Kwasi Kwarteng has submitted proposals to the Treasury for a bailout package worth several hundred million pounds to help energy-intensive industries suffering from soaring costs.
The Business Secretary is understood to have sought temporary subsidies for sectors including steel, glass, ceramics and paper, which have been hit after the wholesale price of gas more than quadrupled in the past year.
The Treasury acknowledged receipt of his submission, which officials are now examining. However, it warned that any financial support for business had to take into account of the impact on the taxpayer. “We will do what is in the best interest of both consumers and taxpayers,” a Treasury spokeswoman said.
Mr Kwarteng held talks with industry leaders last week, with ministers and officials set to continue speaking to businesses over the coming days.
Industry chiefs have made an array of demands of the Government, spanning loans, tax cuts and the suspension of red tape, amid concerns about factory closures and job losses.
Dave Dalton, chief executive at British Glass, told Times Radio that a quarter of the jobs in the glass sector – which employs 6,000 people directly and up to 120,000 people more widely – were at risk unless the state intervened to help.
Energy prices spike
Officials at the Department for Business, Energy and Industrial Strategy (BEIS) have kept details of their proposals to the Treasury confidential. However, it is thought that calls for an energy price cap for industry, as exists for households, do not form part of the blueprint.
Tensions grow amid government row
Mr Kwarteng won the backing of the Prime Minister on Monday after tensions with Rishi Sunak, the Chancellor, erupted into public a day earlier, with hostile briefing from the Treasury.
Sources from the Chancellor’s department had accused the Business Secretary of having “made things up” after Mr Kwarteng indicated in an interview that he was in talks with the Treasury about a financial bailout for struggling factories.
Downing Street confirmed that both the Treasury and BEIS were indeed looking at how to support firms struggling with rocketing energy prices.
The Prime Minister’s Official Spokesman said the two departments “continue to work very closely together as the public would expect”, adding: “This is a significant challenge and there is work across Government to mitigate against it.”
On Monday, Mr Kwarteng sought to defuse the quarrel as he was approached by Sky News entering his department. Asked whether he was rowing with the Chancellor, he insisted “not at all” and added: “We get on very well.”
Business bosses appeared unimpressed by the squabbling. Gareth Stace, director-general of UK Steel, called on the Prime Minister to “bang ministerial heads together” to avoid an industry crisis hitting his sector.
In a second boon for the Business Secretary on Monday, he announced that the carbon dioxide industry had struck an agreement on price with the companies it supplies in order to keep manufacturers operational while gas costs remain high.
The deal came after the Government agreed a three-week bailout for CF Fertilisers, which supplies around 60 per cent of Britain’s carbon dioxide, to ensure businesses in the food processing sector and beyond did not run short.
No 10 said the UK exposure to the global gas price spike underscored “the need to move away from fossil fuels towards a low carbon energy system” as the best way to protect consumers in the long term.
‘Very very bad’ idea to subsidise energy, say MPs
However, Tory MPs called on the Government to eschew subsidies and liberalise constraints on energy markets.
Marcus Fysh, chairman of the Economic Growth group of Tory MPs, argued that to “subsidise energy throughout the economy at vast cost to the public finances” was a “very very bad” idea.
He said the only "realistic" option for Government in the medium term is to “increase domestic gas supply” – starting with approving the Jackdaw gas field in the North Sea, which has reportedly been rejected by the regulator due to environmental concerns.
Former minister Steve Baker said: “A policy of interventionism is proving to be a policy of socialism by instalments.”
He said “of course desperate firms are demanding price caps and bailouts but what on earth is a Conservative government with a majority of 84 for if it’s not to make markets work?”
Ministers should “liberalise energy markets with a vigour not seen in decades”, rather than “force the private sector to leave gas in the ground”, he said.
Licensing decisions for oil and gas fields are currently made by an independent regulator, rather than ministers.
A Government source defended Mr Kwarteng as “one of the most free market MPs the party has”, stressing that any state support advanced in coming weeks would be “very specific”, focussed on helping “a small section of certain factories” suffering from short-term problems caused by energy prices.
Labour MP Darren Jones, chairman of the BEIS select committee, urged the Government to put in place a windfall tax on companies that are making big profits from the surge in gas prices.
On Monday, Tory frontbencher Lord Agnew of Oulton argued that soaring energy costs were the result of a “geopolitical move” by Russia to put pressure on Europe, in some of the strongest remarks yet on the role of Moscow in generating the current crisis.