Dave Stands Corrected

David Cameron – and his chum Nicholas Clegg – have been corrected about the statements they made justifying the Coalition’s withdrawal of the £80million loan made to Sheffield Forgemasters by Peter Mandelson, the former Business Secretary. The current Business Secretary, Vince Cable, on an official visit to Sheffield earlier this month stated that they did not know what they were talking about. Or as he politely put it, they made statements whilst not knowing the full facts about the loan.

This decision and its repercussions are not going to be buried as the House of Commons Business Select Committee is to hold a one-off evidence session on the controversy next month. Nick Clegg has faced repeated calls in the Commons to apologise over the decision. Vince Cable will now have to face the Select Committee to give evidence. It will not be a pleasant experience as the Sheffield Labour MPs are extremely angry – as are the citizens of Sheffield – and will be supplying the bullets, based on inside knowledge, for their colleagues to fire. Vince has praised Forgemasters and said it was doing good business but their proposed expansion could not be supported and the decision was based on affordability.

Dave and Nick had originally said the deal was axed because the loan had not been signed off by the Treasury and it would only benefit Forgemasters shareholders. Labour was accused of announcing it as a “photo opportunity” days before the general election. However, Vince has confirmed that the advice given to the previous government had shown that the benefits of the loan were likely to exceed the costs. But Vince also said if the Coalition had kept to all Labour’s 2010 spending commitments, every company in the country would have faced the risk of a disastrous rise in borrowing costs. Just why was not explained but perhaps the Select Committee will press him on the point. The loan would have allowed the construction of a 15,000 tonne steel press for the manufacture of huge components for the nuclear industry, making Forgemasters the world leader in that sector ahead of Japan.

Japan Steel Works are now left as a monopoly supplier for civil nuclear power and it delays the development of nuclear energy as a stopgap alternative to greenhouse fuels. The demand for nuclear forgings is expected to reach 70,000 tonnes worldwide by 2020. As a result of this decision capacity will only be 59,000 tonnes. There will be a shortfall with only enough forgings to supply seven reactors per year when it is anticipated the construction rate needs to be thirteen reactors each year between 2010-2030. There is also the risk that the lights will go out over the UK as generating capacity reduces with the retirement of existing power stations. A domestic market exists to create steel for the next generation of nuclear power stations. The biggest contracts for stations could go to EDF of France as a result of backroom deals by Gordon Brown, but there is hope that lead sub-contractors would be British. They would supply 50% of plant requirements for the nuclear programme and this would increase to 70% if the Forgemasters expansion went ahead.

None of the reasons given so far for axing the loan stand up to scrutiny. Money was available and they have allowed the finance to proceed on other projects. £30million has been given to General Motors and £20million to Nissan Motors to produce electric cars in England, while the Ford Motor Corp has been given a loan guarantee of £360million. The Coalition chose to axe certain projects out of the 217 that they inherited; and reviewed in less than six weeks. Only 12 were scrapped and 12 suspended; three of those were in Sheffield. There is a suspicion in Sheffield that the City was targeted as in addition, to the Forgemasters loan, £13million for the Outukumpu industrial park and £12million for the Sheffield city-centre Sevenstone Retail Quarter were also withdrawn. People in Sheffield have accepted the Outukumpu and Sevenstone cancellations, but the Forgemasters decision has provoked persistent anger and a 10,000 signature petition demanding that the loan be reinstated. It would have created apprenticeships and 400 new jobs in Sheffield. Forgemasters has a high percentage of apprentices – 70 out of a workforce of 800.

The loan was affordable and would have been repaid with £30million interest. A private sector loan was not available so the government stepped in because it was a strategic investment to develop jobs in a new sector. The project was also supported with match private investment funding of £60million, including £40million from giant US nuclear plant manufacturer Westinghouse. The money was to be paid out of the Strategic Investment Fund and the external body – Industrial Development Advisory Board – had verified that it was ‘good value for money’. The loan passed a strict ‘value for money’ review by the Treasury before approval. Former Labour ministers Peter Mandelson and Pat McFadden returned to the Business Department to vet the papers relating to the loan. They confirmed that everything was in place and budgeted for. This loan was good for Sheffield and good for the UK; it ticked all the boxes and the Coalition would be on to a winner.

Real reasons for axing the loan include the lobbying by rival Sheffield steel magnate Andrew Cook who donated over £650,000 in cash to the Tory party and funded 23 flights for David Cameron. He e-mailed No. 10 suggesting that the loan was probably unnecessary and possibly illegal under EU rules. In fact the loan was delayed for nearly a year while Brussels vetted it before approving the aid. Another possibility is the LibDem opposition to nuclear power generation and their favouring of renewable energy. Forgemasters is not putting all its eggs in the nuclear power basket. They are targeting the global market for equipment used in hydro-electric schemes by joining forces with the British Hydropower Association and moving further in to the renewable energy market. Forgemasters have also signed a £30million contract with Bharat, the Indian state run power equipment maker, to oversee the development of power generation forgings for their rapidly expanding domestic market.

And then we have the contradictions, which hardly demonstrate joined up government. The Business Department is guaranteeing a funding deal to ensure a £22million Nuclear Manufacturing Research Centre goes ahead. This is to be built at the Advanced Manufacturing Park at Waverley on the Rotherham – Sheffield border which has already received £15million from the Business Department. The Centre includes Forgemasters, Westinghouse, Rolls-Royce and Sheffield University. It will play a major role in replacing the UKs nuclear power stations and has export potential. An Innovation Technology Centre has also been built on the Park. Sheffield’s expertise in special steels is in much demand in the aerospace sector so it is no surprise to find that Boeing has located at the Park to work with the University. Sheffield’s Firth Rixson is supplying engine parts to Pratt & Whitney the Canadian engine manufacturer as well as Rolls-Royce.

Corus Special Steels in Sheffield is supplying an expanding world wide aircraft manufacturing industry that is expected to explode and they have worked with Dowty to develop landing gear for the latest generation of civil aircraft like the Boeing Dreamliner. This has involved using techniques developed in collaboration with researchers at the Advanced Manufacturing Park Research Centre.

The Park is a centre for advanced technology development with tremendous export potential and job creation. The Forgemasters loan was a vital component in a strategy towards achieving this. It capitalises on the worldwide recognition of the ‘Made in Sheffield’ brand which stands for excellence and quality. It fits in with the Coalitions plans for a recovery based on export led manufacturing. The Coalition’s decision to axe the Forgemasters loan is therefore incomprehensible and it calls in to question their economic competence. The project was cleared by government departments and the Treasury as good value and sound use of public money, but was then delayed for months because the EU rules on state aid had to be cleared. The new Coalition Government cancelled the loan without any recourse to Sheffield Forgemasters – who are the worlds only independently owned forge master – to discuss alternative methods of funding. It is plain crazy.

One thing does seem certain, Nick Clegg needs to find a safer parliamentary constituency before the next general election.

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