The British Retail Consortium (BRC) has slammed the government’s plans to introduce a supermarket ombudsman, saying it would hand negotiating power to multinational food businesses and cost customers millions of pounds in higher prices.

The government plans to establish a costly new bureaucracy to oversee relationships between supermarkets and their suppliers, but the BRC said this would be the only example of an ombudsman set up to favour corporations over customers.

The BRC is also challenging the claim that the only extra cost would be the £5 million that the government says retailers would be charged for setting up the new quango.

BRC director general Stephen Robertson said: “This would tip the balance of negotiating power in favour of multinational food manufacturers allowing them to drive up the prices customers pay.

“This is not about farmers; very few deal directly with supermarkets, and it’s not about a ‘mere’ £5m of extra costs.

“The UK grocery market is worth £130 billion a year. If threats of involving an ombudsman allow big food companies to squeeze even 0.1 per cent more out of supermarkets, that’s £130 million extra on customers' bills.

“It is disappointing that the government has decided to pursue this despite the lack of evidence that it is needed. There is already a supplier code, overseen by the Office of Fair Trading (OFT), offering the right to independent arbitration. It has long been compulsory for the big four supermarkets and is being extended to more retailers next month.

“OFT chief executive John Fingleton has said supermarkets are pro-consumer, bringing lower prices, innovation and new services and an ombudsman is not necessary.”

The Food Ethics Council has also responded to the government’s announcement on a supermarket ombudsman. Dr Tom MacMillan, executive director, said: “The government must now ensure that it listens to small producers as well as big business while it consults on what shape an enforcement body should take. A strong supermarket ombudsman, invested with real power, would have the authority to ensure fair prices from the farm gate to the checkout. It would protect the livelihoods of farmers across the UK and give consumers better access to fresh, healthy food.”