Johnson’s plan to cut food tariffs would make little difference on grocery bills, analysis finds Business News

A government plan to cut tariffs on food imports will do next to nothing to help households cope with a cost-of-living squeeze that threatens to push more than a million people into poverty, new analysis shows .

Ministers hope the move – reportedly backed by Boris Johnson – will reduce grocery bills, which rose by an average of £271 last year and are set to rise further in the months ahead.

The Treasury has resisted calls to offer extra financial support to struggling families, asking departments to find ways to lessen the impact of the rising cost of living without spending money.

Nick Thomas-Symonds, Labour’s shadow international development secretary, said the tariff plan showed government ministers were “out of ideas to deal with the cost of living crisis”.

New analysis of official figures for The Independent by the University of Sussex’s Trade Policy Observatory, shows that removing import taxes on food products would only have a marginal impact on the prices of a narrow range of items.

It would also take several months for changes to occur, meaning it would not help those facing immediate cost-of-living pressures.

The majority of food consumed in Britain is already duty-free because it is produced in the UK or by trading partners with whom agreements have been negotiated, including the EU.

Around 66% of UK food imports come from the EU. Of the 34% of food imports from non-EU countries (£12.9bn), a fifth is already duty free. Three-fifths (£7.5bn) of imports are subject to tariffs above 5%.

Analysis by the Trade Policy Observatory shows that key UK imports from outside the EU, such as citrus fruits, are generally not subject to high tariffs, so any economy resulting from the government’s proposed policy would be minimal.

Goods that are currently subject to high tariffs, such as beef, lamb and dairy products, generally come from the EU.

Sam Lowe, director of trade at consultancy Flint Global, said lower tariffs on non-EU beef, for example, could lead companies to source from places like Brazil, but it’s a long way off. to be certain that they would and it would take time to form new relationships.

“For this to work, you have to assume that removing tariffs leads people to buy at a lower price from somewhere they weren’t buying before, and that they pass that saving on to consumers,” he said. he declared.

A move to cut tariffs on meat and dairy imports would also anger UK farmers who would face additional competition from lower-cost markets. Moreover, it would reduce the influence of the government when negotiating trade agreements with other countries.

Alternatively, the government may seek to reduce tariffs on a narrow range of products that are not made in the UK, so as not to upset domestic producers.

“It’s hard to find goods that we don’t produce in the UK that are also subject to duty,” Mr Lowe said. “You end up looking at things like rice and oranges.

“When you’re talking about so few products, it’s very hard to see how it would make any difference.

“You could potentially reduce the price very insignificantly for a small number of products.”

Although it is not possible to calculate a precise estimate of the extent of the reduction in import tariffs that would benefit buyers, the Treasury estimates that its tax revenue would fall by “a few hundred million” as a result.

If all these savings were passed on to shoppers, it would equate to less than a quarter per cent reduction of the £205billion Britain spent on food last year.

Nor would any savings be targeted to those most in need, as it would also help wealthier households.

Guillermo Larbalestier, a fellow at the UK Trade Policy Observatory, said: “The effects of removing import tariffs on food products will be quite small as most imports now enter duty free.

“Where they face tariffs, these are only significant in a few cases. Even if the product becomes cheaper by removing its tariff, there are also other processing, logistics, wholesale and retail margin costs, so the percentage reduction in consumer prices will be much lower. .

Government ministers are under increasing pressure to urgently support families facing steep increases in the prices of food and energy, among other essentials.

Measures reportedly under consideration include removing the need for motorists to renew their MOT every 12 months and increasing the number of children childminders can care for at one time.

These proposals would do little to help households facing increases in their energy bills of over £1,000 and food prices rising faster than wages.

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This notice was published: 2022-04-29 19:03:16

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