Clegg rejects Forgemasters loan demand

In rowdy Commons question time exchanges, shadow justice secretary Jack Straw repeatedly attacked the Deputy Prime Minister over the decision and urged him to think again.

But Mr Clegg hit back, accusing the Opposition of being in "complete denial" over the scale of the deficit inherited by the coalition Government. The clash came after it was reported that Sheffield Forgemasters had shelved plans to buy equipment to make parts for nuclear power stations after losing the loan.

Mr Clegg, who is Liberal Democrat MP for Sheffield Hallam, has come under heavy Opposition criticism over the axing of the loan.

Mr Straw said it was no wonder Mr Clegg's "new found friend, Lord Ashcroft, says today 'even in the Liberal Democrat held seats less than a quarter of voters thought the Lib Dems were having a significant impact on the Government's agenda'. First you blamed the cancellation of the loan on the company's unwillingness to dilute the shareholding.

"Last week you told the Yorkshire Post that the company didn't need a loan after all. This is one excuse after another. You said Forgemasters can find the money for expansion elsewhere. Now we know that they cannot find that money, hasn't the whole edifice of your argument been demolished and why on earth won't you reconsider this ludicrous decision."

Mr Clegg said Mr Straw should go away and practice his questions.

"Why did your government do nothing to sort out the banks who were not prepared to offer a decent loan at reasonable rates to Forgemasters," he asked. "Why did your party scrap the 10p tax rate. We have taken 800,000 on low pay out of paying tax altogether. That is more progress in 10 weeks than you managed in 13 years."

But Mr Straw added: "Just over a month before the election you warned about the dangers of the kind of policies you are now following. The Liberal Democrats are giving power to the Conservatives without any influence over the policies which they used to oppose."

Mr Clegg responded: "You may bellow as much as you like. I'm happy to account for everything we are doing in this coalition Government, which has brought together two parties, working in the national interest to sort out the mess that you left behind. Perhaps one day you could account for your role in the most disastrous decision of all, which is the illegal invasion of Iraq."