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Business Department Advisors Lobbied Government BankOver Greensill Loans
David Hencke reports on a new twist in the Greensill Capital lobbying saga uncovered by the independent public spending watchdog
A previously undocumented attempt inside Whitehall to gain favourable treatment for the now bust Greensill Capital finance group – which controversially counted the former Prime Minister David Cameron as a lobbyist – has been revealed in a new report by the public spending watchdog.
According to the National Audit Office (NAO), special advisors to the former Business Secretary Alok Sharma tried to put pressure on the Government’s British Business Bank to prioritise £200 million of COVID-19 loans to Greensill – knowing that it would be a backdoor way to help the ailing Liberty Steel Group run by Sanjeev Gupta.
The pressure came after Cameron had been directly lobbying Chancellor Rishi Sunak and Michael Gove, the Cabinet Office Minister, to fund Greensill – which financed Liberty Steel.
The attempt to secure special treatment is disclosed in the independent report today, which examines how Greensill eventually received £400 million of taxpayers’ money under a scheme to help businesses hit by COVID-19 – most of which is unlikely to be recovered by the Government.
Greensill, which was run by Australian banker Lex Greensill, collapsed into administration in March, triggering an international political and financial scandal. The lender’s ties to Gupta’s companies are also currently the focus of a criminal investigation by the Serious Fraud Office.
Cameron’s unsuccessful back-channel lobbying was also the subject of an independent inquiry by Nigel Boardman, who was appointed by Boris Johnson to look at the lobbying activities of Greensill.
The NAO report reveals internal emails between the Department for Business, Energy, and Industrial Strategy (BEIS) and the British Business Bank last year, about COVID-19 loans.
“The Department had eight email exchanges with the bank over 19 weeks between April and September 2020 requesting updates on Greensill’s accreditation to CLBILS [Coronavirus Large Business Interruption Loans Scheme] and the Larger Scheme Facility,” the report states. “Six email chains originated from a policy advisor in the Business Growth Directorate, one from a Grade 6 official in the Business Growth Directorate, and one from an assistant director in the Metal and Advanced Materials Team.
“…Later emails confirmed that Liberty Steel was lobbying the department and that it was a significant client of Greensill, who met its financing needs. The department was therefore interested to know whether Greensill would be accredited to provide loans of up to £200 million.
“…The department stressed that Liberty Steel was reliant on Greensill and seeking financial support above the £50 million available under CLBILS and, if Greensill’s application to lend more than £50 million was likely to be rejected, then the department wanted this decision to be prioritised so alternative support options could be considered. The department considers these to be informal approaches.”
The bank told the department that it was independent and that details of applications were confidential. However, the bank did agree to provide Greensill with £400 million in loans by October without full due diligence – following COVID-19 Treasury guidelines that money had to be handed over speedily to firms without full checks.
On 2 October last year, the bank became concerned that Greensill’s lending may have contravened the scheme’s rules on lending to groups. The bank identified that Greensill had made seven loans totalling £350 million to Gupta Family Group Alliance borrowers. Greensill told the Bank on 6 October that it considered the loans to be compliant. The bank escalated its concerns to the Treasury on 7 October and to BEIS on 9 October.
The bank opened an investigation into Greensill’s lending on 12 October and suspended the Government guarantees on 2 March this year.
Greensill, through its administrators, has denied making loans outside the scheme’s rules. It has also challenged the fairness of the bank’s procedures, including claiming that the time-frame provided to Greensill to collate the necessary information to respond to the bank’s allegations was procedurally unfair. The bank’s investigation is ongoing and the guarantees to Greensill’s loans remain suspended.
Gareth Davies, head of the NAO, said: “The British Business Bank used a streamlined version of an existing accreditation process in response to the policy requirement to provide businesses with prompt access to finance during the pandemic. In the case of Greensill, this process did not identify the risks that materialised less than a year later when Greensill entered administration.
“It is to the Bank’s credit that it quickly picked up the loans allegedly in breach of the scheme rules, but had it applied a different accreditation process it is possible that this situation could have been avoided.”