Economy Minister Pierre-Yves Dermagne (Francophone socialist) is on a collision course with the food sector. He wants to name and shame food producers if they do not cut prices. By mid-July, prices need to be lowered. However, not everyone is convinced the minister’s zeal to intervene is a good thing. Wouldn’t it be a better option to support people in need instead of intervening and cutting prices for all?
With the election on the horizon political parties are eager to distinguish themselves. Food prices remain at new historical highs. The socialist politician hopes to please his electorate by a strong intervention. VRT’s political commentator Fabian Lefever notes that the Francophone socialists are being whipped up by competition from the left from Labour Party.
A bill supported by the Flemish and Francophone socialists and the far-left Labour Party was shot down in the committee stage in parliament. The bill allowed for the government to impose maximum prices or margins the moment prices spiked abnormally. The price observatory that monitors price evolutions in Belgium would also be given more clout.
No political majority
Food inflation currently stands at over 16 per cent. A price freeze has been introduced in France, but there is no political majority for that kind of action here. Right-wing and centrist parties believe it’s a market-distorting measure. The risk is that products will disappear from the shelves if prices are restricted.
To be clear, there is already a procedure in Belgium allowing action if producers' margins become excessive. In such cases, the price observatory can alert the competition authority, which can then freeze prices. Only, this has never happened, partly as a result of the demanding procedure involved.
Investigating price margins
Failing to get parliament on board Dermagne has now decided to change direction. After meeting Fevia, the food industry federation, on Wednesday night, he started to use threatening language. If prices do not come down by mid-July, Dermagne will name and shame anyone who does not want to lower prices.
The minister believes that while commodity prices are falling, a number of companies are hiding behind inflation to keep shelf prices from following suit. Fevia denies this: according to the federation, margins are not rising. Dermagne has already ordered a survey from the prices observatory to scrutinise margins.
The question remains: what is the best approach? Blocking prices, or an alternative? According to Professor Xavier Gellynck, agricultural and food economist at Ghent University, government intervention is not a good idea.
"The food product market is a textbook example of competition; price fixing is not an issue. Our market works perfectly and government intervention is not desirable. You cannot speak of high profit margins" Gellynck says. According to the academic, the research commissioned by Minister Dermagne will show this.
The economist acknowledges that prices are high and will remain so. He thinks intervention is permitted and indeed necessary, but the approach should be different. He points to the energy vouchers as an example and advocates targeted support for those who are struggling. This is then a measure paid for by the taxpayer and not by the food sector itself.
Gellynck: "Social problems may arise because some people cannot cope with higher food prices. But measures for that specific group make more sense than a measure that benefits everybody."
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