Did the Scottish Government break state aid law?
Business minister Ivan McKee makes stunning admission that SNP government-Gupta deal might have broken the law
December 15th 2021 saw a statement made to the Scottish Parliament that ought to raise more eyebrows. Hiding among the jargon was a SNP minister admitting his government might have broken the law.
On the agenda was an update on the blandly named ‘Dalzell Historical Industrial Transaction’. The Minister for Business, Trade, Tourism and Enterprise Ivan McKee stood up and admitted that Nicola Sturgeon’s government might have broken state aid rules. Apparently Mr McKee and everyone else in the Scottish Government were either unsure or hedging. And once again the names Gupta and Greensill appear in connection with the SNP.
The whole affair goes back to the 16th March 2016 when Tata Steel UK and Liberty House Group (part of billionaire Sanjeev Gupta’s GFG Alliance) both agreed that the Scottish Government could “act as an intermediary between the companies and facilitate a sale of the plants by Tata Steel UK to the Scottish Government, which would immediately sell the sites to Liberty House”1
What “facilitate a sale” and “act as an intermediary” means in plain English is that ScotGov purchased a Tata Steel facility in Motherwell for £1 back in 2016. And then proceeded to immediately sell it on to Sanjeev Gupta’s Liberty House Group.
As part of the agreement to sell it to Liberty House, SNP Ministers agreed to protect Tata from any future clean-up costs for environmental damage to the site. The Scottish Government agreed a clause which had committed the SNP government to protecting Tata from future costs if Liberty were to go bust.
Much fanfare accompanied this arrangement at the time, with SNP ministers proclaiming they had saved hundreds of highly skilled jobs in Scotland.
It is so very unfortunate then that the viability of Liberty is now in question after the collapse of Greensill Capital - who was the main lender to its parent company GFG.
Even more unfortunate that Sanjeev Gupta - who owns GFG- is under investigation for “suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd”2
So the saviours for a Motherwell steelworks in the mind of the SNP was a billionaire, who they gave a taxpayer funded guarantee of £586m in relation to his purchase of a Lochaber smelter3. And who is now under investigation for money laundering. Oh, yes, who was also heavily funded by controversial banker Lex Greensill (whom the then SNP minister Fergus Ewing met alongside Gupta without minutes taken, any records kept in Glasgow for a posh meal)
Such sterling judgement from the Scottish Government. Such transparency, honesty and integrity…
According to Ivan McKee’s statement from the 15th December however, the SNP are now in full panic mode. The SNP Government is now desperately attempting to distance itself from its own commitments. That clause that the SNP had agreed, committing the government to protecting Tata from future costs if Liberty were to go bust, well now the SNP are trying to disavow this. Perhaps the reason for this scramble is because Liberty might now actually go bust (Greensill’s bankruptcy hurting GFG, and Gupta under investigation by the Fraud Squad).
Ivan McKee told Holyrood that
“We are advised that there is one specific part of the contract arrangement that has arisen during our contingency work that may not comply with state aid rules. The clause in question granted an enduring indemnity from the Scottish ministers to Longs Steel, whereby the Scottish ministers would be liable to cover the cost of certain liabilities arising from Tata Steel’s ownership of the Lanarkshire plants.”
The key bit is the line “may not comply with state aid rules”. The SNP minister continued saying
“In 2016, the contractual negotiation proceeded at pace in a highly pressured commercial environment, with our aim being to save a totemic Scottish industry—an aim in which we were successful. It was not our intention to sign up to a contract clause that might not comply with state aid requirements. The conclusion that was reached on state aid, based on advice at the time, was different from what I have outlined today, and we decided that we were able to proceed with the transaction.”4
Putting aside the claim that they were ‘successful’ in ‘saving’ the industry in question (Liberty may yet go bankrupt), an interesting bit is the language around advice from the time being different from what the SNP are confessing today. That raises a few questions, not least who gave the Scottish Government the advice at the time that the clause protecting Tata from future liabilities was fine? Furthermore, who is informing them that it isn’t fine today? Name those officials responsible, even the law officers should be subject to accountability to the electorate.
Unfortunately for Mr McKee and the SNP however is that Tata has a say in all of this. The BBC reports that Tata has issued a public statement insisting the SNP’s commitments are "valid and binding in all aspects"5. So it looks like yet another major legal fight is on the cards for the SNP government.
LibDem MSP Willie Rennie made a public statement about all of this which rather hits the proverbial nail on the head:
“This is another industrial intervention b---s-up from this government. It’s amateur hour
What does this say to companies who may be interested in doing business with this government in future? How can they trust the government to deliver on its agreements?
I know the minister wishes nothing will go wrong, but he needs to be frank about the potential consequences”
This whole episode raises yet more questions about the quality of decision making that has been going into SNP policy choices. But it also once more raises the spectre of the links between Gupta, Greensill and Nicola Sturgeon’s government. Shadowy connections amid - as Willie Rennie correctly describes as amateur - industrial policy decision making. Taxpayers deserve the fullest possible transparency, but I doubt we will get anything like that from this SNP government.
Scotsman 17th November 2021 ‘SNP accused of 'dodgy deals' after £586m value of Lochaber guarantee revealed’
BBC 16th December ‘Scottish government may have broken law in steel mill deal’
..but will they get away with it yet again?
They seem, easily, to get away with everything dodgy under the sun? Invincible, untouchable and 'above the law', the SNP live a charmed existence in this post-Brexit, northern backwater. Certainly, those various MSPs in Holyrood clearly aren't anywhere near capable of nailing the most glaringly questionable acts from the current FM - what a lucky person she is? I wish I were that lucky, that Teflon-coated, that immune, protected and left-alone to her devices.
Good blog, Dean; keep doing what you're doing.