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Battle of the departments as PM appears to back gas support loans

12 October 2021

By James Surallie

After a very public spat over the weekend, Business Secretary Kwasi Kwarteng looks to be on the verge of securing government support for energy-intensive industries hit by soaring gas prices. Yesterday, Kwarteng - who had been accused by a Treasury source as “making things up” following interviews on Sunday in which he insisted talks were ongoing within government – submitted a formal request for support from the Chancellor. The plea for help followed crisis talks with energy-intensive sectors including ceramics, paper, and steel manufacturing: it would see loans worth hundreds of millions of pounds to help save businesses drastically impacted by soaring global gas prices and on the verge of shutting down production. The UK has been hit particularly hard by the surge in prices, with multiple energy firms collapsing and Ofgem raising its household price cap for an unprecedented second time this year. 

As the row between the Treasury and the Department for Business, Energy, and Industrial Strategy intensified over the weekend, the Prime Minister is reported to have intervened from his post-conference break in the south of Spain to weigh in behind Kwarteng, with a No 10 spokesperson confirming Kwarteng’s version of the weekend’s events, saying, “as you would expect, ministers from BEIS are working across government, including with Treasury, on this important issue”. The Prime Minister is understood to back plans for a short-term package of measures to keep production going. 

The Chancellor is considering the proposal but appears sceptical given his pledge to restore public finances following the pandemic, which saw the government borrow a record £325.1bn in the last financial year. In addition, the Treasury is reluctant to set a precedent of the government coming to the rescue of industries whenever they are in trouble, instead of resolving the issue themselves, particularly as the Chancellor continues to wean businesses off the various support schemes set up during COVID. A loan scheme, however, may prove an easier sell for the Chancellor than a wholescale bail out of the sort the government – including Kwarteng - rejected for struggling energy suppliers, many of whom subsequently collapsed.

Labour has attacked the government’s handling of this crisis, with Shadow Chancellor Rachel Reeves saying: “government ministers should be working together to fight for British jobs and industries, rather than fighting each other”. However, the intervention of the Prime Minister in support of the Business Secretary would not be a surprise given the potential job losses facing energy-intensive sectors in exactly the type of skilled jobs the Prime Minister sees as part of his vision to ‘Level Up’. He will also be extremely wary of the impact it could have on the ‘red wall’ seats the Conservatives flipped from Labour in the 2019 General Election, with some of the key industries affected located in those seats. 

The battle lines drawn over the weekend are likely to remain in place for some time as Cabinet ministers facing new crises look to the Treasury for extra support for their specific sectors. Even as the Chancellor prepares to get out his Budget and multi-year Spending Review in less than a fortnight, he will know that the Business Secretary will not be the last of his Cabinet colleagues to come knocking on his door asking for more.