Supermarkets do better than No 10 on food price cuts

SAINSBURY’S did its bit to ease the food inflation nightmare today when it cut the price of more than 40 products including staples such as cheese, yoghurt and cream. It is only a drop in the milk churn but as the grocer’s deadly rival is fond of saying, every little helps.

Whether the move is a deliberate rejoinder to the Government’s bizarre scheme to introduce food price controls — floated in this weekend’s Sunday papers — is not clear. Probably not. But the timing certainly sends a clear message to Downing Street that the supermarkets are already driving prices lower, when and if they can.

It is a complex picture. No one wants consumer retail prices to be slashed at the expense of suppliers going out of business, particularly farmers. But equally the soaring cost of food in the UK — still at 15.4% in May, according to the British Retail Consortium — is having devastating knock-on social and economic consequences.

Forecaster Capital Economics today examines the case for food price controls in a note from its chief economist Neil Shearing. He concludes that “by discouraging new supply and encouraging additional demand” they will “only make the current food inflation shock worse”.

Rather than float eye-catching but impractical diversions the Government should focus on the real issues keeping food costs high: labour shortages, energy costs and friction at the border with the European Union.

In the meantime supermarket competition will do more than any No 10 kite-flier to keep prices under control.