Forgemasters loan 'would have been value for money'

Business Secretary Vince Cable admitted the deal would have been "value for money" – and insisted the only reason for turning it down was because it was unaffordable given the state of the public finances.

But in a grilling by a committee of MPs yesterday, he was accused of hiding behind Freedom of Information laws to keep secret details of how much benefit the project – creating up to 400 jobs and turning the company into a world-leader in manufacturing components for new nuclear power stations – would have brought.

Labour MPs were left dissatisfied with his explanation of why the loan was one of 12 projects axed by Ministers soon after the coalition came to power, when 217 other schemes were given the go-ahead, although Mr Cable insisted his door was open to Forgemasters returning with a revised bid or seeking a loan from the 1 billion Regional Growth Fund being set up by the Government.

Speaking after the meeting, Leeds West MP Rachel Reeves said: "Why was this loan cancelled? Even Vince Cable says it is good value for money. Out of the 241 projects the Government reviewed, 12 have been cancelled, 12 postponed. But 217 are going ahead. Why are Sheffield and Sheffield Forgemasters being picked out for the chop?"

Under an hour of sustained questioning from Labour MPs on the committee, Mr Cable revealed that the loan – agreed by Labour before the election but then axed by the coalition shortly afterwards – would have been good value for money.

An analysis of the scheme carried out by officials at the Department for Business, Innovation and Skills calculated the loan would have generated up to 3 for every 1 at risk from the Government.

He repeatedly insisted that despite offering value for money, the scheme was simply unaffordable as the coalition battled to reduce the deficit.

"The Government has to ration capital expenditure and we are restrained on what we can do. If something is unaffordable we can't do it even if it offers net benefits."

Mr Cable also admitted that as the company has been unable to find private finance to fund the giant forging press to manufacture the components, Britain's new generation of nuclear power stations will be built abroad.

Labour MP Jack Dromey, a former union boss, accused Mr Cable's department of hiding behind the Freedom of Information Act and refusing to release details of exactly how positive the benefits would have been.