Updated 3pm with PN reaction.

Prices of up to 400 basic food items will be reduced by 15% from February 1 in a deal negotiated between the government, importers and major retailers to bring down inflation.

Prime Minister Robert Abela and Economy Minister Silvio Schembri told a news conference on Thursday that the recommended retail price (RRP) of the following products will be cut:

• brands of corned beef,
• cornflakes,
• cream crackers,
• fresh and frozen minced beef and pork,
• packed fresh and frozen pork chops,
• frozen raw chicken legs,
• frozen raw whole chicken,
• frozen peas, broccoli and spinach,
• imported black tea bags,
• instant coffee including decaff,
• skipjack tuna in vegetable, soya or sunflower oil,
• standard low fat and reduced salt vegetable spreads,
• straight cut frozen friable French fries,
• UHT skimmed, semi-skimmed and whole fat milk in cartons or bottle
• wheat spaghetti and penne packets of all sizes.

The prime minister said the government wanted to provide price stability and peace of mind for families. It had taken various measures to contain inflation and people could not understand how prices still went up.

Abela said he acknowledged the problems that food importers were facing, such as more expensive logistics.

Recalling assistance given to businesses during the pandemic and as a consequence of the Ukraine war, he said the government had now asked businesses to help reduce prices. He thanked importers and retailers, saying that when the economy grew, businesses would also see their business grow. 

"This is a strong message that we understand the people's concerns and act on them," Abela said. 

Schembri explained that 15 categories of food products, with 400 products, had been identified as the ones that are most susceptible to inflation and consumed most by the local population.

Extensive talks had been held with importers and retailers and an agreement was reached to lower the recommended retail price by a minimum of 15 per cent. The talks started in November with individual large retailers, with the government arguing these could give something back to society.

Times of Malta first revealed details of the scheme earlier this month with some insiders saying the move could backfire as operators will "probably" inflate the prices of other products to make up for any potential losses.

The same prices offered by importers to supermarkets will be offered to the smaller grocery stores.

Small stores, which do not benefit from economies of scale and do not have a turnover of more than €800,000 a year will be given €125 per month by the government to make up for the reduction in profits.

More than 200 shops so far have agreed to participate in the scheme and their number is expected to grow.

The new prices will remain in place until the next budget. The budget could then feature certain measures such as the additional COLA to see whether an additional form of assistance if needed, the minister said.

Furthermore, according to Eurostat projections, food inflation was expected to go down in the coming months and the scheme would no longer be needed.

Importers and major retailers signing the agreement with the government, watched by Prime Minister Robert Abela and minister Silvio Schembri. Photo Chris Sant Fournier.

The minister said that while baby milk and personal care products had not been included in this scheme for now it was worth remembering that the last Budget had featured assistance for families with certain difficulties, including an increase in children’s allowance to help with baby products.

Participating shops to be listed on website and will feature shopwindow label

Schembri said shops participating in the price cut scheme will be listed on a website where consumers would be able to see prices from February 1. The products will be marked with a label while the shops that are participating in the scheme will also have a sticker at their entrance.

He also announced that people with celiac disease can apply for vouchers for gluten-free food, with support varying between €65 and €70 a month for those over 60 or on social benefits. 

Price capping, not price fixing  

The  Chamber of Commerce hit out at the government’s plans last Sunday, saying they amounted to price fixing and reduced consumer choice.

Schembri denied the charge on Thursday, saying this was not price fixing but setting maximum prices that products could be sold.

“If anything, this is price capping,” he said.

“Importers give supermarkets a recommended retail price. Supermarkets or shops can choose to sell at the recommended price or else go lower than that by reducing profits,” he said.  

While the RRP does not equate to the price at the till, it represents the maximum price that can be charged for an item. So, the closer to the RRP a retailer charges, the more of a reduction they will be forced to make. 

Many convenience shops will probably reduce the entire 15 per cent but larger supermarkets could afford to reduce even more than 15 per cent, Schembri said. 

Importers and retailers had accepted the scheme as being part of their corporate social responsibility, he said. It was in their interest to have stability in prices because inflation had social and economic consequences. They understood that they were better off reducing their profits on these items.

Prices, the minister said, would be monitored and retailers who strayed from the agreement would be named and shamed. 

He downplayed fears that shops would raise prices of other items to compensate for the reductions elsewhere.

Consumers, he said, would call out such matters and would likely name and shame on social media.

PN insists on holistic plan to curb inflation

Reacting to the price stability agreement signed by importers and retailers, the Nationalist Party said that while it was always in favour of any initiative to reduce the cost of living, this should not be in isolation but part of a holistic plan. It said the agreement may lead to an increase in the price of other products to make up for the lost revenue from the cheaper products.

In a statement, the PN said that the holistic approach would lead to greater benefits for the general public.

Instead of putting all responsibility on businessmen, the government should declare that the Cost of Living Adjustment would be tax-free and that an economic model is created with the addition of new sectors that create better-paying jobs.

PN MPs Robert Cutajar, Ivan Castillo and Jerome Caruana Cilia said the government should also give employers tax credits to avoid them raising the price of their products or services to counter for the COLA increase. The PN also suggested the creation of a national fund that supports businessmen involved in the import/export business.