Food price cap plans clash with Scottish business ambitions

Share Two set-piece moments in the Scottish Parliament calendar matter most to business: the Scottish Budget and the First Minister's Programme for Government, the latter of which was unveiled last week. Business often approaches both with trepidation. Geo-political turbulence, weak domestic growth, and spiralling costs mean appetite for further burdens is non-existent. There was therefore relief when First Minister John Swinney made several welcome announcements including measures to boost housebuilding, speed up consent for major investments, and continued funding for Police Scotland's Retail Crime Taskforce. Two things in particular stood out: public sector reform and the pledge to 'make Scotland the best place to do business'. On reform, Mr Swinney is absolutely right to address the scale and cost of government. The vast number of health boards and public bodies are to be culled, and even Scotland's thirty-two councils could be slimmed down. Read more: As the Scottish Retail Consortium has argued, rationalising public bodies, premises and civil service headcount should put devolved finances on a firmer footing and lessen pressure for tax rises that could stymie growth. Ministers should be bolder however, including revisiting the policy of no compulsory redundancies. As The Herald recently reported, the civil service has grown over the past year despite a pledge to trim the workforce. The First Minister's vow to 'make Scotland the best place to do business' is equally welcome. So too is the pledge to make Scotland a "competitive place to do business" and "reform the regulatory landscape to make it easier to do business". The challenge of course is turning fine aspirations into reality. Most obviously, statutory food price caps jar with that vision. Alongside the legislative programme, government published a consultation paper on price caps to allow Ministers to set prices at the till. Mercifully, the invective that accompanied the policy's unveiling in April has been dropped. Read more: Five months on and what's clear from the consultation is that Ministers haven't the foggiest idea how the policy would work. In the intervening period civil servants have made a valiant effort to make something out of remarkably little, but as the Americans say, 'where's the beef'? After five months we still don't know which fifty products will be in scope, what prices would apply, how long caps would last, or how the scheme would be delivered. One of the few details to emerge is that Ministers are minded to target larger grocers. The consultation reads more like a briefing paper for Ministers, setting out pros and cons on a range of aspects but without gripping the cost pressures facing retailers and food producers. Statutory employment costs across the UK – for retail alone – have risen by £6.5 billion in two years, while larger Scottish stores pay £54 million more in business rates than equivalents in England. Croatia and Hungary are cited as examples where price caps have been tried, but neither is reassuring. Grocery prices in Croatia are still less affordable than in Scotland, while Hungary introduced price caps by decree during a state of emergency under populist leader Viktor Orban. Read more: Food inflation was running at 20% and 45% respectively when price caps were brought in, here it is under 3%. European courts later found Hungary's scheme to be unlawful and Mr Orban has since been booted out of office by voters. Neither model looks appealing. The consultation paper does confirm just how fiendishly complex and onerous price caps would be. It highlights risks including higher prices for non-capped goods and domestically produced food being displaced by cheaper imports. It's late November deadline kicks into touch Mr Swinney's promise to have price caps 'in place by the end of the year'. Tomorrow ministers convene a "summit" of grocers, food producers, and poverty campaigners to discuss the issue. It follows a resounding rejection of price caps by retailers, food manufacturers and wholesalers, with twenty-three trade bodies writing to the First Minister. Retailers already compete fiercely to keep prices down which is why we have the most affordable grocery prices in western Europe. Ministers should use the summit to drop price caps and work with industry to reduce the policy burdens driving up the cost of producing and distributing food. Retailers support the First Minister's ambitions on competitiveness and public sector reform. It is now for ministers to take a pragmatic approach and deliver. Retail stands ready to assist. David Lonsdale is director of the Scottish Retail Consortium.Share Get involved with the news