Cost-of-living crisis: Plans for UK supermarkets to introduce price cap on basic food items such as bread and milk

A voluntary agreement with major retailers could see price reductions on basic food items like bread and milk

Government plans to encourage supermarkets to impose price caps on food staples to help with the cost of living will have no “element of compulsion”, a Cabinet minister has said.

Downing Street is understood to be drawing up proposals that would seek to get retailers charging the lowest possible amount for some basic products like bread and milk.

The opt-in scheme, modelled on a similar agreement in France, would allow supermarkets to select which items they would cap, the Sunday Telegraph reported.

A shopper walking through the aisle of a Tesco supermarket. The UK Government wants to encourage supermarket to place a price cap on basic food items such as bread. Picture: Yui Mok/PA Wire

It could mark the biggest intervention on pricing since controls introduced by Edward Heath in the 1970s, the paper reported – though No 10 stressed any scheme would be voluntary.

Asked about the proposals on the BBC’s Sunday With Laura Kuenssberg programme, health secretary Steve Barclay said: “My understanding is the Government is working constructively with supermarkets as to how we address the very real concerns around food inflation and the cost of living, and doing so in a way that is also very mindful to the impact on suppliers.”

Mr Barclay acknowledged small family-run businesses would themselves be under “significant pressure” and stressed the plans were “not about any element of compulsion”.

A No 10 source said the proposal was at “drawing board stage”, but would not involve Government-imposed price controls.

It comes after Chancellor Jeremy Hunt backed interest rate hikes – even if they risk of plunging the UK into recession – to combat soaring inflation.

Although down from 10.1 per cent in March, the Consumer Prices Index of inflation remains stubbornly high at 8.7 per cent in April, while experts have warned that alarmingly expensive food is set to overtake energy bills as the “epicentre” of the cost-of-living crisis.

Food prices are expected to keep rising, having already increased by 19.1 per cent in the year to March, placing additional pressure on families.

Andrew Opie, director of food & sustainability at the British Retail Consortium, said: “This will not make a jot of difference to prices. 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.

“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. 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.

“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.

“As commodity prices drop, many of the costs keeping inflation high are now arising from the muddle of new regulation coming from Government. 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.”