Cameron wooed Tata bosses with FIVE sweeteners
THE Prime Minister personally intervened to persuade Tata to keep its UK steelworks by offering a package of sweeteners – including a controversial plan to tear up pension laws.
Documents seen by the Daily Mail show changes to the £15bn Tata-sponsored pension fund are part of a package of perks drawn up by David Cameron ahead of meetings in Mumbai with the Tata board, which are a last- ditch attempt to persuade the Indian owners to stay.
This included a letter from the Prime Minister personally delivered by Sajid Javid, the Business Secretary, to Cyrus Mistry, Tata chairman, setting out how the Government would help to keep Tata at Port Talbot.
A source close to the negotiations said: ‘The PM is desperate to keep Port Talbot alive by any means. He can’t afford to let this blow up ahead of the EU referendum.’
As well as the proposed pension changes, Tata’s bosses have been offered a package of four other inducements in a bid to keep them in the UK or help secure buyers. These include:
Help with debt and financing in the UK and Europe. This would be on commercial terms with a third party. The finance deal would be flexible to suit the needs of the firm;
Help with competitiveness. The Government would offer to reduce energy costs for steel-making so it is no more expensive than other European countries;
Help with training, research and development, and energy efficiency;
Lowering costs for dredging.
The leaked papers also show that Javid, on behalf of the Government, told the Tata board of its preference for a bid – citing the joint offer from Wilbur Ross, the US steel-to- coal magnate, and Endless, the turnaround fund.
Tata director Koushik Chatterjee is also understood to have said his preference was for one bidder going through to the next stage rather than two or three. He has, however, been persuaded by Javid that having more than one bidder helps ‘beneficial negotiating ten- sion’ between rival bids that could lead to a better deal if the assets are sold. But the Government’s plans to consider special legislation, which would allow the British Steel pension scheme to water down benefits to its 130,000 members, may have backfired.
The consultation paper from the Department for Work and Pensions has provoked uproar across the pensions industry and Whitehall.
Experts claim the concession, which would require changes to the 1995 Pensions Act, would lead to other firms with pension problems also demanding special action.
Instead of having their pensions uprated by the retail prices index each year, British Steel members would have them raised by the consumer prices index which is about one percentage point lower per year – a move which could wipe off as much as £2.5bn from the pension liabilities.
A Whitehall spokesman said: ‘It’s true the Business Secretary delivered a letter to Tata while he was in Mumbai. This was all Sajid’s idea. Having met Tata’s senior management on a number of occasions, he knew the value they’d attach to a personal letter from the PM underlining Government support.’