Energy crisis: Treasury reprimands Kwarteng after help for firms claim

Source close to Rishi Sunak accuses business secretary of ‘making up’ talks with chancellor about support

The Treasury has issued an extraordinary reprimand to the business secretary, Kwasi Kwarteng, after he suggested he was consulting the chancellor, Rishi Sunak, about support for firms struggling with soaring energy prices.

Representatives from firms in key industries including steel and paper are said to have told Kwarteng at a meeting on Friday that many are “days away” from having to halt production because of spiralling costs. A source said the business secretary had asked his team to help with work on an agreed list of proposals that could be passed on to the Treasury in the next few days.

However, Treasury sources denied the department had yet received any proposals or even discussions about support for ailing essential industries, despite claims made by Kwarteng to broadcasters on Sunday morning.

Kwarteng was accused of “making things up” when he said he and Sunak were considering the options. A chastened Kwarteng was forced to change approach mid-way through his broadcast round.

One industry boss who attended the meeting with Kwarteng on Friday said the business secretary had at first seemed blase about the potential problems for industry, suggesting soaring energy prices were temporary and driven by the weather.

However, after pressure from businesses, which said they were likely to be forced to suspend production if costs continued to remain high, he had promised to examine their suggestions and ask the Treasury to consider some of their demands. These include reducing green levies and a request that the energy regulator, Ofgem, replicated the network tariff discounts offered to competitor industries in the EU.

But sources close to the chancellor cautioned the business secretary against making any promises to companies and said there had been no approach to the Treasury.

Kwarteng had suggested that struggling companies would not get much more support from the Treasury, saying he was liaising with Sunak but did not expect “billions” more in subsidies.

One Treasury source said it was wrong to suggest the pair were already in discussions about potential support. “Kwasi was mistaken. The facts are that, to date, the Treasury and the chancellor have not been involved in any talks on this topic,” the source said.

The source did not rule out any further support but said the Treasury could not assess what may be necessary without seeing proposals. A source close to Kwarteng said work was under way after the meeting with businesses, while proposals were examined.

The companies are also reported to have requested potential subsidies, as well as putting forward suggestions for a cap on gas prices, though it is understood both the Department for Business, Energy and Industrial Strategy and the Treasury see that suggestion as far too complex, backed by Ofgem.

However, Kwarteng said on Sunday he had not asked for significant further support from the Treasury. “I’ve not asked for billions. We’ve got existing schemes. I’m working very closely with Rishi Sunak, the chancellor, to get us through this situation,” he said.

Kwarteng told Sky it was clear some businesses did need short-term help. “What I’m very clear about is we need to help them get through this situation – it’s a difficult situation, gas prices, electricity prices are at very high levels right across the world and of course I’m speaking to government colleagues particularly in the Treasury to try and see a way through this,” he said.

When he was asked on the BBC whether it was definitive that those industries would get more support, Kwarteng said: “No … we already have existing support and we’re looking to see if that’s sufficient to get us through this situation.”

Treasury sources briefed that Kwarteng was overreaching with his comments about negotiations with Sunak – and then the business secretary told Times Radio there had been no specific request.

Kwarteng said he had not “asked him for anything” but that his department was “always in conversation with the Treasury”.

Labour said the cabinet split showed there was no direction at the top of government to help business in crisis – as it was also revealed that Boris Johnson was to spend the next week holidaying in Marbella.

“In the teeth of a crisis of its own making, the government has put its out-of-office on. The prime minister has gone on holiday, no one knows where the chancellor is, and this morning we understand the business secretary has entered the realms of fantasy,” said the shadow chief secretary to the Treasury, Bridget Phillipson.

“The two key government departments responsible for the current cost-of-living crisis have spent this morning infighting about whether they were in talks with each other. What a farce. If government ministers can’t even tell the truth about each other, then what hope do we have for the challenges facing our country?”

In his interview, Kwarteng suggested removing green levies was an unattractive option. “We need to double down on the age of transition. We need to invest in hydrogen as we’re doing and get a better diversity of supply away from fossil fuels and that’s exactly where we’re going.”

The price of wholesale gas has risen 250% since January, leaving many businesses in crisis because many have not fixed their purchase prices and there is no energy price cap for companies, unlike for consumers.

The UK’s steel makers warned the government that failure to take action could lead to long-term damage to the industry. Gareth Stace, the director general of the UK Steel trade body, said some companies had already been forced to suspend production even though the market for steel was “incredibly healthy”.

He said: “Failure to [take action] may result in long-term damage to the future of the steel industry in the UK. Heading into the winter months, increasing prices could result in extended shutdowns, damage to equipment, loss of export opportunities and market share at home, and a loss of talent and employment.”

Other energy intensive industries, including glassmakers and ceramics producers, said the government needed to take “prompt and preventative measures” to avoid the spread to other sectors.

Contributors

Jessica Elgot and Sarah Butler

The GuardianTramp

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