Ideas for Electability: Cap how much profit can be made on essentials

By Kathryn Rose

Profits being made by some supermarkets and food shops are not only costing customers a fortune; they are also costing the welfare state a fortune and increasing global poverty. Whilst supermarkets wouldn’t run if they didn’t make some profit, it is time that there was a cap on how high the percentage profit these vast institutions can make on non-luxury food items.

Essential items of non-designer clothing that are necessary to appear in public decently attired, and are sometimes built upon the backs of sweatshop workers, should also be subject to this profit-cap.

If the profit cap should happen to be exceeded, then those who make the excess profit should have a legal obligation to pay the excess to those who produce the product – whether they are farmers or garment workers.

Consumers throughout the country would benefit from being able to afford food and basic clothing in these times of fiscal constraint. Exploited producers would get a better deal as exploitation would yield little financial gain.

Those on higher incomes would also benefit because the cost of running the welfare state would be reduced; even those who purchase a vast number of luxury items would benefit from the fact that the welfare state wouldn’t need as much money in order to provide those dependent upon it with enough to live on. Since it would only be profit levels rather than overall income affected, the income spent on staffing would be unaffected and any cuts in staffing would not financially benefit the company. Any cut in staffing would simply result in these companies having to give more money to their suppliers. The only people to lose out from these arrangements would be those who own the supermarkets. The cap could be set at a level whereby small businesses fall below it and needn’t worry whilst huge multi-nationals are affected.

If the cap was a pre-condition of trading in this country from stores of a certain size, rather than being based upon where the company’s head office is located, then the law couldn’t be evaded by having a head office in another country.

The Independent ran an article on how supermarkets treat their suppliers on 10th October this year:

“The supplier, who did not want to be identified, said he could not afford to offer better terms to Asda, and was consequently penalised. “They carried out their threat of reducing shelf space for our products and we were seen as a non-supportive supplier,” he said. “We have suffered because of it, but it was either that or lose money”.

Meanwhile the Daily Mail was scandalised by supermarket profits back in 2007:

“Few supermarket shoppers crosscheck prices with small, independent shops, but a trip to a greengrocer, butcher, fishmonger or market stall can be a revelation. Swop your fresh food shopping to the independent sector and you can expect to save anything from 20 to 40 per cent…Organic and Fairtrade lines sell for more than the standard equivalent because they retail for a premium price. And as supermarkets expect to make a profit margin of at least 36 per cent on anything they sell, the higher the cost then the greater their net profit.”

Such articles suggest that there may be some support for such a measure.