Government under pressure over axed loan

The Government was under pressure tonight to publish full details of its decision to axe a loan to an engineering firm following the disclosure that ministers were lobbied by a major Tory Party donor.

Labour MPs reacted with anger after it emerged that Andrew Cook urged against granting the £80 million loan to Sheffield Forgemasters just weeks before it was withdrawn by the Conservative-Liberal Democrat coalition.

In an email to Business Minister Mark Prisk, Mr Cook - who runs a rival Yorkshire steel business - claimed the loan offered by the former Labour government was "probably unnecessary and possibly illegal under EU rules".

He stressed too that he had been "the largest donor to the Conservative Party in Yorkshire" since Mr Cameron became Tory leader in 2005.

The issue is particularly sensitive for the Lib Dems as their leader, Deputy Prime Minister Nick Clegg, is a Sheffield MP and has come under fire in the city for failing to save the loan.

Shadow business secretary Pat McFadden tonight wrote to Business Secretary Vince Cable demanding to know if he was aware of Mr Cook's email when he took the decision to withdraw the loan.

"It is crucial that ministers now publish the Government's value for money case for cancelling the loan. There are now too many doubts and questions to simply accept this situation as it stands," he said.

"This was a bad decision for Forgemasters, a bad decision for British industry, and the only people who will benefit will be the Asian competitors of this great British company."

Mr Clegg dismissed claims that ministers had been swayed by Mr Cook's lobbying as "absurd".

"It's constant muck-raking from Labour MPs who won't live up to their own responsibility in making a number of promises with money they didn't have," he told BBC Radio Sheffield.

Mr Cook has previously provided Mr Cameron with thousands of pounds worth of private flights via engineering firm William Cook Holdings, of which he is chairman.

He and his company have also given more than £700,000 to the Tories in cash donations, according to Electoral Commission records.

Mr Cook acknowledged in his letter that he was specifically targeting Mr Prisk, a Tory, as Mr Cable might have found the issue "a difficult nettle to grasp, being as Nick Clegg is a Sheffield MP".

Mr Prisk told MPs last night that the email had "no bearing" on the decision to cancel the loan, while Downing Street insisted that it had been made on "affordability grounds".

But Labour MPs called for an inquiry into the affair and raised questions about relations between Mr Cook and the Prime Minister.

Rotherham MP Denis MacShane said Mr Cameron and his deputy, Mr Clegg, had already "slurred" Sheffield Forgemasters by wrongly claiming its owners would not dilute their shareholdings.

"Now we learn that a Tory donor who has flown Mr Cameron around in his jet intervened to block the deal even if he has castings operations himself which are rivals to Sheffield Forgemasters," Mr MacShane said.

"This affair now stinks to high heaven."

In a statement today, Mr Cook said he had previously offered to help provide the funding Sheffield Forgemasters needed and regarded support for private business to be a "misuse of public funds".

"I have not only spoken publicly about this on many occasions but have challenged these subsidies in the courts," he said.

"So it is no surprise that I am strongly opposed to the previous government's hand-out to Forgemasters, particularly when I had already offered, as a local businessman, to help supply the funding they needed.

"At my own expense I took legal advice which confirmed my view that this subsidy was illegal.

"As a taxpayer and a businessman I believed it was right to pass on this information to the Government which I did in my characteristically blunt way.

"My only intention was to highlight the illegal use of taxpayers' money by the previous Labour government."

In his May 25 email - obtained by Labour MP Angela Smith under the Freedom of Information Act - Mr Cook opened with: "I am the largest donor to the Conservative Party in Yorkshire and have been since David Cameron was elected leader."

He said Sheffield Forgemasters was "not a competitor" of his businesses, but described himself as a "major industrialist" with two steel castings plants in Sheffield and another in Leeds.

The businessman went on to claim "specialist knowledge" of the situation regarding the Forgemasters loan.

"The loan is probably unnecessary and possibly illegal under EU rules," he said.

"I believe the private sector could provide the required finance without the taxpayer shelling out."

He added: "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."

On June 17, the Government cancelled the loan as part of its cross-Whitehall programme of cuts. It had been offered by former business secretary Lord Mandelson in March.

Unions and MPs have warned that the move will hit jobs in South Yorkshire and limit Britain's nuclear industry in the future.

Sheffield Forgemasters, which specialises in steel forgings and castings, said this week it had been forced to suspend work on a hi-tech press for nuclear power plant components.

After the cancellation of the state loan, it could not easily find a private finance alternative, it said.