This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.

This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from The i Paper. If you’d like to get this direct to your inbox, every single week, you can sign up here.

The supermarkets have been asked by the Government to agree to voluntary caps on essential foods prices. The deal is reportedly that in exchange for this, the Government will ease its new packaging regulations and maybe delay plans which would force food manufacturers to produce more healthy products.

It is, on the face of it, a positive idea. The Government is under huge political pressure to do something about the rising cost of food, with prices already climbing faster than inflation as a whole, and expected to climb further still through the coming months. The Government will also delay a rise in fuel duty to help contain the rise of the price of petrol and diesel at the pumps.

But for many people, food is even more important than fuel. In addition, poorer households spend a higher proportion of their income on food than richer ones. In Scotland, the SNP leader John Swinney plans to put a legal cap on some essential food items sold in large supermarkets. So, will the Government’s voluntary version work?

There is, inevitably, a huge problem. The Government cannot cut the price of food directly by cutting VAT on it, for unlike nearly all European countries, there is no VAT on most types of food in the UK. Partly as a result, the UK has the cheapest food in Western Europe and Scandinavia, with only Hungary, the Czech Republic, Bulgaria, Poland, Slovakia and Romania enjoying lower prices. Food is much cheaper than the US too. That’s food and non-alcoholic drink, for the bargains in European supermarkets are on the beer, wine and spirits shelves.

You have to be........

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