Cabinet tensions have broken out over a plan for Britain to unilaterally cut tariffs on food imports, after the price of groceries in the UK rose 5.9 per cent in the past year.
Boris Johnson, prime minister, is backing a proposal to cut tariffs on foodstuffs such as rice and oranges, which are not produced in large quantities in Britain, to cut the cost of living.
Anne-Marie Trevelyan, international trade secretary, is resisting the plan, arguing Britain would be throwing away its leverage in trade negotiations with third countries if it unilaterally cut tariffs.
Jacob Rees-Mogg, Brexit opportunities minister, is pushing the idea of unilateral tariff reductions, arguing that Britain’s freedom to pursue its own trade policy is one of the gains from leaving the EU. However, his critics argue that the border friction that arose from Britain’s exit from the EU is a contributory factor to higher shop prices.
“Jacob is a big supporter of unilateral action of tariffs,” said one government official. Another confirmed Johnson was sympathetic to the move, adding: “The Department of International Trade aren’t fans.”
Sam Lowe, director of trade at the consultancy Flint Global, said the DIT had a “bad recent experience” of proposing a unilateral cut in most tariffs after Brexit.
He said Canada walked out of trade talks saying “why would we pay for something you’re giving to everyone else for free”. DIT insiders say a lot of technical work would be needed to implement the tariff cuts.
Rishi Sunak, chancellor, is said by colleagues to be open minded about the idea of cutting household food bills, even if it might lead to lost revenues estimated to be in the low hundreds of millions of pounds.
Market researcher Kantar on Tuesday said the rise in food prices over the past year was equivalent to £271 a year for the average household, the biggest increase since December 2011.
The group said customers were increasingly turning towards discounters such as Aldi and Lidl to try to make their budgets go further.
Johnson on Tuesday chaired a cabinet meeting in which ministers were ordered to come up with “innovative ways to ease pressure on household finances” without running up new costs to the Treasury.
The ideas will be discussed at a meeting of the government’s “domestic and economic strategy committee” in a few weeks’ time, the government said. The tariff-cutting plan is not yet official policy.
Sunak insisted at the meeting that any new measures had to be funded from existing departmental budgets, warning that extra government spending now would further fuel inflation.
Although the chancellor is expected to unveil extra support in the autumn to households facing spiralling energy bills, Sunak is determined to contain spending now.
Ministers came up with a range of ideas at the cabinet to contain the cost of living; Johnson suggested cutting childcare costs by requiring fewer carers to look after each child.
That policy was previously proposed by Liz Truss, former childcare minister and now foreign secretary, during the Conservative-Liberal Democrat coalition government, but it was blocked by the then deputy prime minister Nick Clegg.
Grant Shapps, transport secretary, suggested reducing the need for annual MOT certificate, while Rees-Mogg claimed the government’s 2050 “net zero” target was pushing up energy bills. He was rebuffed by business secretary Kwasi Kwarteng.