Earlier this month, Tesco chairman John Allen told listeners of the Today programme that there was “an overwhelming case” for a windfall tax on energy companies. Allen’s voice joined a growing chorus: as interest rates and energy company profits simultaneously hit record highs, calls for such a tax have been building steadily, with chancellor Rishi Sunak facing pressure from the public, opposition parties and even prominent members of his own. The message appears to be getting through: speaking to the online forum Mumsnet, Sunak hedged his insistence that he would not introduce a windfall tax, adding that in the current climate “nothing is ever off the table”.
The case for such a tax is overwhelming. “Eating or heating” has become the grim catchphrase of the present crisis, with around 250,000 people expected to slide into destitution over the next year, taking the number of people in Britain living in extreme poverty to 1.2 million. Yet as this catchphrase suggests, there are two areas where people are feeling the pinch most acutely: food and energy. We’re acting as if we can only do something about one of them.
For as John Allen chimes in on the need for a windfall tax, he’s been enjoying a bit of a windfall himself. Tesco recently reported that between February 2021 and February 2022, it more than doubled its pre-tax profits to £2.2bn. Last year the company’s chief executive Ken Murphy took home £4.75m, including the highest bonus awarded by a supermarket since 2016. The firm played down its financial wins, insisting there were “significant uncertainties” as they try to keep prices in check. But with average food prices rising 6.7%, and oil-based products like margarine up 24%, it’s clear their profits always come first. As Tory MPs blame the poor for failing to feed themselves, suggesting they “buy value brands” and learn to cook, nobody is suggesting the obvious: make the supermarkets pay.
Despite both experiencing huge pre-tax profit growth last year, there’s been no real commitment from the two largest supermarkets Tesco or Sainsbury’s to lower prices – unlike competitors Asda and Morrisons, who both announced price cuts to hundreds of products. The reason? They don’t have to. For years, Tesco has accounted for around 27% of the market, which most economists agree constitutes a monopoly; Sainsbury’s, Asda and Morrisons together made up another 38.6%. To put this in perspective, in 1979, these “big four” supermarkets collectively held 14.8% of the market; today, it’s 65.9%.
This marks a transition of power in the food system that began half a century ago. In the early half of the 20th century, food manufacturers were emerging as kingmakers, capitalising on new processing techniques, the advertising boom and growing urbanisation to sell branded goods to British people. In 1964, the Tories passed the Resale Prices Act (RPA), which prevented manufacturers and suppliers from setting the retail price of their goods, which was stopping large retailers from using their buying power and economies of scale to undercut smaller shops. Ironically, the measure was proposed by the future Conservative prime minister Edward Heath, then president of the Board of Trade, as a solution to lower prices during a balance of payments deficit and a time of economic uncertainty. Others have since argued Heath’s measure essentially institutionalised the growing power of large retailers, including supermarkets, over both smaller retailers and manufacturers. Either way, the RPA was a turning point in the growth of supermarkets, making them key players in our food chain.
The capitulation of government to large food retailers has defined this country’s food policy ever since, an approach summarised by emeritus professor at the Centre for Food Policy Tim Lang: “Leave it to Tesco, et al.” For decades supermarkets have been allowed to push down prices, stretching producers to breaking point, propping up a destructive industrial food system, and distorting the true cost of food. In an ideal world, we should be paying more for our food, not less. But cheap food stacked high means times of plenty – and the politicians were more than happy to let the supermarkets keep food prices low while real wages stagnated and economic crises abounded. At what cost?
For the past 50 years, supermarkets have defined how we behave as consumers, replacing shop workers with consumers through self-service and, more recently, self-checkout models. Rural and urban geographies have been restructured, as out-of-town supermarkets have decimated local high streets and increased car use. The RPA has locked farmers into supermarket contracts at low prices, leaving them heavily reliant on government subsidies to break even; in 2020, subsidies made up at least 47% of total farm profits in the UK, rising to an astonishing 95% in some regions.
Meanwhile, vertical integration – the ownership of one or more stages of the supply chain, e.g. supermarket-owned farms – has further consolidated supermarket power and squeezed out independent companies up and down the supply chain. And just-in-time supply logistics threaten the security of our food supply, leaving us vulnerable to shocks such as Brexit and the pandemic.
As these wider shifts have taken place, the slashing of benefits and consequent proliferation of food banks has created a food system in which charitable organisations and altruistic individuals are forced to prop up the failing state. And it’s been left to individuals like anti-poverty campaigner and influencer Jack Monroe to push for lower prices of essential goods during times of crisis.
For a brief time last year, it looked like government laissez-fairism was about to come to an end when the government announced a ban on the promotion of junk food in retailers. Last week it was reported that the government had decided to delay this measure and potentially scrap it altogether, in an attempt to ease the cost of living crisis – a real “Leave it to Tesco et al” moment. While the government could instead mandate promotions on healthy food or, better still, subsidise healthy foods for those on low incomes, the decision to backtrack on the first piece of substantial supermarket regulation in years is yet another surrender to supermarket monopolies.
When it comes to food prices, the government is out of ideas. And for many, out of time. The National Food Strategy, the first independent review of England’s food system for 75 years that was released in full last year, is generally seen as our best chance of changing the food system in this country. But only one of its 14 recommendations is related to retailers, calling for the introduction of mandatory reporting for large food companies – and the government is yet to formally respond to even these pitifully modest demands.
Right now, people are starving and we need bold measures. What might those be? Lang calls for decentralisation, breaking up the Tesco monopoly so that no one firm holds more than 15%, thus rebalancing power in the food system. But this won’t do the job in the short term. Food price caps, just like the energy price caps which currently exist in the UK, are another possibility – and are being implemented elsewhere in Europe as we speak. But as always, the government just doesn’t have the balls to take on the supermarkets.
Ella Thorold is a food policy master’s student based in London.