Rachel Reeves suffered a major backlash on Wednesday over her ‘completely preposterous’ plan to cap food prices.
Marks & Spencer, the Bank of England and the CBI hit out at the Chancellor’s suggestion that stores limit the price of essentials such as eggs, bread and milk.
The proposal was described as ‘mad’ and ‘neo–Soviet’ by one City analyst, while Bank of England governor Andrew Bailey told MPs price caps were ‘not sustainable’ in the long run.
M&S chief executive Stuart Machin said ministers should instead consider reversing the tax and red tape burdens they are piling on to firms which are driving up costs.
‘It’s completely preposterous,’ he added. ‘I don’t think the Government should be trying to run business. I think they should be trying to probably understand business better.’
Retailers, he said, are already working to keep prices down at a time when businesses are facing a ‘triple whammy’ of higher costs from tax, red tape imposed by the Government, and disruption caused by the Iran war.
The row overshadowed better than expected figures showing inflation fell from 3.3 per cent in March to 2.8 per cent in April.
The figures, which showed food inflation is falling, revealed retailers were ‘taking a big responsibility to try and minimise passing through prices’ to customers, Mr Machin said.
Rachel Reeves suffered a major backlash over her ‘completely preposterous’ plan to cap food prices
Hours later, Mr Bailey gave the cold shoulder to Labour’s price cap idea as he was questioned by MPs on the Treasury select committee. He said: ‘If you start doing it as a matter of course then effectively you’re artificially moving prices relative to costs and that’s not a sustainable thing.’
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Bank of England chief Bailey warns Labour over ‘unsustainable’ food price cap plan
Former M&S boss Lord Stuart Rose told the BBC the price cap plan ‘smacks of state control. It is idiotic. It is dangerous and it will never work’. Justin King, ex–boss of Sainsbury’s, told Sky News: ‘Competition is what keeps prices honest and this is a very competitive market.’
Louise Hellem, chief economist of the CBI, Britain’s biggest business group, said: ‘Retailers are already competing fiercely to keep prices low for customers.’
Tory business spokesman Andrew Griffith said: ‘This shows an extraordinary backlash from the most serious voices in business against a Chancellor who is completely out of her depth.’
Clive Black, retail analyst at broker Shore Capital, said of the latest ‘mad’ idea that the Government ‘appears to be losing its mind in an orgy of neo–Soviet policy ideas’.
Treasury minister Dan Tomlinson later told the BBC that while the Government would be ‘having conversations with supermarkets’ it would not be implementing ‘a mandatory price cap’
