Downing Street is drawing up plans for retailers to introduce price caps on basic food items such as bread and milk to help tackle the rising cost of living, The Telegraph can disclose.

Rishi Sunak’s aides have started work on a deal with supermarkets akin to an agreement in France in which the country’s major retailers charge the “lowest possible amount” for some essential food products.

The move would amount to the biggest attempt to manage supermarket prices since controls established by Edward Heath in 1973. However, No 10 insists that any action by retailers would be voluntary.

It comes amid growing concern in government about sustained pressure on household finances from inflation and the rising cost of borrowing.