Treasury sources have hit back at the business secretary, Kwasi Kwarteng, after he suggested Rishi Sunak was involved in negotiations over aid for struggling manufacturers hit by soaring energy bills.
In a highly unusual slapdown, which occurred during a round of broadcast interviews with Kwarteng, 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.
Representatives from key industries including steel and paper firms 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.
Kwarteng had suggested that struggling companies would not get much more support from the Treasury, saying he was liaising with the chancellor but did not expect billions more in subsidies.
One Treasury source said it was “made up” to suggest the pair were 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,” one source said.
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 is 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?”
The Sunday Times had reported that Kwarteng was preparing to ask the chancellor for billions for a manufacturing industry bailout, for steel, ceramics, chemical and glass companies who are facing having to halt production.
The companies are 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.
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. “I’ve been very clear we’re not going to bail out failing energy suppliers.”
Kwarteng hinted that help could come for some industries that were extremely energy-intensive, such as steel production, saying he was “looking to find a solution”.
But speaking on the BBC, when he was asked if 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.”
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.
“I can’t come on your programme and say we’re going to have a price cap because we’re trying to work out what the nature of that support might be.”
After Treasury sources briefed that Kwarteng was overreaching with his comments about negotiations with Sunak, the business secretary told Times Radio there had been no specific request. Kwarteng said he had not “asked him for anything” but that “we are always in conversation with the Treasury and we’re always talking about how we can support British business”.
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 chief executive of Energy UK, Emma Pinchbeck, told Sky News’s Trevor Phillips on Sunday programme that energy-intensive users and retailers would suffer unaffordable costs and that more energy suppliers would go bust, putting pressure on bigger companies.
She said: “We are expecting more retailers to go out of business this winter. We had around 50 suppliers when we started, and we’re expecting to see more leave the market … The issue is how many are failing at once and whether or not our mechanisms, which are in place to look after customers when that happens, are up for that many failures in one go.”
Pinchbeck said the government could be forced into a situation where more support was necessary. “For us in the energy industry, the thing we’re still very worried about is domestic retail, I think that’s where we’ll see more failures in the coming weeks and what we do about the costs of that for individual consumers paying their bills.”
Kwarteng said he believed the lights would not go out this winter and said he would not give advice on the personal precautions people should take to save money on energy bills.
“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,” he told Sky. “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.”