The Treasury on Sunday night accused Kwasi Kwarteng, the Business Secretary, of making misleading claims about government plans to offer an energy bailout to struggling factories.
The row was sparked when Mr Kwarteng said he was in talks about support for businesses making products including steel, glass, ceramics and paper – only for Treasury aides to insist there were no discussions.
Major factories are now said to be just days from closure because soaring energy costs mean it is not profitable for them to stay open unless the Government steps in to help with hundreds of millions of pounds to pay power bills.
The latest row involving Mr Kwarteng comes days after he was criticised by fellow Cabinet ministers for failing to act more quickly to tackle petrol shortages.
It also comes as Boris Johnson began a holiday with his pregnant wife, Carrie, and his one-year-old son, Wilfred, in southern Spain.
Conservative MPs said the row was a typical example of squabbling between ministers when a Prime Minister is away. But on Sunday night a "Red Wall" Tory MP warned that it was a test for the Government’s support for seats in the North and said: "You can’t level up if you end up levelling heavy industry in the North of England."
Number 10 declined to comment on the row.
In a series of television interviews on Sunday, Mr Kwarteng admitted that factories facing closure because of soaring energy costs was a "critical situation".
Energy prices spike
Questioned about whether he had asked for extra money from the Treasury to support them, he said: "I have 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.
"I think he showed a great deal of flexibility when he allowed £500 million to be dispersed by local authorities for vulnerable consumers, and we’re working to see what we can do in terms of protecting industry."
However, Treasury sources issued a swift rebuke to Sky News, with one saying: "This is not the first time the BEIS [Department for Business, Energy and Industrial Strategy] Secretary has made things up in interviews. To be crystal clear, the Treasury is not involved in any talks."
Another source told The Telegraph that the "Treasury is not in talks with anyone", adding: "We just haven’t seen any proposals. We haven’t been engaged in discussions – BEIS are the ones in discussions."
Sources close to Mr Kwarteng said on Sunday night that Treasury officials had been in talks with the business department but no request for funds had been made.
Mr Kwarteng and his team met businesses that use a lot of electricity, such as steel and glass factories, on Friday to discuss the crisis. They are understood to have asked for hundreds of millions of pounds of support. Further talks between officials and industry are planned this week. One source said the situation was "desperate – they are on the brink".
One idea is to expand an existing energy compensation scheme for intensive energy users to businesses in other sectors which are currently not allowed to apply for help.
The Conservative Steel Caucus, an informal grouping representing a dozen Tory MPs with seats in the industrial North, is growing increasingly concerned. The group exchanged messages in a WhatsApp group on Saturday and are now seeking an urgent meeting with Mr Johnson.
The Conservative Steel Caucus, an informal grouping representing a dozen Tory MPs with seats in the industrial North, wants talks with Boris Johnson over the crisis
Credit: Hollie Adams/Bloomberg
However, he is reportedly now staying at a luxurious estate in southern Spain owned through a company by Lord Goldsmith of Richmond Park, a government minister and close friend of the Johnsons. The house, according to reports, sleeps 13 and costs as much as £25,000 a week to rent, although it is unclear on what terms the Johnsons are staying there.
One Tory MP said: "These kinds of rows always happen when the PM is away."
To head off the concern among "Red Wall" MPs, Lee Rowley, the steel minister, was due to hold talks with some of the caucus members on Sunday.
Andrew Percy, the Tory MP whose Brigg and Goole constituency includes Scunthorpe Steelworks and several chemical plants, said the question of whether industrial firms would be allowed to fail because of soaring energy costs was a test of the Government’s commitment to levelling up.
He told The Telegraph: "If the Government is serious about levelling up then people in the Treasury need to understand that much of the Northern economy is underpinned by heavy industry. It is no good pretending that we can bury our heads in the sand to this problem or pretend in some way that industry just needs to do more itself.
"You can’t level up if you end up levelling heavy industry in the North of England. There appears to be a bias in certain parts of the Treasury against heavy industry – they are seeing it as something of the past. Nothing could be further from the truth.
"This is a very real problem that is in part of the Government’s own making and therefore can only be solved with government intervention."
Mr Kwarteng also used an interview on Sky News to suggest that people should consider putting on more clothes to keep warm if they had trouble paying to heat their homes.
Asked whether people should wear wear another woolly jumper and pair of socks, he said: "It’s up to people – it’s amazing how different people’s cold thresholds can be. Some people feel comfortable wrapped up in lots of different clothes, others wear relatively little – I think people should be sensible. I think people should do what they feel comfortable with."
But he added: My job as an energy minister is not to tell people how many layers of clothing they should wear – that’s not really my job."