Industry: Mandelson demands rethink on £80m steel firm loan

Days after it emerged a major Tory donor had lobbied against the loan when the coalition Government was formed, Lord Mandelson broke his silence after demanding to return to his old Department to re-examine documents relating to Labour's offer of the loan.

Along with Pat McFadden, who succeeded him as Shadow Business

Secretary, Lord Mandelson emerged to accuse coalition Ministers of scrapping the loan without considering the case and insisted the documents contradicted Government claims the deal was offered knowing the money was not available.

Mr McFadden also urged Ministers to rethink their decision and fund the scheme through the 1bn Regional Growth Fund, aimed at boosting economies outside London and the South- East.

Their visit to the Department of Business, Innovation and Skills allowed Labour to continue their attack after the revelation of lobbying by Sheffield industrialist and Tory donor Andrew Cook last week raised fresh questions over why the deal was pulled.

The loan had been agreed by Labour before the election with the prospect of creating at least 200 jobs and making the company a world leader in manufacturing components for nuclear power stations

"What's clear is that it was very important for our industrial future; it was independently assessed and signed off; value for money was vouched for; and Sheffield Forgemasters themselves were prepared also by the way to dilute their own shareholding," said Lord Mandelson.

"Far from it being a blank cheque the money was vouched for and signed off by the Treasury itself."

He added: "The new Ministers took this decision rather on the hoof without listening to all the facts and also without considering its importance not just to Sheffield Forgemasters but to the whole of the supply chain for the nuclear industry."

Ministers insist the loan was axed purely because it was not

affordable but Mr McFadden urged them to rethink.

He said the loan fitted "exactly the sort of criteria" set for the Regional Growth Fund and said it should be its "first task".

Tory and Liberal Democrat sources have both dismissed suggestions Mr Cook's lobbying had any influence on the decision to axe the loan.