City analysts brand SNP food price cap ‘hair brained’
Top city analysts have slammed the SNP’s pledge to cap food prices as “hair brained,” as the party’s leader refuses to walk back from the policy.
City broker Shore Capital said the SNP’s proposals to cap the prices of some foods would risk diminishing choice, hampering investment in Scotland’s food industry and could even threaten food security.
Scottish first minister Swinney pledged at the Holyrood election to enforce a legal cap on the price of up to 50 staple food and drink items in Scottish supermarkets.
The SNP leader has positioned the policy as a radical response to the cost of living and public health crises facing Scotland.
Swinney said people are “struggling to afford a very basic shop,” and that it was his “public health responsibility” to make nutritious diets more affordable.
‘Economics of the madhouse’
Large supermarkets could be forced to limit the cost of milk, eggs, cheese and rice if the policy becomes law in Scotland, but the idea has since run into significant political and legal barriers.
The Scottish Retail Consortium, a trade body, said the “gimmick” policy could force small shops to go under because they would not be compelled to keep prices down.
It is thought that legislation for price caps would require changes to the 2020 Internal Markets Act, which prevents trade barriers between England, Scotland, Wales and Northern Ireland.
Sir Andy Street, the former Conservative West Midlands mayor and John Lewis boss, said the policy comes from “the economics of the madhouse”.
A note published by Shore Capital’s Clive Black dubs the proposal as “more akin to a severely struggling less developed nation”.
Given that the UK has “one of the most competitive grocery retail sectors in the world,” price caps on food would “feel like a charter to reduce investment, compress choice and encourage Scots to live somewhere else,” the analyst wrote.
Food prices in the UK have grown by as much as 40 or 50 per cent in some areas since the start of the decade, but the broker said this inflation is due to external factors including the Russian invasion of Ukraine, growing labour costs and red tape like the sustainable packaging tax.
‘Regulatory labyrinth’
Black said: “To be clear, none of this cost appreciation was down to the industry, it is all negative externalities.
“As a starting point, therefore, maybe the Scottish Government, alongside Westminster and the other devolved administrations, would do well to look in the mirror if it is really worried about rising food prices and their collective role in the cost environment.”
Black also took aim at the “asymmetrical relationship” between the UK as a state and what it expects from its food system.
“It is very hard to see a state controlled domestic food system delivering the quantity, choice nor quality of foodstuffs that the open market presently provides at present prices,” he said.
Price caps would also lead to a “regulatory labyrinth” as supermarkets would feel compelled to seek consent from the competition watchdog before knowingly setting their prices at the same level as their rivals, the analyst said.