Worst to come for food price rises, Tesco boss says

The chairman of Britain's biggest supermarket has warned "the worst is yet to come" on rising food prices.

Tesco's John Allan told the BBC he was aware people were on very tight budgets and having to choose between food and heating "troubles us".

But he said grocers and suppliers were not immune from rising energy costs.

Mr Allan also defended Tesco against claims from food poverty activist Jack Monroe that the costs of basic staples were rising faster than other goods.

He estimated the amount of household income spent on food was on average about 9% last year, but could rise to about 15% by the spring.

But Mr Allan said he also recognised food took up a bigger proportion of household budgets for people on lower incomes.

People having to choose between heating their homes and feeding their families "troubles us, and I'm sure troubles many people... That's clearly not a situation that any of us should tolerate," he said.

A report earlier this month from the British Retail Consortium said food inflation accelerated to 2.7% in January, up from 2.4% in December.

Annual UK inflation is currently 5.4%, a 30-year high, and is predicted to top 6% in the spring. Meanwhile, the cost of energy is set to go up by 54%, prompting the chancellor to unveil a support package for households last week.

Mr Allan said: "I think the combination of increasing energy prices, the impact of National Insurance increases [in April] on people's incomes, and to a much much lesser extent increasing food prices, is going to squeeze the hardest-up still harder."

The pressure facing poorer households was highlighted by Jack Monroe this month in analysis she said showed that everyday essentials, such as the cheapest own-brand pasta or rice, were going up in price by more than the official inflation rate.

Mr Allan said he could not speak for the rest of the industry, but it was untrue at Tesco. "Price rises depend on individual products - coffee is going up, but other things like the cheapest tin of baked beans in Tesco is cheaper than it was five years ago," he said.

"As far as Tesco is concerned, we have 2,100 products on our lowest price. We're either price matching against Aldi, or it's our own exclusive at Tesco range. That number [of products] has been increasing in recent months rather than decreasing, so it's not true," Mr Allan said.

He also rejected suggestions from the Bank of England's governor that people should not ask for big pay rises because it was feeding into higher inflation.

Andrew Bailey's comments to the BBC were branded a "sick joke" by the GMB union, while the TUC said the call was "ill-founded".

Tesco is the UK's largest private sector employer, with about 300,000 staff. Asked if the company would be telling employees to follow Mr Bailey's advice, Mr Allan said "no, absolutely not".

He said: "We are not telling people not to take a pay rise. We think our colleagues deserve pay rises. We have given 5-6% raises to our distribution colleagues, and we're in the midst of negotiations, which will probably lead to a similar result for our store colleagues."