Labor faces pressure from Greensill following lobbying by shadow minister
Chancellor Rishi Sunak tried to turn the situation around on the job during the Greensill Capital scandal, after it emerged that a shadow cabinet member lobbied for the bankrupt company to have even more access to a UK government guaranteed loan scheme.
Phantom Defense Secretary John Healey urged ministers in May 2020 to give Greensill the opportunity to offer loans of up to £ 200million under a Covid-19 loan scheme for large companies running out of cash.
Despite intense lobbying by David Cameron, the former prime minister who advised Greensill, the Treasury has capped the amount of individual taxpayer guaranteed loans Greensill could offer at £ 50million.
The constituency of Healey in South Yorkshire comprises the activities of Liberty Specialty Steels. Greensill, which is now under administration, is the main funder of Liberty Steel’s parent company, GFG Alliance.
In a letter viewed by the Financial Times, Healey wrote to Nadhim Zahawi, Minister for Business, in May 2020, urging him to allow Greensill to access the higher limit of £ 200million on the loan program for the interruption. of large companies against the coronavirus.
He said Liberty was badly in need of the money and that “their application for CLBILS remains dependent on their lender, Greensill, being accredited for the higher capitalization loan program, which I hope can now be done. done without delay ”.
Healey noted in his letter that it was essential that due diligence be exercised. He told the Financial Times that he had no regrets about promoting as a “local constituency MP.”
“I was doing my job for the large factory in Rotherham that Liberty had recently purchased and expanded,” he said. He added that knowledge of Greensill business model was “the kind of thing people in the Conservative Party had.”
Sunak has been criticized in recent days by Phantom Chancellor Anneliese Dodds for allowing Greensill to participate in the CLBILS program, in which loans from lenders are backed by an 80% government guarantee.
On Wednesday, the chancellor retaliated. A Sunak collaborator said: “His gambling policy brought to light that a Labor Party bench member was lobbying on behalf of Greensill to be accredited for the higher capitalization loan program.”
Greensill’s request for access to the higher cap system was rejected, with Charles Roxburgh, a senior Treasury official who has held nine meetings with Greensill Capital, saying £ 200million would represent ‘significant exposure’.
Even at the lower bound, Greensill was still able to lend tens of millions of pounds through multiple loans to companies linked to Sanjeev Gupta, the steel mogul behind the GFG Alliance, which has multiple assets in the UK.
At the same time, Sunak confirmed in a letter to Dodds on Wednesday evening that the government guarantee on Greensill’s loans under CLBILS would be suspended while an investigation was conducted into the company’s participation in the program.
The investigation is being conducted by the British Business Bank, the public agency for businesses responsible for administering the Covid-19 emergency loan programs. Healey said he believed he also lobbied the BBB to give Greensill greater access to the CLBILS program.
The Treasury’s decision to suspend guarantees shifted the burden of distressed loans to Germany. Greensill Bank, the banking arm of the collapsed Bremen-based financial firm, has provided hundreds of millions of pounds in loans to companies linked to Gupta, on the basis that UK taxpayers would guarantee 80% of the debt.
Greensill Bank is now insolvent, while its management is under criminal investigation, and German cities that bank money face potentially catastrophic losses if the money cannot be salvaged from the ailing Gupta Steel Empire.
Sunak argued that lenders do not have to be regulated by the Bank of England or the Financial Conduct Authority to participate in loan programs. Greensill was one of three non-bank lenders accredited to CLBILS.
The BBB was under pressure to accredit as many lenders as possible, given the weight of demand from struggling businesses. Fintech lenders and challenger banks have been appreciated by managers because they can often make underwriting decisions faster.
About 90 lenders, from traditional banks to online-only peer-to-peer financing organizers, have been granted access to CBILS’s small business lending program.
Meanwhile, Greensill, alongside smaller lenders such as OakNorth Bank and Secure Trust Bank, was among more than 15 companies that had access to the larger CLBILS program.