Lord Hunt of Kings Heath
To ask Her Majesty’s Government why they cancelled a loan to Sheffield Forgemasters, given the willingness of the company to dilute its equity share.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)
My Lords, the decision not to pursue the loan was taken on grounds of affordability.
Lord Hunt of Kings Heath
My Lords, both the Prime Minister and the Deputy Prime Minister in the other place made statements to the effect that the reason why the loan was withdrawn was that the company would not dilute its equity share. It has since transpired that the Deputy Prime Minister was aware that the company was in fact prepared to dilute its equity share. Why will the Deputy Prime Minister not apologise to Parliament for misleading it? Why have the Government taken such a crass decision to withdraw the loan from the company, which could have provided a massive foundation to the development of a nuclear supply chain industry in this country?
Baroness Wilcox
Absolutely not. Our decision not to proceed with the loan was a matter of affordability and that only. The shareholder structure of SFIL did not influence any assessment. I have no knowledge of any privy discussions between the Prime Minister and the Deputy Prime Minister. The Government’s decision has absolutely nothing to do with this issue. We regard Mr Honeyman and his team as having produced an excellent project with no criticism of him or of the company. Perhaps the Opposition should apologise for the necessity of cuts based on the state of the economy that we inherited.
Lord Brookman
My Lords, I declare an interest as the ex-leader of the trade union that represents most of the workers at Sheffield Forgemasters. The Minister is aware—it has already been stated by my noble friend—that this was a loan, not a grant. Therefore, it is difficult to understand the attitude of the coalition Government. As my noble friend said, two companies make this product for the nuclear industry: Sheffield Forgemasters and a plant in Korea. Is it not the case that this loan should be provided to save jobs in the community in Sheffield and to help manufacturing?
Baroness Wilcox
There is no doubt about it: I shall have to answer again and again that this decision was taken on grounds of affordability. Nobody would argue that Sheffield Forgemasters is not an excellent example of a successful British manufacturing company. The Government wholeheartedly support what the company does and I place on the record our recognition of its excellent work. Once again, I tell noble Lords that the only reason why we took the decision was affordability and we had to take that decision because of the condition that the previous Government left us in financially.
Lord Broers
My Lords, in light of the fact that it is largely German and Danish companies that will build the hugely expensive offshore wind turbines, do the Government not think that they should do more to ensure that the same thing does not happen with regard to nuclear power plants?
Baroness Wilcox
I think that the noble Lord will well know the view of this Government—both sides of our Government—on nuclear power. It is something that we have considered long and hard and it was not an easy decision to take. For our party, we will always say that we will not subsidise the nuclear industry.
Lord King of Bridgwater
Does my noble friend not agree that, despite the outrage expressed on the other side of the House, the financial situation of Sheffield Forgemasters might have been much different if the previous Government had not dithered so consistently on the question of further nuclear power for this country, so that that company could have had decent orders instead of having to seek loans from the Government to bail itself out?
Baroness Wilcox
Of course I agree with my noble friend. I say again that Sheffield Forgemasters is an excellent example of a successful British manufacturing company and will, I am sure, continue to be so for a long time to come.
Lord Foulkes of Cumnock
The Minister must agree that the decision to cancel this loan—after all, it was a loan, not a grant—is inexplicable until one realises that it follows a letter to the Government from Mr Andrew Cook, a major Conservative Party donor, who owns two forges in Sheffield. Surely that cannot be a coincidence, can it?
Baroness Wilcox
I assure the noble Lord that the representation from Mr Cook—copies were sent to Clive Betts MP and Angela Smith MP in another place yesterday on their request and will be placed on the BIS website today—had no bearing on the decision-making process. The decision not to pursue the loan was made on grounds of affordability.
Lord Cotter
My Lords, would the Minister not agree—and I am sure that this could highlight the situation generally in the manufacturing industry—on the need for the banks to give support to manufacturing in particular, especially in the light of a recent report from the British Bankers’ Association showing that bank lending fell substantially last year and that many businesses are still being turned down for loans? I know that the Government are concerned about this, but I urge renewed efforts to persuade the banks to address this issue. Time and again they say that they are lending, but the facts say not—and this is an example, perhaps, of a manufacturing industry issue where lending is required.
Baroness Wilcox
The banks will say, as they always say, that it is not their money that they are lending but other people’s money—
Baroness Wilcox
Not all of them are using taxpayers’ money. It must be for the banks to protect that investment and make sure that they get a good return. Sheffield Forgemasters has concluded that at present there is no available private sector alternative funding structure that is both economically viable for the company and fair to existing shareholders and that the company’s best interests will be served by suspending work on the project for the time being. However, as it has also stated, it is still keen to undertake the project.
Lord Young of Norwood Green
Since the issue is one of affordability and value for money, will the Minister confirm that the Government will publish the value-for-money case?
Baroness Wilcox
The trouble with the party on the other side is that it misunderstands what “affordability” means or implies. As I have said, the Government inherited a massive and growing debt. If that had been allowed to grow beyond control, every company in the country would have had to face the risk of a disastrous rise in borrowing costs and there might have been even less money to borrow from the banks.