Clive Betts
Main Page: Clive Betts (Labour - Sheffield South East)(14 years, 4 months ago)
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Mr Clive Betts (Sheffield South East) (Lab)
Thank you, Mr Deputy Speaker—[Interruption.]
Mr Deputy Speaker (Mr Nigel Evans)
Order. Would Members who are leaving the Chamber do so quietly?
Mr Betts
Normally when a Member speaks in an Adjournment debate at this time of night, they stand in the Chamber in splendid isolation. It is obviously pleasing to see so many right hon. and hon. Friends here tonight, particularly four other Sheffield MPs, my right hon. Friend the Member for Sheffield, Brightside and Hillsborough (Mr Blunkett), and my hon. Friends the Members for Penistone and Stocksbridge (Angela Smith), for Sheffield, Heeley (Meg Munn) and for Sheffield Central (Paul Blomfield). It is also pleasing to see my right hon. Friend the Member for Rotherham (Mr MacShane) and many other colleagues.
This issue affects not merely Sheffield—it has touched a nerve across the nation—but forging and forgemasters are very important in the history of Sheffield. As a child growing up in the city, the pounding of the drop forges down in the Don valley, which is now part of my constituency, was like the very heart of the city beating.
However, this debate is not only about the history of industry in Sheffield, but about its future. In 2005, when the company was part of the Aitchison group, there were major financial difficulties. Eventually, the company was saved by a management buy-out led by chief executive Graham Honeyman, who by putting his own money in saved the firm, its workers’ jobs, debts to suppliers and, with the help of the pension protection fund, the workers’ pensions. Despite initial problems with cash flow and rising energy prices, the company became profitable and increased in size to 700 employees, taking on 70 new apprentices. The company has full order books and 80% of its work is for export, and it has a turnover of £100 million. All the company’s profits to date have been reinvested.
Two or three years ago, the company saw a major opportunity in the nuclear industry. With £150 million of investment, it could buy a 15,000 tonne forging press. However, as that was larger than the company’s total annual turnover, it needed additional help. It went to my friend, the previous Member for Sheffield Central, Richard Caborn, who deserves a great deal of credit for the help he gave at that time.
That package would have created 400 jobs. The Government were approached and over a two-year period, very detailed negotiations were held. Eventually, an £80 million loan was agreed as part of a package involving private investment, including support from Westinghouse, loans and equity release. There was a full appraisal by Department for Business, Innovation and Skills officials and Treasury officials. It was confirmed in parliamentary answers that the independent Industrial Advisory Board gave its assessment, and that Deloitte and Allen & Overy looked at market opportunities and additionality, and at cost-benefit and commercial considerations. After all that, it was concluded that a loan of £80 million was the right way to go as part of an overall package. The loan was also part of an industrial strategy with a nuclear research centre and the Advanced Manufacturing Park. I do not think that France and Germany would have such a dilemma about what to do about investing in such a company.
After the election, we were told that there would be a review. Funnily enough, most of the reviews that took place actually approved schemes that were in train, so let us examine what the review of the Forgemasters loan amounted to. There was no new cost-benefit analysis and no new external advice was sought. Indeed, the Government did not get back to the original advisers. There was no contact with Forgemasters. The first time the company learned anything of the review was when the chief executive got a phone call from a Minister, who said, “Your loan has been withdrawn.” That is no way to carry out a review. The kindest thing I can say is that it was a virtual review; the worst thing I could say is that it was an absolute sham.
Since then, various reasons have been given for the refusal of the loan, including that the directors would not dilute shares. The Deputy Prime Minister and the Prime Minister said that, but the former has had to write to the chief executive to apologise for making inaccurate statements, although he did not apologise today in the House.
Private funding was involved via an element of equity release, but the company would not continue with extra equity release to the point at which control passed back to an absentee owner—the very sort of owner that nearly bankrupted the company in 2005 when the workers and management had to save it.
It was said that commercial options were available. Indeed, the Lib Dem leader of Sheffield city council, Councillor Paul Scriven, said that the commercial markets would provide the money. Will the Minister confirm that at a meeting with Forgemasters and his officials the other day, it was agreed that there were no straightforward commercial options without the loan?
We have been told that there is no money, and that this is unaffordable, but we are talking about an £80 million loan, not a grant. It would have been repaid with interest, making a repayment of £110 million, plus additional money from equity warrants if the investment had been successful, plus the tax revenue from those employed by Sheffield Forgemasters and by companies in the supply chain such as Davie Malcolm, Siemens and Rolls-Royce. This loan would actually have made a profit for the Treasury. The Business Secretary almost admitted as much to the Select Committee the other day.
We were also told that the loan had been a pre-election bribe to buy up a few votes at the general election, but the negotiations had been going on for between 18 and 24 months before the election. So what was the real reason for this decision?
Angela Smith (Penistone and Stocksbridge) (Lab)
I have here correspondence released following a freedom of information request. It indicates that Andrew Cook, of William Cook Holdings, wrote to the Government to urge the cancellation of the loan. Does my hon. Friend agree that this approach from a major donor to the Tory party seems to provide the only basis for the Government’s decision to cancel the loan?
Mr Betts
I have not heard any other reason. I have read out four reasons, all of which have been proved to be inaccurate and untrue. I shall read out some of the letter that Andrew Cook sent. There were lots of letters sent in during the review, but I think the Minister will be able to confirm that this was the only one that objected to the loan and said that it should not be granted. It is dated 25 May, and it begins:
“Dear Mark,
I am the largest donor to the Conservative Party in Yorkshire and have been since David Cameron was elected leader. I am delighted you are at last back in power, albeit in coalition.”
The letter goes on:
“I have specialist knowledge of the situation which I would like to share with you confidentially. The loan is probably unnecessary and possibly illegal under EU rules. I believe the private sector could provide the required finance without the taxpayer shelling out…It is a typical labour ‘sacred cow’. I believe you may be the best person to consider this matter as Vince Cable may find it a difficult nettle to grasp, being as Nick Clegg is a Sheffield MP.”
Well, he needn’t have worried about that, need he? A second letter from Andrew Cook, dated 9 June, states:
“For the record, I am convinced from my own industrial experience that the necessary finance could be raised from the private sector.”
He goes on to cite
“the reluctance of local management to accept outside equity investment.”
Where have we heard those comments repeated subsequently?
Did the Minister, or any other Minister or civil servant, reply to this letter? Who knew about the letter? Did the Deputy Prime Minister or the Business Secretary know about it? Did the Chief Secretary to the Treasury know about it? Tonight, Downing street has issued a statement saying, “Not us, guv. It was all down to the Liberal Democrats. It was down to the Business Secretary and the Chief Secretary to the Treasury. They made the decision.” It will be interesting to hear people’s response in Sheffield to how the Lib Dems have treated them in this regard. When did Ministers know about this letter? Was it taken into account in reaching the decision? It is difficult to believe that it was not, because there was not one other shred of evidence thrown at the review that could have led the Government to change the decision that had been taken previously.
In the end, Sheffield Forgemasters will continue to be a successful company without this loan. Without it, however, the losers will be UK workers, UK industry and the UK economy. In the light of the cloud that these letters have now cast on the real reason for the withdrawal of the loan, and in the absence of any other real reasons being provided, will the Minister now accept that the case for a proper independent review into this whole matter is unanswerable?
Mr Prisk
No. I have 60 seconds left and I want to ensure that I draw my thoughts to a conclusion.
Business in this country cannot prosper while we have a record budget deficit hanging over us. That is the simple fact, but it is one that—sadly—the Front-Bench Members of the Labour party seem unable to grasp. A clear plan to eliminate the structural deficit by the end of this Parliament can leave the markets in no doubt that the Government will live within their means. That is why we have placed fiscal discipline at the top of our programme for governance. Our job in government is to create a stable, long-term framework so that all companies—