The powers of supermarkets that force suppliers to cut their prices will be curbed by a future Conservative government.

The Tories are planning to create a new office of supermarket ombudsman to rein in British retailers accused of squeezing the profit margins of farmers, growers and food processors. Until now the party had backed a tough new code of practice to deal with any disputes between supermarkets and their contractors.

But in a move designed to shore up the party’s credentials as champions of the countryside, Nick Herbert, the Shadow Environment Secretary, will promise in a speech to farmers tomorrow to set up a new office to handle complaints and grievances inside the Office of Fair Trading. It would be paid for by a levy on retailers with an annual turnover of more than £1 billion.

The proposal for such a body was put forward by the Competition Commission last year but the Government delayed any decision after fierce resistance from the big four supermarkets — Tesco, Asda, Sainsbury’s and Morrisons.

Kevin Brennan, the Consumer Affairs Minister, in recent private meetings with MPs has questioned the public benefits of an ombudsman and has expressed concern that consumers would have to pay higher prices in the shops.

After deliberations at the top of the Conservative Party, however, Mr Herbert, in a speech to the Oxford Farming Conference, will emphasise that while the party believes in a free market, he feels that there is a responsibility on government to ensure that markets operate fairly.

He is concerned that there has been insufficient sanction over supermarkets that lower previously agreed contract prices and leave producers operating at a loss. He believes that an ombudsman will provide the enforcement framework necessary to stamp out any irregular practices.

He has ruled out a new stand-alone body, which had previously been dubbed “Offshop”, and is convinced that the expertise and structure is already available within the fair trading watchdog.

Mr Herbert said: “Supermarkets deliver real benefits but some aspects of the way they treat their suppliers can harm consumers as well as producers. We will introduce an ombudsman to curb abuses of power which undermine our farmers and act against the long-term nterest of consumers.

"As the Competition Commission has made clear, failure to do so could result in reduced investment by suppliers, lower product quality, less product choice, and with potentially higher prices in the long run. It is time to act.”

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