Firms paying large bonuses or dividends may not be eligible for the state-backed financial support that is being considered to help businesses worst-affected by soaring energy prices, a minister has signalled.
Boris Johnson has reportedly sided with Mr Kwarteng and backed a multimillion-pound bailout to prevent energy intensive industries going to the wall, but no announcement is expected on Tuesday.
The Independent also revealed that the UK could be forced to rely on other nations for key nuclear and defence components unless ministers offer heavy industry an energy bailout — piling further pressure on Rishi Sunak to accept the proposals.
Steve Barclay, the chief secretary to the cabinet office, told Times Radio that the government would need to examine “what is value for money and what is proportionate” when considering taxpayer support for the sector.
“Have they recently paid dividends? Are they paying big bonuses? We’ll need to understand the detail rather than just knee-jerk to a taxpayer response,” he added.
“Quite rightly, otherwise you would press me in terms of value for money for the taxpayer and the huge amount the Treasury has already provided to the industry. So it’s about balance and engagement.”
The Independent understands the requirements for firms could be similar to the Coronavirus Large Business Interruption Loan Scheme (CLBILS) – introduced at the onset of the pandemic to provide financial support.
The scheme, which is now closed to new applications, helped medium- and large-size businesses to access loans and other kinds of finance up to £200m.
Those seeking under £50m had to ensure dividends did not increase while any loan amount was outstanding. Businesses requesting over this amount had to agree to not to pay any cash bonuses to senior management until the facility had been repaid in full while similar restrictions were put in place for dividends.
Richard Warren, head of policy for trade body UK Steel, said state support would be welcome but industry representatives had not been given an indication by Mr Kwarteng about what help will be available.
“Loans would be a very short-term fix but we need a mechanism for securing the industry in the long term,” he said.
“We have not seen the details of what the secretary of state has put forward. We need to see those details but the loan scheme that has been reported won't fix the underlying issue.
“It might solve a problem for businesses that have an immediate cashflow issue. It allows them to pay their electricity bill.
“But that is not the problem; the problem is exorbitant energy costs. By the time you've produced the steel, you can't sell it and you also have a large debt.”
The British steel industry has been calling for years to be placed on an equal footing with competitors in Germany and France. According to UK Steel’s calculations, plants in the UK pay 80 per cent more for their energy than their German rivals do.
UK Steel general director Gareth Stace told BBC News: “If this package results in us still paying 80 per cent more for energy than our competitors in continental Europe, then this will really be a flimsy sticking plaster on what is really a major crisis that we are going through at the moment.”
Conservative frontbencher Lord Agnew added on Monday that soaring energy costs were nothing to do with supply shortages, but were due to a “geopolitical move” by Russia to put pressure on Europe. The Treasury minister appeared to go further than the government has gone before in pointing the finger directly at Moscow for the current crisis.
“The current squeeze on gas prices is nothing to do with the quantity of gas available,” he told peers in the House of Lords. It is a geopolitical move by Russia to put pressure on Europe and we are caught up in that. Public ownership of our own utilities would make no difference.”
The Treasury has been contacted for comment.
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