RACHEL Reeves has reportedly U-turned on a proposal to freeze the prices of essential groceries following backlash from supermarkets.

The measure proposed by the Chancellor would have shops limit the cost of everyday staples like eggs, bread, and milk.

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Rachel Reeves has U-turned on a plan to cap food prices after backlash from retail heads

The CEO of M&S, Stuart Machin, called the plan ‘completely preposterous’ Credit: Oliver Dixon/Marks & Spencer/PA Wire

But after a fierce reaction from senior retailers, Reeves will now not include the voluntary cap initiative during her speech on Thursday.

Marks and Spencer chief executive Stuart Machin described the plan as “completely preposterous”.

Clive Black, head of research at Shore Capital, said the initiative was “lazy, populist scapegoating”.

“The biggest source of inflation is the British government. If you take just the extended producer responsibility legislation — that’s £80mn of costs for Tesco,” he said.

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With Brits feeling the cost of the Iran war in their wallets, the Treasury is looking for ways to keep people financially afloat.

The supermarket industry warned that food prices could rise to as high as 10 per cent due to the war in the Middle East.

The proposed measure, which was in its infancy, was aimed at easing the cost of shopping.

The Government has spent some time with retail bosses to see if they would voluntarily cap their food prices.

Newly-published inflation figures show the annual rate of food price rises was 3 per cent in April.

To get supermarkets on board with the plan, regulations on packaging and new rules of healthy foods would be lifted or delayed.

Reeves was expected to introduce the plan during her speech on Thursday while addressing the cost of living crisis for Brits.

But after a stern word from retailers opposing the proposal, it is reported that she will cut it out of her address.

One industry source said: “Labour has showed a fundamental failure to understand how markets work.

“You can’t force retailers to sell food below market costs.”

Andrew Bailey, the Governor of the Bank of England, told a parliamentary committee that the idea risked “artificially moving prices relative to costs, and that is not a sustainable thing in the long run”.

There have been claims that the major supermarkets have profiteered from the cost of living crisis.

A poll by the Institute of Economic Affairs of 3,000 individuals found that people believed that supermarkets were making profit margins of up to 50 per cent.

Despite this, the Competition and Markets Authority watchdog said that inflated grocery prices were not being driven at an “aggregate level by weak competition”.