Former Labour business ministers condemn £80m loan withdrawal

Labour's former business ministers today urged the government to reconsider the withdrawal of an £80m loan to a company to make parts for the nuclear industry, after warning that the work could go to Japan or Korea. Former business secretary Lord Mandelson and Labour's current spokesman Pat McFadden spent an hour at the Department for Business in London examining papers related to the Sheffield Forgemasters loan. The previous Labour administration pledged the loan to the leading engineering company, but it was axed by the new government as part of its drive to reduce public spending, on the grounds that the loan was unaffordable. Mandelson said reading the papers again reminded him of the project's importance, which he believed would have boosted the civil nuclear supply chain across the country. He accused ministers of deciding to cancel the loan without considering all the facts and said the work could go to firms in Japan or Korea. Deputy prime minister Nick Clegg has already rejected calls to rethink the decision, claiming that the problem is one of "affordability". The former business secretary rejected claims he had written a cheque that would have bounced, saying that the loan had been agreed with the Treasury after consultations on the firm's expansion plans with independent experts. McFadden, the shadow business secretary, said: "Looking at the papers, they make clear that the government's accusations about the decision to grant the loan to Sheffield Forgemasters are wrong. "The papers confirm that the project had important potential benefits for the civil nuclear supply chain, that it had Treasury approval and that it was very carefully considered by the Industrial Development Advisory Board, the external body that looks at such decisions. They concluded that it represented good value for money. Rather than continuing with wrongful statements about the project, the government should look again at this decision." Sheffield Forgemasters said it has shelved plans to buy the equipment to make parts for nuclear power stations. Chief executive Graham Honeyman said efforts to secure funding for the metal press would be suspended "for the time being". About 200 jobs would have been created, but the loan was cancelled as part of a package of spending cuts designed to save £2bn. The matter engulfed the government in its first sleaze row since the general election, when it was revealed last week that secret Whitehall documents showed a Tory donor successfully lobbied for the cancellation of the loan. Downing Street denied ministers had acted improperly when the loan was cancelled weeks after Andrew Cook, who has subsidised some of David Cameron's flights, warned the government it could be illegal.