Rishi Sunak attends a children's group in her Richmond County. PM draws up plans to bring down inflation Photo: CCHQ
Downing Street is drawing up plans for retailers to impose price caps on staples such as bread and milk to help deal with the rising cost of living, reports The Telegraph.
Rishi Sunak's aides have begun work on a deal with supermarkets, similar to the deal in France, in which the country's major retailers charge the «lowest price possible» for some staple foods.
The move will mark the biggest attempt to manage prices in supermarkets since Edward Heath took control in 1973. However, No. 10 insists that any action by retailers will be voluntary.
This comes amid growing government concern about persistent pressure on household finances due to inflation. and rising cost of borrowing.
A Treasury Department source said: «Food inflation is much more persistent and difficult to get rid of than we expected.»
The Telegraph could also report that continued inflation and rising equity yields cast doubt on Mr. -on Sunaka to reduce personal taxes until the next general election.
Official data released last week showed that core inflation in the UK economy, which excludes food and energy price volatility, rose to 6.8% in April, the highest level in 31 years.
< p > Ten-year-old gilts yield 4.33%, peaking at 4.54% after Liz Truss's mini-budget.
2705 Inflation underestimated
A government source echoed Mr. Sunak and Jeremy Hunt's mantra that «we need to fix high inflation and high borrowing first» before cutting taxes. A cabinet source added: «If you don't have growth, you don't have money [to cut taxes], it's simple.»
The minister said tax cuts are now unlikely until next spring.
The prime minister is expected to be preparing to discuss the state of the economy in public speeches this week as officials prepare fresh recommendations on how long high inflation may continue.
French-style proposal A food price ceiling agreement has been quietly discussed in Whitehall and among industry figures over the past two weeks.
In France, supermarkets that have signed an agreement with the government have identified items in their stores that will be subject to price cuts or freezes. In many cases, private label products have been chosen on the basis that it is easiest for retailers to control their costs.
However, one source briefed on the plan warned that it would be «anti-market» and could harm smaller businesses. retailers who will lose business due to discount supermarkets.
The source added: «It's very easy to point the finger at retailers and say they're making a fortune, but some of the margins they're operating on aren't all that great. It's pretty cramped.»
Food inflation
Source #10 said the proposals are at the drawing board stage.
The source said it was recognized that supermarkets «are not operating at a high profit margin» but added: «The pressure is such that we are working with retailers on everything they can do to keep prices down for consumers.» Talks with retailers were in the «initial stage».
The French government's deal with retailers was announced in March, when Finance Minister Bruno Le Maire said the deal, in which retail groups agreed to cut prices, would turn the period from April to June in the «anti-inflationary quarter».
Earlier this month, Mr Le Maire said the initiative was being extended for another quarter, with food inflation at a record 15%. He later threatened to raise taxes on retailers «to recover profits unfairly earned at the expense of consumers» if they refused to cut prices further.
Last week, it emerged that UK inflation fell less in April than than expected, with consumer prices up 8.7% year on year compared to 10.1% in March.
The UK has the highest inflation rate among the G7, along with Italy. Three former Bank of England rate-setters warned on Saturday that interest rates, which rose to 4.5% earlier this month, would have to rise by 6% to quell inflation.
2605 UK inflation Bonds returned to levels that helped fuel Ms Truss' exit as prime minister in October as traders bet on further Bank rate hikes to bring inflation under control.
Since then, during his campaign to become Conservative leader, Mr. Sunak has insisted that he wants to cut taxes, but only after he manages to bring down inflation and get borrowing under control.
This approach marked a dividing line with Ms. Truss's strategy, which said tax cuts were needed immediately to help the economy grow.
Now the economic outlook determines Mr. Sunak. advisers wonder if he and Mr. Hunt can afford to cut personal taxes in the run-up to next year's expected elections, unless things improve dramatically.
Last week, Mr Hunt said he was fine with a recession in the UK if it brought down inflation.
One minister said: “All the Tory parties want tax cuts… that’s in our interest.» DNA. I just want them at the right time.
“We just need to get our house in order first. Let's wait for next year's budget. ”
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