Pat McFadden: Don't throw away a chance for Sheffield... and for Britain

His article about Sheffield Forgemasters in Saturday's Yorkshire Post was a tired repetition of unfounded allegations about this project which displayed a complete failure to understand what his Government has just done.

While Britain can claim to have led the first industrial revolution with Sheffield playing a critical role, our economic history is also marked by a number of lost opportunities to gain early advantage at times of major economic and technological transition.

The expansion plans at Sheffield Forgemaster represented a 21st century opportunity to seize the advantage in the growing area of civil nuclear power.

Forget phoney allegations about a pre-election bribe or the project being paid for with money the outgoing Government didn't have. This project took two years to negotiate and it was for a loan, not a grant. Under the terms of the deal, 40m in private sector funds from leading American Nuclear Power station manufacturer Westinghouse would have been put in and Forgemasters would have had to repay the loan to the taxpayer with interest. The project had been extensively examined by civil servants and approved by the Treasury.

If Labour had won the election, it would have gone ahead. And as a Minister involved in backing it, I would have done so even if it had been located in the leafiest Tory constituency in the land.

This proposal was never just about helping one company or creating a specific number of jobs in one city – it represented a wider industrial ambition for Britain to become stronger in the worldwide nuclear supply chain.

The purpose of the loan was to enable Forgemasters to buy a 15,000 tonne press. This would have given the company capability to make the ultra heavy forgings for civil nuclear and other sectors which currently can only be sourced from Japan or Korea because the capacity does not exist elsewhere in Europe. It would have put the UK into the world premier league of a growing field and given us great export opportunities with a potential boost right across the UK nuclear supply chain.

For all of us who want the response to climate change to be about new industries and new jobs and not just a discussion around targets and emissions, this project mattered because it was about the real opportunities presented by the transition to a lower carbon economy.

Conversely, the absence of the 15,000 tonne press will mean that more of the key components for new power stations, both here and elsewhere in Europe, will have to be sourced from outside the UK. Good news for Japanese and Korean steelmakers perhaps but hardly good news for Britain's lower carbon industrial future.

It has been suggested that Forgemasters should simply borrow the money privately. Half of the money raised in this proposal was already coming from the private sector but this was a big investment for a company of that size and if the banks were willing to lend the money the company would not have needed to come to the Government in the first place.

It is government's role to consider whether there is a wider interest which makes projects like this worth backing, even when banks won't do so. By cancelling it, the new Government is behaving exactly like the banks it likes to criticise for favouring finance over industry. And saying the cancellation won't cost jobs is not the point – the tragedy here is the jobs that won't be created because we have failed to grasp the opportunity in front of us.

The decision also exposes a wider issue about how the deficit should be cut. We are all agreed that the deficit has to come down – but deficit reduction without regard for industrial and employment opportunities in the future risks hurting more than it cures.

The Forgemasters proposal was part of a wider Labour strategy for Britain to succeed in the industries and jobs of the future – the same strategy that saw us win the contract to have the first mass produced Nissan electric car made in the North East and saw Ford agree to develop its new generation of low carbon diesel engines here in the UK.

The new Government, by turning their backs on the low carbon industrial ambition represented by the Sheffield Forgemasters proposal, appears to be opting for a strategy of cuts with no coherent plan for growth or for our industrial future. And going by the rationale Mr Clegg advanced in these pages for that decision on Saturday, it doesn't even seem to know what it is throwing away.

Pat McFadden is Shadow Secretary of State for Business.