No 10 backs Kwasi Kwarteng in Treasury spat over energy prices

PM’s spokesperson says Treasury and BEIS officials looking at ways to help manufacturers

Last modified on Mon 11 Oct 2021 09.01 EDT

No 10 has weighed in behind Kwasi Kwarteng, the business secretary, in his spat with the chancellor, Rishi Sunak, saying both of their government departments are looking at how to support firms struggling with soaring energy prices.

Boris Johnson’s official spokesperson said work was under way involving Treasury and business department officials to look at ways to help manufacturers hit by the gas crisis, after warnings that swaths of heavy industry could go under.

The comments contradicted a Treasury source who said on Sunday that Kwarteng was “mistaken” and “making things up” in saying that Sunak’s officials were looking at ways to help industry with energy prices.

The row was sparked over the weekend when Kwarteng told broadcasters that he was liaising with Sunak over helping firms struggling with energy prices but he did not expect billions more in subsidies.

In response, the Treasury source said: “Kwasi was mistaken. The facts are that to date the Treasury and the chancellor have not been involved in any talks on this topic.”

Sources at the Department for Business, Energy and Industrial Strategy (BEIS) insist Treasury officials have been involved all along, even if Sunak himself was not directly taking part.

No 10 appeared to back this account on Monday morning, saying: “As you would expect, ministers from BEIS are working across government, including with Treasury, on this important issue, the challenges that are currently facing industry in light of global gas prices, and that will continue.”

Johnson’s spokesperson said it was “right to continue to listen to industry” and “see if further mitigations are necessary” on top of an existing scheme to help heavy industry with high energy prices.

“We recognise they are facing a particular challenge at this point and we’ll continue to discuss that with them,” he said.

The spokesperson also said the prime minister had been “closely involved” in the situation, even though he is currently on holiday in Andalucía at a property owned by the environment minister Zac Goldsmith.

While No 10 and BEIS have not ruled out a targeted invention to help energy-intensive industries through the high gas prices, the Treasury remains sceptical, having stressed that it had not received a specific proposal.

Representatives from firms in key industries including steel and paper told Kwarteng at a meeting on Friday that many were 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.

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, replicates the network tariff discounts offered to competitor industries in the EU.

The companies also reportedly requested potential subsidies, and put forward suggestions for a cap on gas prices, though it is understood BEIS and the Treasury see that suggestion as far too complex, backed by Ofgem.

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.

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