Private Notice Question
Asked by
To ask His Majesty’s Government what plans they have to ask supermarkets to introduce voluntary price caps or freezes on essential food items; and what assessment they have made of the impact of such measures on food prices, supply, competition and investment.
My Lords, the Chancellor has held a round table with supermarkets to discuss the role that retailers can play in bearing down on food prices and the additional steps that the Government can take. This comes on top of the action that the Government have already taken to reduce the cost of living, which has helped drive today’s larger than expected fall in inflation.
My Lords, I am grateful to the Minister for his Answer. The Government should understand and know that price controls do not work and do not reduce prices. They instead suppress supply, create shortages, and ultimately leave consumers worse off and more exposed to food insecurity. I must say that, when we first heard these stories, we feared that the ghost of Stalin was roaming the corridors of the Treasury. For the avoidance of doubt, will the Minister today give an unequivocal commitment that the Government will rule out price caps, voluntary or otherwise, entirely? Can I suggest that he confers with noble Lords in this House, including on his own Benches, who will confirm that the supermarket industry is fiercely competitive?
I am grateful to the noble Lord for his questions. I agree with his last point, if not all of what he said. I understand exactly what he set out, which is why we are not doing what he suggests we are doing. We are of course having discussions with supermarkets—that is the right thing to do—as we have with all sectors. The Chancellor has held round tables with fuel retailers, supermarkets and high street banks, among other industries. It is right that we discuss ways we can work together to ease the cost of living for households. This is not about price caps, as some speculation has suggested. We will never advocate for that, as it is not for the Government to tell supermarkets how to do their jobs. We are taking action across the board, with rail fare freezes, prescription fee freezes and £150 off energy bills. These are the driving factors behind today’s bigger than expected fall in inflation. Further, today, the Chancellor extended the 5p cut on fuel duty and introduced further new fuel duty support for HGVs and farmers.
My Lords, I am pleased to hear that the Government are talking to supermarkets about the role they might have in prices, because prices are an important worry for people right across the country—they really are going up. In the course of those discussions, did the Government talk about their role in bringing down prices and with supermarkets? The input costs that supermarkets face have gone up dramatically; some of those things a Government cannot control, but some of those things they can. They can control employer contributions for NICs and the level of business rates—so ask not what the supermarkets can do for you but what you can do for the supermarkets to bring down the cost.
There is definitely something in what the noble Lord says, although I am not sure that I quite agree with where his question ended up. He is right to say that families are struggling with the cost of living, and they will be worried about the prospect of food prices rising again following the conflict in the Middle East. That is why, in April, major food and farming trade bodies came together with the Government to share intelligence, assess emerging pressures and agree on how we can keep our food sector resilient and stable. As I say, the Chancellor held a round table with supermarkets to discuss the role that retailers can play in bearing down on food prices, and, as the noble Lord asked, additional steps that the Government can take.
Will the Minister congratulate the supermarkets on being competitive, with good prices, despite all the costs the Government are imposing on them? Does he agree that their net profit margins are very low, showing that the problem of rising food prices rests elsewhere?
As I said yesterday in response to similar questions, we want the most competitive supermarket sector we can possibly get, and it is not for the Government to tell supermarkets how to do their jobs.
My Lords, I asked the Minister yesterday about caps on food prices and he said then that that was not the role of the Government. Having said that, the suggested freeze is voluntary, as I understand it. Given that supermarkets— I think I might get booed here—squeeze producers of all kinds, farmers and their customers, making huge profits, should the Government not be a little bolder and actually think about the people for once?
The end of the noble Baroness’s question is preposterous. This is not about price caps, as some speculation has suggested. As I said yesterday, we would never advocate for that, and I repeat that it is not for the Government to tell supermarkets how to do their jobs.
My Lords, food poverty and food security need a joint focus. Examples of best practice can be found in our neighbourhoods, in Italy’s approach to local food systems, where there is a 50% reduction in business rates for greengrocers selling produce from within 50 miles of their town, or in the Liège food-land belt initiative, which sponsors the growth of farmers’ co-ops to supply 50% of their own food needs. Have the Government explored these alternatives to addressing the cost of living crisis?
I am not in a position to stand here and suggest a 50% business rates reduction for any business, but my noble friend is absolutely right on the importance of taking action across the board to help reduce the cost of living. As I say, we have frozen rail fares, frozen prescription fees and taken £150 off energy bills—these are the driving factors behind today’s bigger than expected fall in inflation.
It is the turn of the Conservative Benches next, and then of the Liberal Democrat Benches.
I am grateful to the Government Chief Whip. The Minister will be aware that the Scottish Government are proposing compulsory caps on the prices of basic foodstuffs in supermarkets that operate in Scotland. Can the Minister confirm for the benefit of your Lordships whether that power is actually within the devolved competence of the Scottish Government?
That may be subject to UK internal market and single market regulations. I am happy to check and confirm that to the noble Lord. As I have said, this is not about price caps, as some speculation has suggested, and we would never advocate for that.
My Lords, does the Minister agree that any deal that the Government might do with the supermarkets to cut prices in exchange for delaying regulations on healthy food would be short-sighted, against public health and damaging to the NHS?
I absolutely understand the importance of the regulations that the noble Baroness is talking about. As her noble friend said, this is about what we as a Government can do, such as easing existing regulations on supermarkets, which would then enable them to keep costs down for consumers.
My Lords, 50 years ago I was working in the retail sector when the right honourable Baroness Williams, who was a Member of this House some time later, was the Minister for food prices. At the end of her term of office, she admitted that it was a hopeless task to try to curtail food prices or to ration them. Can I suggest that the Government dig out the files from 50 years ago, read them and then maybe reconsider whether this rather extreme idea from Scotland is worth pursuing any further?
The noble Lord asks me to reconsider an extreme idea that we are not considering, so I think we should be okay on that point. The times he talked about were very different. I do not think anyone would advocate for that now, and we certainly are not.
My Lords, I very much welcome that the Minister has ruled out supermarket price fixing, because the people who would be pressurised by such fixing are the farmers and the producers. They are already under incredible pressure from the power of the supermarkets. I am concerned that this will gain some traction and that, even though it is not government policy, the supermarkets might take this up. Are there any plans to meet farmers’ representatives to discuss those issues?
The noble Baroness is absolutely right. The Government are aware of the challenges and the cumulative pressures facing food and drink manufacturers, and farmers in particular. I hope that she will welcome our announcement today on red diesel, for example, to support farmers who face substantially increased costs on fertiliser and fuel. The Government have announced that we will cut the duty rate on red diesel by over a third per litre, to the lowest rate for over 20 years.
My Lords, if the House allows me, I will quote a headline from the Daily Telegraph:
“Rishi Sunak scraps plan for supermarket price cap after backlash … Downing Street had been considering a voluntary cap scheme for major supermarkets, modelled on similar plan in France”.
In the Government coming to the conclusion that this would be the wrong way forward, instead of going back 50 years we can go back to 2023. What did the current Government learn from the attempt under Rishi Sunak as Chancellor to introduce the very caps that have been described by those on the right-hand side as Stalinist?
I would not necessarily recommend that the noble Lord rely on a headline in the Daily Telegraph as the basis for his assumptions of what the Government are or are not considering.
It was the previous Government.
I understand that, but, as I already said, this Government are not considering price caps, as some speculation has suggested, and we would never advocate for that.
My Lords, I would like to ask the Minister about several factors that seem to be occurring at once. The first is that floods in Morocco, Spain and Sicily have badly affected salad crops at the beginning of the year. Further, Cambridgeshire had just 5% of its annual rainfall in April and many farmers cannot plant crops, and we now know from American scientific research that there is a 61% chance of a super El Niño this year. We will therefore face severe shortages of fresh food and other food. What are the supermarkets doing? What are the Government doing to engage them and farmers in conversations about the situation here in August, September and October, and indeed going into the winter? From everything I understand, this is potentially very serious. It is not about price fixing; it is about how we keep people in healthy food, rather than ultra-processed food from a factory.
I do not underestimate at all the significant climate factors to which the noble Baroness refers. I have said that, in April, major food and farming trade bodies came together with the Government to share intelligence, assess emerging pressures and agree on how we can keep our food sector resilient and stable. It is why the Chancellor held a round table with supermarkets to discuss the issues that I have already mentioned and many of the issues raised by the noble Baroness.
We will hear next from the Labour Benches and then from the Conservative Benches.
My Lords, could my noble friend the Minister indicate whether ongoing discussions are taking place with the Groceries Code Adjudicator, who is the overall ombudsman, to negotiate between suppliers and the 10 largest supermarkets and to protect consumers?
We are engaging with a wide range of stakeholders and I am sure that we will continue to do so.
My Lords, I am extremely pleased that the Minister has confirmed that price controls, if they came in, would be voluntary. However, we have also been informed by his replies that it is going to be voluntary in exchange for a regulatory incentive. If certain regulations will be repealed in exchange for price controls, does that not show that such regulations—whether they are on the environment, food safety or anything else—should have been considered for repeal or for lightening anyway?
I am sure that there is much in what the noble Lord says. On regulatory burdens, the Prime Minister has set a 25% target to bring the cumulative cost of regulation down. We have already announced £1.5 billion of gross annual administrative savings so far, and we expect to set out further savings in due course.
My Lords, first, I congratulate the Government on bringing inflation down to 2.8% and removing the 5p fuel duty. If the Government had a quiet word with the supermarkets making excessive profits of billions and billions of pounds, telling them to take it easy and not make that much profit, I am sure that the public would welcome that kind of interference, because the public would like cheaper food in every supermarket.
I agree with the first half of my noble friend’s point but not necessarily the second half—I think there was an “if” in there, which is important. As I have said already, we are taking action across the board to ease the cost of living: we are freezing rail fares and prescription fees, and we have taken £150 off energy bills. These are the driving factors behind today’s bigger than expected fall in inflation, which my noble friend mentioned. Further, today, the Chancellor has extended the 5p cut on fuel duty to the end of the year.
My Lords, at a time of rising economic populism, there is a responsibility on all of us in this House, and especially Ministers, to be calm, factual and accurate. To follow on from the remarks of my friend the noble Baroness, Lady Jones of Moulsecoomb, and the noble Lord, Lord Sahota, there is a widespread view among the public that supermarkets are making huge profits. A survey by the Institute of Economic Affairs found that the median voter thinks that supermarkets make a 50% profit, whereas the actual figure is about 3%. Will the Minister take this opportunity to repeat the very basic economic verity that price rises are a signal to producers to make more of something and that if prices are artificially frozen then there is less incentive to bring that product to market, so you end up with a worse shortage and higher prices than you had before you started?
As always, the noble Lord is very interesting. I simply say that I always strive to be calm, factual and accurate.