Government hits back at MPs’ accusations over axing of Forgemasters £80m loan

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The government has denied that it axed an £80million loan to steel giant Sheffield Forgemasters because it was an “easy” cost saving.

The coalition’s long-awaited official response to a scathing MPs’ report insisted the decision to cancel the funding was “not taken lightly”.

A report in December by the Business, Innovation and Skills select committee said the Forgemasters loan “represented value for money” and said the Government would have made a £30.9m profit in interest payments.

It criticised the Government for not coming clean about the real reasons for the cut - that it was an easy target for Ministers who were trying to make a quick start to cutting the country’s deficit.

But the government’s official response to the report has now rebuffed the findings.

It said: “The government does not accept the Sheffield Forgemasters loan was identified as an easy cost saving.

“The project re-approval process was about making the books balance for the current financial year.

“The government was not able to bear the cost of all the commitments made by the previous government.

“This meant that it had to take a very difficult decision regarding the affordability of the loan.

“This decision was not taken lightly, and was taken on grounds of affordability.”

The loan was due to be used by Forgemasters to fund a 15,000-tonne press to make parts for nuclear reactors.

Ministers have insisted Forgemasters can still apply for money from the £1.4bn Regional Growth Fund.

But Labour’s Penistone and Stocksbridge MP Angela Smith said: “This response is overall disappointing and the government has unfortunately decided not to come clean over this sorry state of affairs.

“The truth is, if the loan had not been cancelled, Sheffield would now be on its way to being a major player in the nuclear energy supply chain.”