Food price intervention: questions answered

This signifies a national effort to address the current logistical challenges, recognising their magnitude and the need for robust measures to overcome them.

Starting from 1st February, a collaborative agreement between the government, importers, and major retailers will result in a 15% reduction in the prices of up to 400 essential food items.

Prime Minister Robert Abela and Economy Minister Silvio Schembri announced this initiative during a news conference on Thursday, highlighting the focus on lowering inflation. The recommended retail price (RRP) of various products will be slashed under this arrangement.

The Journal followed the Prime Minister’s response to questions that were put forward by the press.

Why were the specified food items chosen?

There are 15 categories, comprising around 400 essential food products. In other words, we are referring to 400 products identified as the most sought-after by consumers in Malta through an analysis, making them susceptible to price increases.

This initiative is robust because it takes the recommended retail price from the end of October last year, locks it, and applies a 15% reduction. This results in a significant decrease and a strong stability provision for the most essential products.

The most important criterion remains that of establishing fairness. The inception was a standpoint where all the experts consulted advised against getting involved in these discussions. They argued that attempting something seemingly impossible due to legal constraints and the competitive market was unwise. Despite these warnings, the Government acknowledged the people’s frustration and took action.

The Givernment is determined not to let legalities, limitations, or the mindset of “this cannot be done because it has never been done” deter it from implementing an initiative that is greatly needed and will provide substantial relief to people.

Why is this scheme there up to the next Budget?

This is because, until that point, Eurostat predicts a decline in the inflation rate. The measures implemented through government intervention align with this prediction.

Among the 400 listed products, the Government is prioritising the most essential ones – those vital for sustenance – and it stands to reason that it is impossible to include all food items. Otherwise, the administration would have been in a situation in which food importers would be unable to cooperate with it. Therefore, the Government’s focus has been on the most crucial items.

This initiative is exceptionally strong, and the Prime Minister expressed confidence that it will not be subject to abuse. This historic agreement was driven by a cooperative spirit among importers who acknowledged the government’s support they received during challenging times. They expressed a commitment to reciprocate by aiding the people when needed.

Furthermore, incentivising the people will lead to increased consumption, fostering trust, and contributing to the continuous growth of the economy. Therefore, despite the sacrifices supermarket owners and food importers may make, this initiative simultaneously instils confidence in consumers to maintain their purchasing habits. Ultimately, it will strengthen their purchasing power, creating a positive impact for everyone involved.

Are importers and retailers going to receive additional assistance from the Government?

In the case of small shops, yes; the Government will be providing assistance. It aims to help all shops with an annual turnover of less than €800,000, understanding the impact on individuals directly reliant on these businesses for their livelihoods. The Government want to avoid any undue suffering.

Reflecting on 2020, during the onset of the pandemic, the Government faced a crucial decision. Some economists suggested letting the market self-regulate, where those who can afford it thrive and those who cannot suffer. However, guided by socialist principles, the Government chose to channel its full financial support towards both businesses and individuals; a strategy that proved successful.  Today, as the administration approaches businesses again, it conveys the message that the time has come for them to collaborate with the authorities.

The Government envisions a synergistic effort where it works together with businesses to assist the people. Thankfully, this approach was well-received, though not without some heated discussions and initial reluctance from some. Through persuasion and effective communication, agreement was successfully reached.

Is there any assurance that prices of other products not listed will not increase, even by a fraction unnoticed by the consumer?

The Prime Minister voiced his confidence in the goodwill of businesses, including both food importers and those managing supermarkets. “I trust they will refrain from employing any methods to undermine the success of this initiative,” said Robert Abela. “Simultaneously, our authorities will diligently carry out their responsibilities, particularly in terms of price surveillance. They play a crucial role, not only in today’s context but also in unrelated matters, such as medicine pricing.”

He added that he has witnessed efforts to discount 50 medicines. Similarly, authorities like the MCCA and other responsible bodies, will actively engage in preventing any artificial inflation of prices. They will conduct regular inspections in supermarkets, ensuring there is no abuse and prices remain fair.

Some are expressing concern that the food categories could be healthier, citing the inclusion of French fries but the absence of fresh produce.

Indeed, while French fries are included, there is a diverse range of vegetable products, chicken, beef, and a variety of other items among the 400 listed products. Additionally, items like tuna, considered relatively healthy foods, are part of the selection.

In the discussions with these companies, the agreed-upon timeframe of 9 months was established. Was there any consideration or indication during these discussions that, in the event the forecast does not align with expectations, an extension of the agreement might be considered?

The Prime Minister said he cannot rule out the possibility. When Budget day arrives and the situation is assessed within the budget period, if Eurostat’s forecast does not materialise and inflation remains higher than expected, an extension of the agreement or the introduction of additional initiatives may be necessary. The crucial aspect, in his view, is the Government’s commitment to aiding the people.

In 2020, had the authorities abandoned both the people and businesses, despite the advice to prioritise financial concerns, the country would be facing a dire situation. The decision to support people and businesses not only bolstered their finances but also fostered trust.

It was a bold decision that yielded positive results, as trust in businesses, people, and investments remained high. This synergy proved effective, and the Government intends to continue working with this formula moving forward.

If the inflation rate remains high, would the Government consider extending this same scheme?

Yes, ideally Eurostat’s forecast materialises, leading to a continuous decrease in inflation. In such a scenario, government intervention alongside businesses may no longer be necessary. However, if this does not occur, the Government is not ruling anything out. As the country approaches the next Budget in October, the Government aims to ensure that the country’s finances permit it to continue supporting the people. This emphasises the crucial role of economic growth.

The Prime Minister said that he consistently stress the importance of economic growth so that, whenever the Government is called upon to assist the people, its response is always in the affirmative, pledging to provide more support than requested. This initiative aligns with that principle.

The Government aims to continue on this path. Moreover, it strives to prioritise assistance for those in our society who have the least means. The measure announced this week not only brings stability to the market in a general sense but primarily focuses on assisting those who have fewer resources in our society, ensuring they can afford the basic necessities of food.

What about small shop owners?

Small shops are, indeed, included in this scheme. In fact, a financial support programme has been initiated specifically for them. While the signatories of Thursday’s agreement do not receive any financial support as part of the agreement, small shops with annual sales of less than €800,000 will benefit from monthly financial support throughout the duration of this scheme. The government is committed to providing this support until the next Budget and, if necessary, it will consider extending it after a revision.

It’s crucial to emphasise that grocery stores hold a special place in the government’s considerations, as they are integral to our communities. The majority of these stores are operated by individuals who derive their income from them. This is precisely why this scheme was introduced to assist them. While they continue to serve the people, their specific challenges are being recognised, acknowledging that their profit margins are constrained due to the size of their businesses. The authorities’ intention is to support them and address their unique needs.

But were small business owners consulted?

Not only were they consulted, but a support scheme was launched for them. A letter was sent out, and support offered. The decision to participate in the scheme rests with these businesses.

Additionally, discussions were held with organisations such as the GRTU and the Chamber of SMEs. The Government considered their input, and it’s essential to note that these businesses have the option to participate, using the simplest electronic means available. Upon participation, they will receive financial compensation.

Currently, there are 200 establishments as part of the agreement, and this number will continue to grow, encompassing both small and large business owners. It’s worth noting that there are still a few larger establishments that have not joined the agreement. This initiative is designed to be inclusive and not disadvantage any business, while strongly safeguarding the interests of the people.

How did the consultation process take place?

The Government’s primary approach involved direct engagement with business owners themselves. While it also held discussions with representative associations, it recognised the importance of direct dialogue. Despite some expressions of concern about potential interference in the free market and legal implications, the administration was determined to address the pressing issue.

The government has consistently provided various forms of assistance, such as stabilising energy and fuel prices, offering aid on wheat and cereal prices, and injecting funds into people’s pockets through pensions, children’s allowances, and caregiver grants. However, the persistent fluctuation in prices of essential products was a surreal phenomenon that needed to be addressed. Faced with resistance during initial discussions, the Government pivoted to engage directly with business owners, who not only cooperated fully but also became active contributors to the initiative. The impetus for this dialogue came from them, and their collaboration was instrumental in moving the discussion forward.

The administration recognised the importance of the government’s strategy to support the clientele of these businesses. Its approach was resolute, without any compromise, reflecting a firm stance. This marked a moment when the business community, understanding the government’s commitment to assisting the most vulnerable, willingly contributed to finding a solution.

The country has achieved a historic agreement, which smaller businesses can also sign in the coming days. The door remains open for further discussions together with agreement signings. This signifies a national effort to address the current logistical challenges, recognising their magnitude and the need for robust measures to overcome them.

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