The Government “must focus on how it will reduce the public policy costs which are pushing up food prices”, the British Retail Consortium (BRC) has said after reports the Treasury asked supermarkets to limit food prices in return for the lifting of some regulations.

The proposals would see shops voluntarily cap the prices of essential groceries such as eggs, bread and milk, according to the Financial Times.

The Treasury has said it would in return offer supermarkets “incentives” which may include easing packaging policies and delay potentially costly changes to healthy food rules, the newspaper said.

Helen Dickinson, the chief executive of the BRC, the leading trade association for retailers, said: “Rather than introduce 1970s style price controls and trying to force retailers to sell goods at a loss, the Government must focus on how it will reduce the public policy costs which are pushing up food prices in the first place.”

She added: “The challenge facing retailers is a combination of higher energy and commodity costs resulting from the Middle East conflict, and the soaring cost of the Government’s domestic policies.”

“The UK has the most affordable grocery prices in Western Europe thanks to the fierce competition between supermarkets,” she also said.

A spokesperson for the Treasury said: “The Chancellor has been clear we want to do more to help keep costs down for families, and will set out more detail in due course.”

The Treasury asked supermarkets for guarantees that British farmers would not lose income from price caps, according to the FT.

Some measures, including the packaging regulations, generate revenue for the Treasury, it reported.

The Government has also recommended supermarkets reinvest the savings from the regulation changes to freeze grocery prices, it added.

This comes after UK food inflation rose to 3.7% in April.

The Foreign Secretary on Tuesday told an aid summit of the risk of “sleepwalking into a global food crisis” as a result of Iran’s blockade of the Strait of Hormuz.

Chancellor Rachel Reeves is to set out measures to help households with the cost of living on Thursday.

Writing in The Times, she said she had made decisions which were “responsible in the national interest”.

“I will not tolerate anyone exploiting a crisis to make a quick buck off the back of hardworking people,” the Chancellor wrote.

“I am clamping down on price gouging, giving regulators new, focused investigatory powers. Where regulators identify concerning practices, they will be encouraged to name and shame.”

UK inflation is set to have eased last month as a drop in household energy bills offset a jump in fuel prices – but experts warned of turbulence ahead as the Iran energy price shock “catches up” with the cost of living.

Most economists think the rate of Consumer Price Index (CPI) inflation slowed to 3% in April, from 3.3% in March.

This would mean that prices were still rising year-on-year, but at a slower rate than they were the month before.

A big driver of the expected slowdown is set to come from Ofgem lowering its energy price cap from the start of April by 7%, or £10 a month, for the average household using both electricity and gas.

This was largely driven by Government measures to reduce bills including moving 75% of the cost of the UK’s renewables obligation from household bills on to general taxation, and scrapping the energy company obligation scheme.

However, experts point to a mixed picture for energy costs last month with motorists hit by a surge in fuel prices following the start of US-Israel’s war with Iran.

Sanjay Raja, chief UK economist for Deutsche Bank, said he was expecting pump prices to have risen by about 15% in April from March.

“Looking ahead, we expect price momentum to pick back up as the Iran shock catches up with the inflation data,” Mr Raja wrote in a research note.

“Indeed, dual fuel bills won’t rise until the summer.”

Household energy bills are forecast to jump from July when the regulator sets its next price cap, with the latest predictions from analysts Cornwall Insight suggesting this could be 12% or £196 a year higher.

Victoria Scholar, head of investment for Interactive Investor, said April’s lower energy price cap will “go some way towards helping offset higher petrol, airline and other prices impacted by the elevated global oil price backdrop” with Brent crude oil trading at an average of around 120 US dollars a barrel during the month.

“When the Ofgem energy price cap resets in July, UK households will be faced with a sharp increase in energy bills,” she cautioned.

“Were it not for the Iran war, it would be about this time that the UK inflation rate was finally expected to fall back to the Bank of England’s 2% target.

“Instead, interest rate and inflation expectations have drastically rerated higher.”

The Bank of England kept interest rates on hold last month and is expecting inflation to increase under several of its potential scenarios for the impact of the energy shock.

Experts have stressed that the economic outlook could change depending on how long the Middle East conflict goes on, and how high oil and gas prices go.