Time to get a grip on energy costs for firms
The potential for high users of energy to collapse under the pressures of rapidly rising gas costs is serious enough without government departments falling out over what to do about it. The unedifying spat between the Treasury and the Business ministry, headed by Kwasi Kwarteng, does not indicate the sort of joined-up government that businesses and household consumers are entitled to expect.
Mr Kwarteng was very publicly admonished by “sources” at the Treasury for suggesting that he was in talks with officials there about possible help for industries most at risk from the price increase. They said such discussions had not happened and Mr Kwarteng was “making it up”. But, fanciful or not, it is incumbent upon ministers to discuss what might be done in such circumstances if a serious crisis is to be averted. The Business Secretary has now made a formal request for assistance to be directed to the hardest hit industries. We urgently need to know the Treasury’s thinking.
The Business Secretary has ruled out a price cap for industry to match that for households and is right to do so. A cap is a bad idea because the market would simply push the price up further on the basis that it is being underpinned by a state guarantee, thereby making the situation worse.
The help that can be offered is actually in the gift of the Treasury, such as temporary tax breaks to help businesses negotiate their immediate difficulties in the hope that the prices stabilise. Some energy-intensive industries are seeking direct cash subsidies to further offset the green costs already loaded on them by the Government’s fixation with unrealistic “zero carbon” targets.
The political difficulties have been compounded by the absence of the Prime Minister, who is on holiday in Spain. Mr Johnson is entitled to a break while Parliament is in recess but he needs to get a grip on this situation if he does not want to return to a crisis like James Callaghan did in 1979.
Clearly something has to happen soon since employers in industries ranging from steel and paper to glass, cement and ceramics say they have days before going under. The Government cannot let this drift unless ministers want to find themselves presiding over a 1970s-style industrial shutdown. Moreover, if companies go under, then goods will be imported instead from countries that do not subscribe to low carbon policies. How will that help the planet?