Cost of living: MPs call for price controls and tax on ‘astronomical’ supermarket profits

Price controls should be brought in on essential supermarket items to ease the cost of living crisis, a group of Labour MPs has urged.

Politicians, such as the former Shadow Chancellor John McDonnell and leadership candidate Rebecca Long Bailey, are also calling for a special tax on the ‘astronomical’ profits recorded by big supermarkets since the pandemic.

In total, the ‘big four’ supermarkets - Tesco, Asda, Sainsbury’s and Morrisons - recorded almost £3.5bn in post-tax profits in their most recent accounting periods, while their highest-paid directors earned a combined £17m.

The senior Labour figures have warned that rising prices could see people unable to afford the basic food they need to survive.

This comes after a NationalWorld investigation found supermarkets hiked the prices of basic range food and drinks products faster than inflation.

Inflation hits 10% for first time in 40 years

New CPI figures out this week show the rate of inflation hit a new high again in July, reaching 10.1%, while the Retail Price Index (RPI) was even higher, at 12.3%.

As costs are rising, real-terms wages are falling in most parts of the country, with workers outside London experiencing the sharpest pay slump since records began in 2001 in the three months to June.

While inflation has to a large extent been driven by major increases in energy bills, this has had a major knock-on effect on all kinds of goods and services, which consumers have felt particularly sharply at supermarket checkouts.

This has hit the poorest shoppers particularly hard, with research carried out by NationalWorld showing that value range products have increased in price by more than the rate of inflation in recent months.

Meanwhile, the ‘big four’ supermarkets have recorded ‘astronomical’ profits.

The former shadow chancellor John McDonnell has called for the government to intervene by way of a special tax on supermarkets and price controls on staple items.

He told NationalWorld: “As food prices rise and food banks are overwhelmed, I am extremely worried that many more people will simply not be able to afford to pay for the basic foodstuffs they need to survive.

“Supermarkets are making significant profits and doing little to limit price rises. In past times of crisis like this governments have intervened to control prices and limit price rises on basic foodstuffs to help people get through. That’s what’s needed today.”

He added: “The profiteering supermarkets should take the hit, not hungry families.”

Tesco Group has biggest profit of £1.7bn

Tesco Group recorded the highest post-tax profits in their most recent accounts filings, up from £1.2bn in 2020/2021 to £1.7bn in 2021/2022.

The group’s highest paid director’s total remuneration package was worth £4.7m in the year up to February 2022.

Asda Group posted profits of £1bn in the year up to 2021, while Sainsburys and Morrisons saw markedly lower profits of £677m and £94m respectively.

Asda, Tesco and Sainsburys saw significant increases in profits in their most recent accounting periods compared with the previous year.

The highest-paid directors at Asda, Sainsburys and Morrisons had remuneration packages worth £5.4m, £3.8m and £3.1m respectively.

Former Labour leadership contender Rebecca Long Bailey is among MPs calling for a special tax on supermarket giants to help ease the cost of living.

She told NationalWorld: "It’s time for a tax on the astronomical profits of big supermarkets and other big businesses that have hiked up prices for shoppers.

"There must also be strict legally imposed limits on the prices of many foods, and other essentials during this crisis.

"These are desperately needed measures to protect families as the cost of living crisis get worse by the day."

While Richard Burgon MP told NationalWorld that a special tax on supermarket profits could also help tackle food poverty, by funding an extension of free school meals.

The MP for Leeds East warned that “soaring food costs” will inevitably lead to millions of people skipping meals and cutting back on other essentials.

Polling carried out by YouGov in May found that around one in three people (31%) were cutting back on staple food items even then, before inflation hit the heights it has now reached.

Burgon added: “The government shouldn’t stand by while this happens. We need bold measures that treat this as the emergency that it is.

“Price caps should not only apply to energy bills but to other essentials too including basic foods and rents.

“At the moment, we have the scandalous situation where people are facing sky-high food bills while supermarkets are making record profits. Food price caps would reverse that to ensure that millions of people can afford the essentials.”

Polling carried out by Opinium back in February found overwhelming public support for the idea of price controls on essential items.

They found that 71 per cent of voters were in support of price controls which place limits on what companies could charge for certain goods and services, including  energy, housing and other essentials.

Just seven per cent opposed the measure, which had broad support across the political spectrum, even higher among Conservative voters (76 per cent) than among the general population.

Supermarket value range prices rising faster than inflation

Labour MSP Katy Clark is also among those calling for action.

She told NationalWorld: "As hard pressed families suffer there is no excuse for either the UK or the Scottish Government not to use their powers to introduce these measures."

The recent research by NationalWorld found that UK supermarkets put up prices on their basic range food and drink products faster than the overall rate of inflation in the three months to June.

We revealed prices for value range food and non-alcoholic drinks across five major supermarkets rose by an average of 3.6% between April and June.

Office for National Statistics (ONS) figures show the rate of inflation – as measured in the Consumer Prices Index (CPI) – stood at only 2.7% for the same goods during the period.

Extensive tracking of prices across a wide range of products over the last few months also showed that supermarkets have raised prices on half of value range food and grocery products since April.

Since April, more than half of the value range items on offer across five supermarkets have become more expensive – 307 out of the 569 products (54%) that had prices displayed online in both April and August.

The average price rise for the products that saw increases was 15.1% across the five-month period – though 19 items have risen by at least a third (33%), with two products doubling in price.

Supermarkets imposed 102 price rises between April and May, 175 between May and June, and 138 between June and July.

Isabel Hughes, policy engagement manager at the Food Foundation, told NationalWorld that surging prices were putting household budgets under intense strain.

“‘The cost of living crisis doesn’t just mean that low-income households are buying fewer luxuries,” she said.

“More and more households are now unable to afford even essentials – food, let alone shampoo or washing powder.

“People are already facing severe hardship, and as winter approaches we’re facing an impending crisis which needs urgent attention and action.”

HM Treasury spokesperson said:“We know that rising prices caused by global challenges are affecting how far people’s incomes go, which is why we are providing £37 billion worth of help for households which is being phased in throughout the year.

“As well as direct payments worth at least £1,200 for eight million of the most vulnerable households, we have taken action so people keep more of what they earn including changes to the Universal Credit taper rate and a National Insurance cut worth up to £330 a year for the typical employee.”