Business groups urge Swinney to scrap 'ineffective' food price cap plan
More than 20 organisations have written a joint letter to John Swinney urging him to scrap his plan for a legal cap on some food and drink prices.
Business organizations are urging First Minister John Swinney to abandon his proposed plan to cap food prices, calling it "ineffective." Swinney had previously committed to implementing a price cap on "essential items" as part of the Scottish National Party's election manifesto.
Twenty-three organizations have co-signed a letter to Swinney, who is scheduled to unveil his government's agenda on Tuesday. The letter presses him to drop the idea of legally limiting the cost of certain food and drink products. Among the signatories are groups representing the retail, food and drink production, manufacturing, and distribution sectors in Scotland.
The SNP's election manifesto included a pledge to mandate large supermarkets to restrict the prices of essential goods like milk, eggs, cheese, and rice, aiming to alleviate the burden of the cost of living. Swinney had stated that people were struggling to afford basic groceries and that he had a "public health responsibility" to ensure access to an affordable and nutritious diet.
However, the joint letter argues that a statutory price cap would fail to address the "root causes of elevated food prices," which it identifies as rising production, refrigeration, and distribution expenses. The letter is signed by organizations such as the Scottish Retail Consortium (SRC), the Food and Drink Federation Scotland, Scottish Bakers, and Dairy UK.
Ewan MacDonald-Russell, deputy head of the SRC, described the plans as an "appallingly terrible idea" during an interview on BBC Radio Scotland Breakfast. He asserted, "Price caps don't tackle food price inflation. They are not a solution, they are a gimmick that sounds quite effective, but it just displaces cost elsewhere. We can't see a single example of where this has worked."
MacDonald-Russell cited Hungary as an example, where he claimed a price cap policy resulted in product shortages, the replacement of domestic goods with "cheap imports," and increased friction between retailers and consumers. The SRC also warned that the policy could disadvantage small shops not covered by the proposed legislation, making them uncompetitive.
"Scottish consumers benefit from the most affordable food prices in western Europe," MacDonald-Russell added. "We know food price inflation is a problem, but the best model to deal with it is the one we have right now and price caps are going to make that worse. It is giving a false promise that it is going to be able to help with something. In reality, there is as good a chance it is going to make the overall cost of a shopping basket higher, because the cost of the scheme as well as the cap have to be absorbed by businesses."
It is believed that these proposals would necessitate amendments to the UK Internal Markets Act of 2020. This Act was enacted post-Brexit to prevent trade barriers and regulatory divergence among England, Scotland, Wales, and Northern Ireland as powers were repatriated from the EU.
The Scottish Government stated that assisting people with the cost of living is a "top priority." A spokesperson added, "Ministers have welcomed engagement with stakeholders, including retailers, food producers and farmers on proposals for food price controls. A consultation will launch shortly for further views."