Price controls on essential foods: partial business and regulatory impact assessment

Section 7: Options Considered and Recommended

7.1 Options considered so far

The Scottish Government is consulting on whether intervention in food prices is appropriate and, if so, what form it should take. The Scottish Government is asking for views on the potential mechanisms and framework design for introducing a food price control. The Partial BRIA provides an initial assessment of statutory food price controls and signposts to where areas will need to be developed.

Alternative approaches to achieving food affordability objectives, including non-regulatory interventions, will be considered alongside consultation evidence and assessed further in the Final BRIA.

In this partial BRIA, we set out one broad option for implementing the food price control (Option 2) in comparison to the Business as Usual or Do Nothing (Option 1). In relation to the potential designs of the food price control, these are put forward in more detail in the consultation for consultees to consider, for example where the price caps will initially be set. Within this option, we will mention the potential price mechanism of the price cap, which affects the potential impacts of the price cap. However, as these are being explored and considered in the consultation, the overall impacts of a general price cap will be what is explored with the BRIA.

These options are outlined in more detail below:

Option 1 – Business As Usual (BAU) [Do Nothing]

In this scenario, there would be no governmental intervention, meaning there would be no price cap put in place. This assumes that there would be no benefit for consumers in the form of stabilised or reduced prices for essential food items, and no additional costs for businesses.

In the final BRIA we will compare the other option of introducing a food price cap to this option – i.e. the potential impacts (costs and benefits) of different approaches to implement a food price cap will ultimately be compared to a ‘do nothing’ baseline. Government could also choose to pursue other policies in order to address food affordability, however this possibility of this has not been explored in this iteration of the BRIA.

Option 2 – Introduce price controls on essential food items

The Scottish Government recognises that there are a number of models for introducing price caps on essential food items. Options for each design element of a price cap model could combine to produce different impacts, risks and benefits. The aim of the consultation is to seek views on this.

As such, there are varied approaches to a food price cap, this includes:

An Item based price cap (proposed approach set out in the consultation)

An item-based price cap requires setting the price of the individual specific goods that fall into the essential basket of 20-50 items. Where qualifying retailers offer for sale a food product (that matches the description of a qualifying product) at a particular shop or online, they would be required to offer at least one type of that product at or below the applicable price cap in that store or on that website. The retailer can choose which particular product to use to meet the duty, as long as it meets the description of the product as set out in Regulations. If the product type selected by the retailer to be impacted by the price cap runs out, then in order to meet the duty the retailer would be required to offer another type of that product which meets the description outlined in Regulations at or under the price cap if available and on sale to customers.

In the consultation, this is the proposed approach to the price cap. An illustrative example of how a food price cap for an essential item may work can be found in Annex A. Note this is just illustrative and is not necessarily how the food price cap design may develop.

Profit limitation price cap

A profit limitation price cap is a direct restriction on the financial return or total profit a business can generate, reducing prices automatically if profits cross a specific threshold. Recognising that input costs for food producers and suppliers change over time it could be an approach for the market to continue to set the price arising from costs but to limit the total profit allowable for a retailer on specified essential items. International examples also exist. In Hungary, a margin cap was introduced in 2025 which restricts the retail mark-up that larger retailers can apply to a range of essential food products.^[23] This illustrates how a profit or margin limitation approach may operate in practice, although evidence on the effectiveness and wider market impacts of such measures remains mixed. It is unclear how much benefit this would derive for the consumer however given the scale of competition in the Scottish retail market. This also does not limit profits prior to the retailer in other parts of the food supply chain. It would also require a full understanding of the input costs for the retailer including but not limited to taxes and business rates, labour and energy.

Trigger based price cap

A trigger-based price cap would examine whether it is possible to implement a scheme that would see Ministers able to put in place caps on price rises in response to predefined triggers. This would mean that if price rises went above a benchmark, then a price cap for the good concerned could be put in place. There are a variety of measures that could be used as a benchmark – for example specifying a percentage above CPI and if price rises for a given product were to increase past that point the Scottish Government would have the ability to intervene. This would require significant price monitoring to implement.

Retailer based price cap

A retailer-based price cap is different from the sub-options above as it does not consider the grocery market as a whole. The approach could be taken to fix the price of the lowest priced item (say the lowest priced variety of bread) at a retailer from a point in time and only allow that price to rise at some rate less than food inflation for a set period of time. The effect of this is that different retailers would sell their “essential items” at different prices as the price cap is made in reference to the individual retailers’ market price. Issues with this approach include the date at which a price cap is fixed and potentially coinciding with promotions. This approach may be administratively less complicated, however.

Basket-based price cap

A basket-based price cap would be to set the total price of a basket of certain goods, allowing the retailer flexibility in setting individual item prices. This would require specifying a number of items and limiting the total price of those goods in total rather than by item (as in the item-based approach). Although this allows for greater flexibility and competition for retailers, it may mean consumers will not realise the full benefit depending on the items they purchase. Moreover, it becomes more difficult to monitor and ensure compliance, and it becomes complicated for retailers who may not stock specific items. This approach may only be possible in the context of an obligation to stock specific items which is not included in the draft proposals. Alternatively, consideration could be given to requiring if one item within a group (for example a set of fruits like bananas, apples and pears) then at least one of the items within that category must be sold at a capped price, leaving that choice up to the retailer.

Choosing alternative models that add more flexibility for retailers in the application of price caps allows for rapid response to issues that may arise in specific supply chains by increasing prices of that good while reducing others. It also allows for competition between retailers within the category of capped items. However, it increases complexity for all concerned. For the retailer an ongoing assessment of the price of goods that is within a limit set by regulation is required. For the consumer it is less transparent than a clearly defined limitation on certain products. And it increases complexity with respect to ensuring compliance.

7.2 Recommendations/ preferred options

The Scottish Government is currently undertaking a public consultation on the implementation of a food price control on a range of essential food items, asking how a food price control could be designed and implemented.

This iteration of the partial BRIA does not present a formal recommendation to endorse any of the approaches to designing a food price control scheme presented.

Following the conclusion of the consultation, Scottish Government Ministers will consider the views expressed and decide on next steps. An updated final BRIA will then present more detailed consideration of the options upon which recommendation could be made.