Shrouded in secrecy, £600million ‘illegal’ steel deal by SNP
A CONTROVERSIAL government guarantee given to a steel firm on the brink of collapse may have been illegal, it was claimed yesterday.
Ministers backed an aluminium smelting plant in the Highlands – but the company which runs it is in financial crisis.
This means taxpayers may have been left exposed to major financial risk as the 25-year guarantee is worth nearly £600million.
Think-tank These Islands said the deal may have been unlawful, while legal advice given to the SNP Government has emerged in ‘heavily redacted’ form.
Scottish Tory finance spokesman Murdo Fraser said: ‘The SNP’s Finance Secretary [Kate Forbes] needs to be urgently upfront about just how much taxpayers’ money could be at risk over their failings.
‘It appears the SNP are up to their usual tricks and unwilling to release key legal advice.
‘These are serious claims and the SNP Finance Secretary must address them.’
Tycoon Sanjeev Gupta’s firm GFG Alliance is in crisis after financial backer Greensill Capital went into administration.
His GFG empire includes Liberty Steel, which owns 12 plants in the UK, including in Motherwell, Lanarkshire, and Fort William, Inverness-shire.
GFG Alliance bought a smelter in Fort William and a Highlands hydro plant from Rio Tinto in 2016 in a £330million deal. As part of this, Rural Economy Minister Fergus Ewing committed the Scottish Government to buying the plant’s electricity if the smelter were to shut, with securities worth £575million over 25 years.
Former fund manager Sam Taylor, of These Islands, said yesterday: ‘Greensill and Mr Gupta persuaded the Scottish Government to guarantee the power purchase obligations of the aluminium smelter to the hydro plant.
‘This was a highly unusual arrangement and was justified on the basis it would safeguard around 150 jobs.’ Mr Taylor said that ‘if the smelter does go bust, the power can be sold to the National Grid and the Scottish Government should avoid losses’.
He added: ‘But that doesn’t mean the guarantee wasn’t improper. And it might even have been illegal.’
A ‘key question’ was whether the guarantee breached EU rules on public cash being given to firms. ‘We know the
Redactions: Blacked out sections in the report
Scottish Government considered this, because the due diligence report it commissioned from Ernst & Young has several pages devoted to the state aid implications of the guarantee,’ Mr Taylor said.
He added: ‘The E&Y report was made public via a freedom of information request. But it is very heavily redacted.’
He said he could find no record of the Government going to the EU to get approval for the cash as ‘state aid’, adding: ‘The guarantee
‘These are serious claims’
certainly looks like state aid now.’
Last night, GFG Alliance refused to comment on the claims by These Islands, or on the guarantee.
A Scottish Government spokesman refused to release the guarantee, insisting it was not a ‘public document’. On the claims by These Islands, the spokesman said: ‘These suggestions are wrong.
‘The guarantee is compliant with EU state aid rules and was approved by the Scottish parliament’s finance and constitution committee, which has cross-party representation, following appropriate due diligence.’