Mandelson urges Clegg apology over axed Sheffield loan

Labour say the loan would benefit the company and the local supply chain

Lord Mandelson has called on Nick Clegg to apologise for saying the government had to cancel a Labour-approved loan over fears the "cheque would bounce".

The ex-business secretary visited his old department to examine paperwork he claimed vindicated his position that the Treasury had "signed off" on the £80m loan to Sheffield Forgemasters.

Mr Clegg last week told MPs the loan had been stopped due to lack of funds.

And he accused Labour of spending money it did not have.

The Forgemasters loan was one of a number of spending commitments agreed by the Labour government since the start of 2010 either cancelled or put on hold by ministers in the Lib Dem/Conservative coalition last month as they sought to slash borrowing levels.

Labour have said blocking the March loan - which the firm wanted to enable it to make parts for new nuclear power stations - would hit employment in Sheffield and the surrounding area and have questioned the motives behind the decision.

Deputy Prime Mininster Nick Clegg, a Sheffield MP who has come in for harsh local criticism over the decision, said last week the decision was simply a matter of affordability.

Speaking in the Commons, where he was standing in for David Cameron at prime minister's questions, Mr Clegg accused Lord Mandelson of writing cheques that he knew could not be cashed as Labour acted irresponsibly in its final months in office.

'Vouched for'

But after visiting the Business Department to look at the paperwork and advice from civil servants on the issue, Lord Mandelson claimed his position had been vindicated.

"This was agreed and signed off by the Treasury itself," he said, referring to a letter from former Treasury Chief Secretary Liam Byrne on the case that he said he had seen.

The loan, he added, had been deemed "good value for money" by the Industrial Development Advisory Board, a body which advises ministers on applications from firms for finance for capital investment in specific parts of the country.

"So, what's clear is that it was very important for our industrial future, it was independently assessed and signed off.

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

Lord Mandelson - who is no longer on the Labour frontbench - suggested the loan decision was one of a number made "on the hoof" by coalition ministers when they first arrived in office.

'Badly briefed'

He said Mr Clegg had been "misinformed" and "badly briefed" prior to last week's criticism of him and argued he should apologise.

The Department of Business said Lord Mandelson had asked to see the relevant information and it was able to "facilitate" this, suggesting it was not unprecedented for former ministers to have made requests of such a kind.

Shadow Business Secretary Pat McFadden, who accompanied Lord Mandelson, said the paperwork showed that ex-ministers had been told the loan would help the regional economy as well as the firm.

"Rather than continuing with wrongful statements about the project the government should look again at this decision," he said.

Labour have accused ministers of changing their tune over why the loan was blocked, saying Mr Clegg previously told MPs that the owners of the firm did not want the loan as it would dilute the value of their shares.

The firm's managers have insisted they would be willing to do so.

On Tuesday, Forgemasters announced it had shelved plans to buy the equipment needed to expand which it said could have created 200 jobs.