# Who is actually putting up prices?

_Food prices have fallen this year and supermarket forecourts sell the cheapest fuel in the country. Blaming the supermarkets for the cost of the Iran war is political deflection, if not outright dishonesty._

Neil Woodford · 5 August 2026 · 3 min read

![Morrisons Petrol Station](https://cdn.sanity.io/images/v3acfbvo/production/db8011d2e6da8c8d9c198448550adc0cee1754e8-2122x1414.jpg?w=1600&fit=max&auto=format)

---

John Healey, the new Chancellor of the Exchequer, says he will be watching closely for evidence that customers are being taken for a ride at the pump and at the till. This was translated in a headline on LBC to “Healey vows to clamp down on supermarket price gouging caused by the Iran war”. Not satisfied with this, Mr Healey added in an op-ed in the Telegraph that not only was he planning to give people hope but to also make Britain more resilient to the type of shock that has followed the war in the Persian Gulf.

_[Embedded media](https://www.telegraph.co.uk/politics/2026/08/01/john-healey-wont-let-supermarkets-shoppers-ride/)_

This is the sort of hubristic, hypocritical nonsense that has become a regular feature of modern British politics. Maybe it was always so, but the volume of this sort of stuff has undoubtedly increased significantly in the last two weeks. To put this politically motivated twaddle into perspective, I thought it would be helpful to present the facts.

## Food

Let's start with food. Food prices have fallen year to date, in absolute terms. The supermarkets have spent the year cutting prices into a relatively weak consumer backdrop, competing hard on promotions to get people through the door. The effect shows up in the official numbers. Food is making its smallest contribution to headline inflation in nearly two years.  _(Neil in the margin: Headline inflation is the all-items measure including food and energy, as opposed to 'core', which strips those volatile categories out. A given sector 'contributes' to it in proportion to both its price change and its weight in the basket.)_

Although food prices may tick up towards the end of the year, in the very short term food price inflation may fall even further due to base effects, and yet this is the sector the Chancellor has chosen to put on notice for price gouging. _(Neil in the margin: Base effects are quirks of the year-on-year comparison: if prices jumped sharply a year ago, the annual rate can fall even while prices today are flat or rising, simply because the high prior month drops out of the calculation.)_

## Fuel

What about fuel? The cheapest fuel in Britain is sold on supermarket forecourts, and has been for years. In fact, the major fuel retailers price off them. Not surprisingly, the largest single component of what a driver hands over at the pump is not the retailer's margin; it is tax. 

_[Embedded media](https://www.icaew.com/insights/viewpoints-on-the-news/2026/may-2026/chart-of-the-week-fuel-prices)_

On a litre of petrol at just under 160p, fuel and environmental duties account for around 34% and VAT a further 17%, so tax takes just over half the pump price. The fuel itself accounts for about 39%, and retail and distribution costs together for around 10%. 

Although the fuel retail industry has traditionally operated with margins around mid single digits, the supermarket groups have historically operated with much lower margins in fuel, often using fuel as a loss leader. And yet, again, it is this sector that the Chancellor has put on notice for price gouging. _(Neil in the margin: A loss leader is sold at or below cost to pull shoppers in, on the bet they'll fill a trolley once through the door. The margin comes from the groceries, not the petrol — which is why supermarket forecourts undercut the majors.)_

![Where a litre of petrol goes](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/v1MrZ5I5R4dqYm3goDYey3-8093379dba95-light.png)

## Resilience

As for the third point, making Britain more resilient in the face of energy price shocks, this arguably is the most egregious example of the Chancellor's rank hypocrisy. Quite how this government's energy policy, championed by the last Secretary of State and by the new incumbent, could be seen in any way as compatible with helping to make Britain more resilient in the face of energy price shocks is totally beyond me. 

On the contrary, its energy policies, which have imposed ludicrous levels of taxation on companies operating in the North Sea, banned new drilling and fracking and described fossil fuel extraction in the North Sea as climate vandalism, have made the economy more, not less, vulnerable to energy shocks. _(Neil in the margin: Fracking — hydraulic fracturing — pumps high-pressure fluid underground to crack rock and release trapped gas. England has had an effective moratorium on it since 2019 after minor earth tremors at a Lancashire site.)_

This self-harming policy now means that the UK has to import vast amounts of oil and gas from countries like Norway, which is drilling for these precious resources in the very same basin which UK companies are prevented from exploiting. Then of course on top of this lunacy is the fact that UK industry faces the highest electricity prices of any IEA member country, as a result of bloated government-imposed subsidies paid to renewable energy developers and the costs of connecting that remote infrastructure to the grid.

![UK industry pays the most for its electricity](https://r4at4qm6kmohrtvq.public.blob.vercel-storage.com/charts/chart-uk-industrial-electricity-iea-a10c1253783b-light.png)

_UK industrial gas prices sit below the IEA median. It is only electricity where the UK is the outlier, which is what makes this a policy outcome rather than a fuel-cost one. Vintage note: 2024 data has since been published and shows the UK still highest, at 26.63p per kWh against a lower IEA median. Refresh from table 5.3.1 before publication._

## Summary

My advice to Mr Healey would be to remove the vast plank from his eyes before advising British supermarkets to remove the splinter from theirs. 

In summary, it is this government's policies and its predecessors' which have created this vulnerability to energy shocks. It is this government's daft fiscal policies and its incontinent spending habits that have helped to drive inflation up. 

Food retailers appear to be doing their bit to keep it down right now, and they should be praised for doing so, not falsely accused of price gouging.