was found to be at 19.1 per cent last month, which was only just down from 19.2 per cent in March and close to the highest rate for more than 45 years. Latest figures released last week showed a drop in the headline inflation rate - at 8.7 per cent in April compared with 10.1 per cent in March - but food inflation remains sky-high. There are worries in Government about the continued impact of high food prices on households as the cost-of-living crisis drags on. 'We live in global markets and it's very different to what happened in the 70s and after the war.' One said: 'You can't interfere in markets, it doesn't work in this day and age. The Telegraph reported that two serving Cabinet ministers are opposed to plans for a price cap on basic goods. 'The big food price rises have come from dearer energy, fertiliser and wages, from growing too little of our own food and from past Central bank inflationary policies.' 'The main food shops usually have net profit margins under 2 per cent. 'Too many price controls, high taxes, subsidies and extra rules cut supply, create shortages and damage business,' he added. Sir John Redwood, a former Cabinet minister, cautioned against copying measures 'that have always failed in the past'.
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