The alarm over rising shopping basket costs, the government and the subsidy trap

And here we are facing the consequences of not having had the resolve to say no to subsidies – not just for strategic transport sectors, but universal ones – for energy purchases at petrol and diesel pumps. These subsidies, like all measures that apply to everyone and are not targeted, have the flaw of diverting resources away from structural interventions, producing fiscally regressive effects, and triggering spirals of spending that politicians then always find difficult to bring to an end. We are now seeing a proliferation of ever-new and far-fetched proposals on how to extend the subsidies beyond 5 September, this time focusing them on low-income pensioners and the low thresholds of that veritable mass deception that the ISEE criteria have become today. And if the phrase ‘massive sham’ rubs you up the wrong way, try justifying how, by 2025, over thirty million Italians will have benefited from subsidised prices and tariffs thanks to the ISEE – figures that seem to shock only keen observers such as Alberto Brambilla, Giuliano Cazzola and a very few others. Now, on top of all this, there is the constant drumbeat about the rising cost of the shopping basket – relating not to the goods in the general basket on which Istat based its consumer price index, but to those purchased most frequently for domestic use: namely, fresh and preserved foodstuffs, household cleaning and hygiene products, and personal care and beauty products. The alarm is sounding particularly loudly over the first component: food prices. Newspaper pages are filled with headlines such as ‘Food: a heavy blow for families’, ‘Over 400 million in the next three months’, and so on. Various external factors are cited: drought, wars, falls in agricultural and dairy production, and, of course, the infamous and ever-present ‘financial speculation’ – both in the international component relating to price formation on global agri-food commodity markets, and in the domestic component across the various stages of the distribution chain from producer to Italian consumer.

It is important that the government does not fall into this trap as well. The introduction of universal food subsidies, as if Italy were comparable to the war-stricken Ukrainian population under Russian bombardment, would risk turning the country into a caricature of the “whinge and screw” stereotype of old Italy. It is undeniable that the rising trend in food prices has been a real problem in Italy in recent years. From 2021 to 2025 inclusive, they have risen by 24.9 per cent, compared with 17.3 per cent for the general consumer price index. This prompted AGCOM to launch a fact-finding inquiry at the end of last January, which shines a spotlight on the role played by large-scale retailers in the supply chain stretching from agricultural producers to the food processing industry, and finally to retail distribution to the consumer. The Competition Authority is focusing on the dominant role played by large-scale retailers both in terms of the prices paid to farmers and livestock breeders by their central purchasing organisations, and through the growing expansion of their own private-label products. Whilst we await the results of the investigation, we do know how costs borne by primary food producers have fared in recent years. The surge in costs for farmers and livestock breeders began during the pandemic and was then exacerbated by the Russian invasion of Ukraine. Over the last five years, these costs have risen by 35 per cent – a rise not offset by the 24.9 per cent increase in consumer prices. Contributing factors included the staggering rise in energy bills, a 43 per cent increase in fertiliser costs, a 30 per cent rise in feed costs and a 26 per cent increase in seed costs. In livestock farming, prices peaked in 2021 and 2022, before returning to a 6.3 per cent rise in 2025. However, the backdrop of actual and tariff-related ‘wars’ means that 2026 is also likely to be subject to significant disruptions.

But the sharp rise in food prices is not only a blow to households, exacerbating the decline in spending on food and drink that has been ongoing for decades. It is also a blow to farmers and livestock breeders, who have seen their profit margins and incomes eroded by the greater increase in their real costs. The government should therefore await the outcome of the Competition Authority’s investigation. And it should bear in mind that this is the exact replica of an identical investigation that the AGCM launched in 2005 and concluded in 2007. If you read the 92 pages packed with data and tables, the conclusion was that consumers were being harmed by the small average size of agricultural and livestock production businesses, and by the tension between producers’ consortia and wholesale distributors, whilst the drive for efficiency and low end prices came precisely from the much-maligned large-scale retail chains. The government would do well to refrain from subsidies and instead introduce structural measures to streamline trade—that is what is needed.