David Vance SubstackRead More
I wonder what you make of Scottish First Minister John Swinney’s food price‑cap plan? The headline pledge is simple: cap the price of 20–50 “essential” foods – bread, milk, cheese and so on – in large supermarkets, using Holyrood legislation justified on “public health” grounds. This is the sort of stuff you migh expect in a Communist State, so I suppose it is not THAT surprising for the SNP to tinker with the idea but it really is barking mad!
The Scottish Retail Consortium has branded it a “potty gimmick”, the Scottish Grocers’ Federation warns it could put smaller shops out of business, and the Institute for Fiscal Studies calls it “radical and risky”.
As someone who has spent all my commercial life in the food and drink sector, I can tell you that this is doomed before it starts.
First, basic economics. Food prices have surged because global agricultural and energy costs rose, not because Scottish supermarkets suddenly discovered greed. All economic studies shows that margins for food producers and retailers have stayed broadly stable; it’s the underlying cost of producing the food that has jumped. So if you then cap retail prices below a sustainable level, you do not magic higher input costs away – you either squeeze suppliers, or they quietly reduce supply, shrink pack sizes or downgrade quality. Furthermore, all international evidence on food price controls shows they don’t fix inflation; they distort price signals, discourage supply. Even worsen they can cause shortages once controls bite or are lifted.
Second, market distortion. Swinney says the cap would apply only to “large supermarkets”, with local convenience stores exempt. But you cannot rig part of a competitive market without spillovers. All the big retailers have convenience stores within their portfolios, so how can you apply this to just some convenience retailers
If Tesco and Asda are forced to sell capped “example” products cheaply, many customers will drive past local shops to buy staples out of town, undermining small retailers already hit by higher costs and regulations. Small stores will feel compelled to match prices they can’t sustain, threatening their survival. Meanwhile, supermarkets will respond by nudging customers towards uncapped, more profitable lines.
Third, law. Even Swinney admits the UK government will most likely block a statutory cap under the Internal Market Act. That is why he has already retreated towards a “voluntary” deal, begging supermarkets to act before any law is passed. Voluntary “caps” with no enforcement mechanism are not caps at all; they are PR exercises. If he pushes for a hard legal cap, Westminster can challenge it; if he settles for a soft voluntary scheme, nothing fundamental changes.
It is all sound and fury signifying NOTHING.
