Economics and Trade Minister Naftali Bennett has ordered a 4.17% reduction in the cost to consumers for bread that is subject to government price controls, according to ministry press release on Tuesday. The new prices will take effect within a matter of days once procedures involving the Finance Ministry and bakeries are completed.
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The move follows a drop in global wheat prices and cheaper energy inputs. In the past, Bennett’s predecessors − in what was until now called the Industry, Trade, and Labor Ministry − were pressured by the bakeries to raise the price of bread in light of the rising cost of inputs.
The regulated price follows the so-called Swary formula based on production costs. For a number of years the bakeries haven’t been informing the ministry when input prices declined, ostensibly because they hadn’t felt they were fully compensated when input prices rose, and the regulators never initiated a cut in controlled prices on their own. According to the ministry’s statement, this is the first time the price has been lowered since 2009.
Bennett has also asked the ministry’s price regulator to re-evaluate the Swary formula for bread, as well as for other price-regulated foods and products, including cement. The State Comptroller’s report on food subject to price control and the cement committee have stated that the formulas are outdated and need to be revised.
Discussion took place in a meeting Tuesday at the ministry over the likelihood that a family buying price-controlled bread at a grocery in the Negev town of Yeruham could be paying more than a family in Tel Aviv shopping at a large supermarket chain, since the chain, unlike a small grocer, can dictate prices to the bakeries. Bennett said price controls possibly aren’t serving their purpose of lowering the cost of living for poorer families. Citing his experience in the private sector, Bennett added that companies could artificially increase costs in support of a claim of low profitability. He therefore concluded that setting regulated prices should not exclusively rely on data provided by manufacturers.
“Beyond the monetary savings for every citizen, we have an important statement here for the business sector: There is no reason for the pendulum of prices to only move upward,” commented Itzik Alrov, the initiator of the 2011 cottage cheese protest. “When global prices for goods and raw materials are on the decline, action should be taken to lower prices for the small consumer too, and not just use the difference to increase the wealth of capitalists.”
“The public is hopeful that this is the first harbinger of comprehensive reform in government offices which will bring a reduction in the cost of living for the benefit of millions of citizens,” said Yaakov Lebi, a leader of Israel’s consumers’ movement.
The Dear Israel cost-of-living protest movement welcomed the move, but pointed out that even after the reduction, sliced bread will still cost double the price of similar products in Britain, France and Germany. The movement objects to price controls, claiming they only serve to set the way for boosting prices of hundreds of other products not subject to price control.