Price controls on essential food items: consultation paper

Introduction

The people of Scotland continue to express concern about the cost of living. Back-to-back economic shocks have affected households over recent years. EU Exit, a global pandemic and growing geopolitical instability have led to rising costs. These affect the price of food, electricity, and fuel, alongside other goods and services.

The Scottish Government’s approach to tackling cost of living pressures focuses on fair taxation, growing the economy and providing help with bills and income. This includes:

• work to expand free childcare;
• continuing to provide free prescriptions;
• free university tuition for Scottish undergraduate students;
• additional support for young people looking to buy their first home.

As part of that wider package of support, this consultation seeks your views on the proposed introduction of legal price caps on essential food items. This would include a cap on the price of goods such as bread, milk and eggs sold by large supermarkets chains in their stores or online. This consultation seeks your views on the Scottish Government’s proposal. We also seek your views on the design of any scheme introduced so that it delivers maximum benefit for people in Scotland.

Scottish food producers make vital contributions to rural life, the economy and our food security. We are committed to supporting active farming and food production in Scotland. We want to work with farmers and food producers to address any impacts that could potentially arise for them.

We must also take forward this work in a way that meets our Good Food Nation ambitions and outcomes. This means that whilst the main aim of this work is to improve the affordability of food for households facing cost of living pressures, we will also take into account how a food price cap could support or affect our health, climate change, economic growth and child poverty, amongst other issues.

We benefit from a competitive retail market in Scotland. Many food retailers have socially responsible practices which support people to make choices about their food. But further collective action is required. Whilst food price inflation has eased from recent peaks, many households continue to face challenges affording essential food items, and it is possible we could face future high inflation.

We recognise that new regulation of this type can be complicated. We must balance many different interests and ensure any new rules are easy to understand and can be implemented in a way that is effective, proportionate and practical. We wish to work with the retail sector to design a scheme which is informed by their practical experience.

The way the proposed price cap could work includes decisions on some of the following:

• How prices would be set and how capped prices should change;
• The shops or retailers in which price caps would apply;
• The goods that would have a price cap applied;
• How we can make sure the rules are followed (compliance) and what penalties might exist for not following the rules (non-compliance).

To help support you in providing your views, we have proposed an example of how this could look in law as part of this consultation.

To inform the further development of policy and future legislation, we invite evidence and views from:

• the general public;
• poverty and equalities campaigners and representatives;
• retailers and other businesses in the retail supply chain;
• hospitality;
• producers, processors and food manufacturers;
• third sector organisations;
• local authorities and other regulators;
• academics;
• any other interested parties.

Why are we consulting?

The Scottish Government is seeking views on the introduction of a statutory price caps on essential food items sold by large supermarket chains. We also want to gather evidence on how any scheme could be made to work effectively and proportionately. We are seeking detailed feedback from all interested parties, to arrive at the best possible outcome, balancing impacts for all those involved.

We appreciate that the introduction of controls on the price of goods is a direct intervention in the market. The design of such a policy requires careful consideration. We are therefore seeking views on:

• What types of Government interventions, including but not limited to price caps, would be best to help with food affordability, particularly for those in low-income households;
• How any caps on food prices could be made to work effectively and proportionately; while balancing impacts for the public and others;
• What approaches to price capping could help us to achieve our aims;
• How a price cap scheme could work, for example in the choice of items that would be capped or how prices are set;
• How to prevent or minimise any unintended effects of a price cap.

Consultation structure

The rest of this consultation paper is set out as follows:

Chapter 1: sets out more detail about our aims and intentions.

Chapter 2: sets out a proposed model for price caps and alternatives.

Chapter 3: considers which goods could be subject to a cap and how that might be determined.

Chapter 4: deals with which businesses could be obliged to comply with price cap requirements.

Chapter 5: considers how the level of price caps could be set.

Chapter 6: relates to support for primary producers.

Chapter 7: discusses compliance, and potential penalties that could apply in the event of non-compliance.

Chapter 8: deals with issues of monitoring and evaluation.

Chapter 9: seeks views on the future operation of any scheme and wider considerations that may inform ongoing policy development.

Annex A: contains illustrative draft legislative provisions for a price cap on essential items. This annex should be read in conjunction with the issues and questions discussed in relevant chapters.

Annex B: summarises some approaches to price caps on essential food items from other countries for reference.

Each chapter contains a series of questions which will support future choices about the proposed scheme. This paper should be referred to alongside the consultation questions on Citizen Space.