Tax Burden Threatens Food Prices, Tesco Warns Government

Tesco has urged the government to resist imposing further taxes on businesses in the upcoming Budget, warning that any additional burden could push up prices for shoppers and threaten the stability of the retail sector.

Ken Murphy, Chief Executive of Tesco, the UK’s largest supermarket, said “enough is enough” when it comes to piling extra costs onto retailers. His comments follow a year in which grocers have been hit with higher employer National Insurance contributions, rising minimum wages, and the introduction of packaging levies under the Extended Producer Responsibility (ERP) scheme .

Tesco revealed it had already set aside £90 million for ERP charges, while the Food and Drink Federation (FDF) warned that the programme could cost UK producers £1.1 billion—an impact even greater than the rise in National Insurance. Jim Bligh, the FDF’s head of corporate affairs, cautioned that much of this cost would inevitably filter down to consumers, fuelling further food price inflation .

Rising Costs and Consumer Impact

Tesco’s own figures highlight the pressure: the supermarket estimates that the higher National Insurance rate alone added £235 million to its costs this year . Murphy said, “Our one ask is don’t make it harder for the industry to deliver great value for customers.”

This appeal echoes warnings from the British Retail Consortium, which recently stated that any further tax hikes in the Chancellor’s November Budget would risk prolonging high shop prices. Official data shows that food and non-alcoholic drink prices rose at an annual rate of 5.1% in August, with beef, butter, milk, and chocolate among the biggest contributors .

Murphy also observed a shift in consumer behaviour, noting that more shoppers were buying fresh ingredients and cooking at home—likely a money-saving measure as households brace for further economic uncertainty.

Government and Union Responses

The Treasury defended its tax policies, stressing that last year’s decisions allowed it to invest in the NHS, reduce waiting lists, and boost wages for millions. It pointed out that corporation tax has been capped at 25% and business rates are being reformed .

However, the Unite union accused Tesco of profiteering during the cost-of-living crisis. General Secretary Sharon Graham argued that while millions of workers struggle to afford essentials, Tesco is “raking in huge amounts of cash” and distributing “whopping dividends” to shareholders. She called on the Labour government to intervene against “corporate greed” .

Profits and Competition

Despite these pressures, Tesco upgraded its profit forecast, expecting adjusted operating profits of £2.9–£3.1 billion this year. The supermarket attributed this to customers putting more in their baskets, even as it cut the price of 6,500 items to stay competitive .

Yet this success has not softened warnings from the industry. The balance between profitability, consumer affordability, and government taxation remains delicate, with the risk that future fiscal measures could tip the scales against households and businesses alike.

The Bigger Question

At the heart of this debate lies a critical tension: can the government raise enough revenue to fund public services without further squeezing businesses and, by extension, households? With the Chancellor’s Budget set for 26 November, retailers, unions, and consumers alike will be watching closely.

Murphy’s warning underscores the growing unease across the retail sector: further taxation, he insists, risks not only eroding profitability but also worsening the strain on households already grappling with high living costs. For both government and industry, the stakes could not be higher.