Kwasi Kwarteng says Government will have to borrow more 'in short-term' ahead of expected £150bn energy crisis plan

Mr Kwarteng delivered the message after an hour-long meeting with City leaders at the Treasury on Wednesday morning.

The chief executives of banking giants Barclays, NatWest, Lloyds Banking Group and HSBC were all in attendance, along with leaders at insurers Aviva and Legal and General, and the top investment banks.

Mr Kwarteng said the Government will have to borrow more money in the short-term to help households and businesses through the energy and cost-of-living crisis.

He said: “We face extraordinary economic challenges in the coming weeks and months and I know that families and businesses across the UK are worried.

“The Prime Minister and I are committed to taking decisive action to help the British people now, while pursuing an unashamedly pro-growth agenda.”

As part of the pro-growth strategy outlined, the Chancellor committed to ensuring that the economy grows faster than the nation’s debts.

This would involve a “radical” supply-side agenda, meaning that businesses could see burdensome regulation and taxes reduced in the future.

Changing the conditions for businesses will in turn create more jobs, wealth and drive economic growth, he said.

“We need to be decisive and do things differently. That means relentlessly focusing on how we unlock business investment and grow the size of the British economy, rather than how we redistribute what is left”, Mr Kwarteng added.

The City regulator has told Britain’s biggest banks to outline their plans for supporting customers through the cost-of-living crisis, according to reports.

It is likely that the Chancellor will have stressed the important role of banks and insurers during his meeting with the leaders on Wednesday.

The chief executive of insurer Legal and General, Nigel Wilson, spoke positively about the meeting with Mr Kwarteng, which he said was “terrific”.

The new Prime Minister Liz Truss is expected to announce a plan on Thursday to freeze energy bills in England, Scotland and Wales at around £2,500.

The policy, which could cost as much as £150 billion according to the The Times, would be funded by borrowing and general taxation.

It comes as a new Institute for Government paper warned that Mr Kwarteng will need to cut spending on public services, raise other taxes or break the government’s fiscal rules if he implements Liz Truss’s promised tax cuts, says a new Institute for Government paper.

Its report warns that the new chancellor should use Truss’s planned ‘fiscal event’ on September 21 to be honest about difficult choices on tax and spending beyond this winter.

The prime minister has said this will be held without a new Office for Budget Responsibility forecast, but the new IfG paper says Mr Kwarteng would be irresponsible to carry out her tax cuts without an updated official forecast.

Much of the £30bn of headroom forecast by the OBR in March may well have been wiped out by rising inflation and interest rates and lower growth prospects due to the energy price shock.

IfG chief economist and report author Gemma Tetlow said: “The huge rise in energy prices perhaps necessitates an extraordinary reaction from government but it comes with risks. It will be difficult for the government to withdraw support while prices remain high and, without a price signal to encourage households and businesses to use less energy the government may need to do more to encourage people to limit their energy consumption. This is something Truss was disinclined to do during the leadership campaign.”