Jeremy Hunt can’t bring down food prices and the Tories may be punished for it
As energy bills finally start to get cheaper, it is now food price inflation which is having the most impact on the cost of living.
Groceries are almost 20 per cent pricier than they were a year ago – with the poor suffering most, because they tend to spend a higher proportion of their income on food.
Jeremy Hunt would love to bring prices down. He has summoned farmers, food manufacturers and supermarkets to Downing Street for talks, and promised to back up the competition watchdog if it finds evidence of wrongdoing.
But privately, he knows there is little that the Government can do. The current surge in food prices is largely down to the cost of energy and labour; the former is set by the global market, and the latter is based on long-term factors which could take years to change.
Food suppliers and retailers are locked into long-term contracts with their suppliers. This explains why the cost of groceries did not start to rise significantly until well after energy prices began to soar – but it also means that they will be slower to come down again.
It is true that retailers have seen their profit margins increase. But the food industry is one of the most cut-throat around, with Aldi and Lidl competing to drive prices down and Tesco, Sainsbury’s and Asda constantly struggling to keep up. Short of literal price controls, which would be anathema to any Conservative, it is hard to see how Mr Hunt could force them into offering their goods more cheaply.
That leaves one further remedy: to hand out more cash to individuals so that they can cope with higher prices. This has already happened to some extent, with cost of living payments available to millions of lower-income households, but this too is an imperfect solution. The more money the Treasury pumps into the economy, the higher demand will get and the longer inflation will stay dangerously high.
The Chancellor and Prime Minister can only urge patience. It may well be the case that food gets cheaper by the end of the year; if not, the Tories will surely be punished at the ballot box.