Twenty-three business groups recently penned a joint letter begging First Minister John Swinney to ditch his statutory food price cap proposal. Their argument is the standard, lazy consensus of corporate defense: price caps are ineffective, ignore the root causes of inflation, and will cause supply chain chaos.
They are right that price caps are economic arson. But they are completely wrong about why the policy is dangerous, and their predictable whining plays right into populist hands.
If you think the debate is simply about whether government meddling disrupts supermarket supply chains, you are missing the entire game.
The Flawed Consensus of the Retail Lobby
The business coalition—representing everyone from the Scottish Retail Consortium to dairy and baking federations—argues that price caps fail to address high energy, fertilizer, and distribution costs. They point to post-pandemic shocks and geopolitical conflicts. They cry foul over packaging taxes and employment overheads.
This is all true. But it is an institutional comfort zone. It frames the issue as a technical mismatch of operating margins versus government interference.
It ignores the basic mechanics of how modern retail actually survives. Supermarkets do not operate on fat, juicy margins where they can casually absorb government-mandated price ceilings on staple goods like milk, bread, and cheese. Net margins in grocery retail routinely hover between 1% and 3%.
When a government forces a retailer to sell staples at an artificial loss or zero margin, the store does not simply swallow the loss out of civic virtue. Basic microeconomic reality takes over. The margin loss on regulated goods must be recovered somewhere else on the shelf.
Price caps do not lower the cost of living. They act as a hidden, regressive tax redistribution across the rest of the grocery basket.
The Unspoken Danger of Market Distortion
Imagine a scenario where a statutory cap is slammed onto basic dairy and bakery lines in Glasgow and Inverness.
Independent convenience stores and smaller regional supermarkets cannot absorb volume losses the way multinational retail giants can. Large chains might use the mandate to squeeze primary producers even harder down the supply chain—forcing local farmers and meat wholesalers into bankruptcy through predatory purchasing power.
Meanwhile, neighborhood shops simply delist the capped items because stocking them triggers a cash-flow hemorrhage.
The result? The exact opposite of what Swinney wants. Food deserts expand. Choice contracts. The vulnerable shoppers the policy aims to protect find fewer local options, higher prices on uncapped goods, and empty shelves where subsidized staples used to sit.
Price controls have a multi-millennia track record of failure, stretching from ancient Rome’s Edict on Maximum Prices to twentieth-century rent controls. Every time, politicians ignore the data because price controls offer a potent visual narcotic: immediate, visible political action.
Why Business Leaders Keep Losing This Fight
Industry groups lose public relations battles against populist politicians because they sound self-serving. When trade associations warn of "significant adverse consequences", voters hear rich corporations whining about profit margins while families struggle at the checkout.
Business leaders need to stop whining about regulations and start attacking the economic illiteracy of treating symptoms while ignoring structural state-induced cost inflation.
If John Swinney genuinely wants to slash food prices, a statutory cap is a lazy substitute for real structural reform. The state does not need to dictate the price of milk; it needs to dismantle the policy burdens it created in the first place. Business rates, high commercial property taxes, escalating packaging levies, and punitive employment regulations are what drive up the baseline cost of moving food from farm to fork.
Fix the inputs. Stop policing the outputs.
Price caps are a political weapon designed to shift blame for systemic inflation onto private enterprise. Until trade bodies have the courage to call out the government's own tax policies as the primary driver of food poverty, they will keep writing letters that end up in the recycling bin.
Stop begging politicians to be sensible. Start exposing the math that proves their policies starve the people they promise to feed.
