Plans for supermarket price cap on basic food

The government is discussing plans for supermarkets to introduce a cap on the price of basic food items to help tackle the rising cost of living.

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

Food prices rose by 19.1% in the year to April – its second highest rate in 45 years.

Downing Street sources have stressed that there are no plans for a mandatory price cap.

The idea of a cap or freeze on basic food items, as first reported by the Daily Telegraph, is said to be at the “drawing board stage”.

Supermarkets are expected to be allowed to select which items they would cap and only take part in the initiative, modelled on a similar agreement in France, on a voluntary basis.

At a meeting with food manufacturers last week the chancellor Jeremy Hunt stressed widespread concern about prices and agreed to engage with the industry on possible measures to ease pressure on household budgets.

Mr Hunt has said he would back an increase in interest rates if it curbed higher prices and soaring inflation – even if that risked plunging the UK into recession.

The rate of inflation can be calculated in various ways, but the main measure is the Consumer Prices Index (CPI) – which tracks the prices of everyday items in an imaginary “basket of goods”.

The last figure for CPI was 8.7% in the year to April, down from 10.1% in March and 11.1% in October.

Soaring prices of some food products has meant inflation has not come down by as much as many predicted.

Experts have warned that expensive food is set to overtake energy bills as the “epicentre” of the cost-of-living crisis.