Will Government Control Food Prices?

Added: 2026-05-13

[00:00:00]Hi, my name is Phil. I like to talk about politics. So, one important bit of news today is the report that four in five Brits are worried that the Iran war will make food more expensive and retailers are warning that the government are running out of time to act. And you think, what are the government going to do about food prices? Well, they do have levers.

[00:00:22]According to the Guardian, the British Retail Consortium want the government to remove non-commodity energy costs from retailers. energy bills. There's no doubt that this would definitely save a lot of money for them. I would actually approve of the policy myself. But before I go over some of the reasons why, let us look at some of the arguments against because there are plenty. I mean, first it would come at a cost to the Treasury, of course. Hard to say how much exactly.

[00:00:49]It seems to be somewhere between about two billion to4 billion pounds a year.

[00:00:54]And sure, even finding a few billion in the budget is tricky these days.

[00:00:59]especially as Rachel Reeves is committed to having to find money in some way to shelter the poorest households from the incoming energy price increases which are also linked to the Iran war. The government will be desperate to do what they can to ease the cost of living in general. They know it is the government killer and especially protect against the extra burden that this war is placing on British households. As such, it might sound mad not to implement a scheme which costs a few billion but could make a real difference. But I'm sure different lobby groups could come up with two dozen different things that the government could theoretically do to address the problems. Each of which might sound like it just costs a few billion but collectively ends up costing half the entire NHS budget. So I can appreciate the problem the government have here. They need to work out first of all what they can actually afford which right now is not that much and then work out which schemes will provide the best economic and political value for that cost. However, speaking purely politically, we know how important certain costs are above others. Fuel, electricity, and groceries. They are the ones which really play on people's minds. This is because they are mostly essentials and people need them on a regular basis. So they are regularly thinking about the cost. We know from polling and elections in the UK as well as other advanced economies how vital it is for these prices to be kept in check and to be seen to be kept in check if you expect to remain in power. So anything that keeps food prices down or better yet even reduces them a bit should be a no-brainer. In fact, I can see how the government could realistically get some food prices to actually go down a bit with this move.

[00:02:51]The potential savings for retailers may be greater than the extra inflation that Iran war could bring. I've said it enough times before. Energy costs for British businesses are sky-high. We pay double that of businesses in France and Germany and four times as much as those in America. Labour have made it a priority in their industrial strategy to get the cost of energy down for businesses in the UK. They have identified it as a major barrier to competitiveness.

[00:03:22]Now, they can't just flick a switch and make it happen. But surely here is an opportunity to do so for one politically sensitive sector of our economy. That being said, I do think it needs to be done very carefully. After all, if Labor simply removed these non-commodity charges, which come in various forms from energy bills, but specifically for food retailers, what will be the actual result? It won't actually make food cheaper, will it? It will just mean those retailers make more profit. So, the government would need to do it in conjunction with retailers. I almost feel there would need to be an understanding that there'd be no profiting from this. some scheme which will act to apply some punitive measures if retailers do not pass on the savings to their customers. I don't think the government just calling it out will work. And I'll be honest, I don't know the best way to do that. I mean, could it be to agree to remove these charges which will account for over half of the energy bill but in return for price controls on some foods? Is that how they would do it? problem then is what happens if retailers just stop stocking as much of those essentials and then blame the government for it. But I do think if the government did this, they would need to be satisfied that retailers would not use it for higher than expected profits, but just to maintain decent prices. I don't think it would be enough to hope that enough retailers play the game and the rest are forced to buy the competition. I do think competition does work reasonably well in food retail, but I wouldn't want to put my faith in it. I suppose another problem is the what about us can of worms it might open. There is not a single sector of our economy that is not being held back by high energy prices.

[00:05:09]The government cannot afford to do this for all businesses. They can't even afford to do it for all retail or even all of the food sector. It will cost just enough to do it for food retail, which not only means the government needing to be very clear about what exactly counts as food retail. I mean, imagine this. I I can I can see all sorts of cans of worms here, right?

[00:05:31]Imagine this. A home furnishing business complains that Tesco, who also sell home furnishings, but mostly groceries, and now getting a competitive advantage over them just because they sell lamb chops as well as cushions. Well, we'll sell some Mars bars. Does that do it? No, that doesn't do it. But just in general, I can see argui with lobby groups throughout the economy demanding their own carve out and explained how it would boost the economy if they got it and all the rest of it. Another factor is that this would be a sort of universal protection for the cost of living rather than targeted at the poorest. Now, Labour showed with their approach to energy bills that they intend to wait for the problems to really bite first before acting, but then means test the support. Now, is that approach just for energy bills or are they applying the same approach to everything? If the latter, then are they going to favor food stamp type approach rather than reducing costs at source? Are they going to do anything for food? But there are advantages to this scheme too. First of all, it would cut energy bills for the benefiting businesses by more than half.

[00:06:38]That makes electricity much cheaper, especially if the government say, "Yeah, we're going to have this as a permanent arrangement." that would encourage those businesses to move from gas to electricity for solutions where either works. The government are wanting to move us away from gas dependence and this would move us partially towards that. Second, as long as you somehow force the retailers to pass on the costs, which remember they didn't when VAT was removed from tampons or at least not all of them did. So don't ever trust them. Then it would reduce the inflation figures. inflation figures are sometimes more important in the mind of voters than their own personal inflation because a lot of people when they complain about the cost of living some of them have good reason to but some of them are just moaning they can afford it it's the number which gets prayed in the media that CPI inflation number so the lower that number is the better for the government if you keep people's grocery bills down they don't have to cut back as much on other spending so it will have a beneficial knock-on effect to the rest of the econ economy even though those businesses will belly ache about not getting their own energy cost reduction at this point. And fourth, it will be a big move which will get a lot of attention and is a sign that the government are addressing people's core concerns. Something that is noticeably lacking from their election campaign strategy this week. I have yet to see a Labor campaign advert actually promoting what Labor are doing. It's madness.

[00:08:05]And it's not like they need to fly blind either. Germany have been hailed as an example of how to approach this for example. But what's actually going on?

[00:08:13]Is the government considering it but as usual just moving slowly for fear of making mistakes? Will the support be enough? Will it be in time? Are they waiting to see just how bad things are likely to be? After all, there is probably a big difference between the support that will be needed if this war drags on beyond the summer and what's needed if a deal really can be reached quickly as Trump is hyping again. What do you think? Let me know your thoughts in the comments below. Please subscribe to the channel for more content. Click the bell notification icon so you know when new videos are out. Thanks for watching and until next time, I'll see you later.