Document:There’s not just a ferry fiasco – the Gupta scandal is even bigger
| And the cost of the taxpayer guarantee to Sanjeev Gupta the SNP didn’t wish you to know about? A gross cost of £586m. |
Article by Dean M Thomson dated 7 November 2022Subjects: Sanjeev Gupta, Nicola Sturgeon, SNP, GFG Alliance
Source: Think Scotland (Link)
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There’s not just a ferry fiasco – the Gupta scandal is even bigger
Sanjeev Gupta and the SNP once had quite a close relationship. Nicola Sturgeon’s government facilitated deals and acted as intermediary, all-in service to Gupta’s industrial expansion into Scotland. The line was this protected jobs in key strategic industries, but the Scottish Government potentially violated state aid law to do so. The scale of the dealings and the liabilities at stake now make the ferry scandal look unambitious.
This is an SNP administration that broke ministerial codes, hid from accountability and battled in the courts to keep Scottish taxpayers in the dark. And all of this in service to Sanjeev Gupta’s GFG Alliance business empire, which is now subject to a Serious Fraud Office investigation. Questions are now raised as to why this Scottish Government has proven so eager to go above and beyond to keep the billionaire businessmen happy.
Furthermore, there is a growing body of evidence to suggest that naivety in the face of superrich business moguls is indeed a hallmark of Nicola Sturgeon’s time ensconced in power. In the particular case of Sanjeev Gupta’s GFG Alliance, the First Minister has questions to answer concerning her judgement. After all, as she is so fond of reminding us all, the buck stops with her.
Contents
Style over substance
When Nicola Sturgeon became First Minister in November 2014, she inherited power from a ruling party reeling from a referendum defeat. Her mission was simple enough, retain power and play for time long enough until another plebiscite could be wangled sometime down the road. An electoral focus was placed on image – hers – and a tough mix of internal discipline and prioritisation of ‘the line’ to media emphasised. She was quick to promise that her party and her government were the true heirs of Scotland’s radical and progressive traditions. At first this seems to have worked, as she presided over the defenestration of Scottish Labour in the May 2015 General Election. Yet the emphasis on style over policy substance would soon begin to cause problems.
Tata Steel announced in October 2015 that it would stop its European plate production. This resulted in the mothballing of the Dalzell and Clydebridge plants at the end of 2015, and the Scottish Government found itself scrambling to save the plants in time for the May 2016 Holyrood elections. This all took place in the absence of any industrial strategy, policy having been de-emphasised under the highly presidential Sturgeon era.
At this point in rode the eponymous ‘hero’ of Ms Sturgeon’s fairy-tale industrial strategy. Sanjeev Gupta. With financing from Greensill Capital, Gupta, had exploded into the UK steel market back in 2014. His group Liberty bought the Newport steel mill, Mir Steel, in South Wales – saving it from closure. From there the Gupta empire’s industrial expansion into the UK grew rapidly, extending into the Midlands of England with the purchase of assets from administration from what had formerly been Caparo Industries Plc. He was being hailed as the saviour of British steel and by 2016 the Gupta spending spree wanted to reach its hands into Scotland.
Mr Gupta was seen as something of a lifesaver for First Minister Nicola Sturgeon. If her government could make things work out for Sanjeev to purchase the mothballed Tata steelworks fast enough, she could boast of her Government’s success in the imminent Holyrood election.
Thus, Ms Sturgeon talked eagerly about the ‘art of the possible’ as her government facilitated Gupta’s Liberty House obtaining the two formerly mothballed steel manufacturing sites from Tata Steel UK.
The Scottish Government bought both sites for £1 from Longs Steel (a subsidiary of Tata), and immediately resold it on to Gupta’s Liberty House. The firm then took on all existing liabilities, while the Scottish Government agreed to indemnify Longs Steel UK from future claims.
The deal was brokered by the SNP government at breakneck speed and by April 28th 2016 Gupta had acquired Clydebridge and Dalzell steel mills. And all just in time for a Holyrood election in May.
Confessing ‘potential’ illegality
A pity then that we only know now that the SNP Government may have broken state aid laws in service to Ms Sturgeon's ‘art of the possible’. Scottish Government Minister Ivan McKee has since come clean to parliament, admitting in December 2021:
- “We are advised that there is one specific part of the contract arrangement that has arisen during our contingency work that may not comply with state aid rules.”
The clause in question causing the problems was the one which meant Scottish ministers would be bound to cover the cost of certain liabilities arising from Tata Steel’s ownership of the Lanarkshire plants. Those ‘liabilities’ were costs of any future industrial clean-up. For context, history shows the cost of the Ravenscraig clean-up was £70m. So, Ms Sturgeon’s ‘art of the possible’ could potentially land future taxpayers with millions of liabilities.
The First Minister personally re-launched the Dalzell steel manufacturing site on September 28th 2016, to much fanfare in the press. But behind those smiles we have a story which speaks of cynical SNP political interests, kowtowing under pressure to billionaire Sanjeev Gupta.
It’s clear there was no robust industrial strategy at play. Instead, taxpayer money was shovelled under the bus to head off a crisis before an election. Considerations were not focused on the importance of saving 100 jobs, and providing a key strategic industry with a sustainable future. Instead, it was fixed on saving Nicola Sturgeon from political embarrassment in the 2016 Holyrood election.
Tata got what it desperately desired, it was off the hook for clean-up and Gupta got what he wanted – ownership of the sites with overly generous help from the SNP. Unbelievably, the billionaire Sanjeev Gupta even got a £7m Scottish Enterprise loan to help him along with his breakneck purchases in Scotland.
And what did we get? We got Nicola Sturgeon’s photo-op in 2016. Oh, and cheap rhetoric about the ‘art of the possible’ – and plenty pricy taxpayer liabilities.
Violating Ministerial Codes
Yet the story does not end with a potential breach of state aid law and risks of environmental clean-up liabilities for taxpayers at Dalzell. Nicola Sturgeon’s government also proved content to allow ministerial codes to be breached if it meant keeping Sanjeev happy.
It is a matter of record that former SNP Government Minister Fergus Ewing had not one but four slap-up meals which were arguably in total contravention of the ministerial code.
In 2017, Fergus Ewing – at the time a Minister in Nicola Sturgeon’s government – enjoyed a posh dinner date with Sanjeev Gupta, Lex Greensill, Jay Hambro and Tim Haywood. This took place in the up-market Cail Bruich restaurant located in Glasgow. There were no civil servants present and no minutes were taken, despite Ewing’s government facilitating major taxpayer backed deals involving those present.
This matters since we now know of potential liabilities for Scottish taxpayers running into the hundreds of millions as a result of deals done between Greensill, Gupta and the Scottish Government. But neither [Fergus Ewing or Nicola Sturgeon seems to have ever felt bothered that meetings such as this one in 2017 took place in apparent breach of the ministerial code.
An interesting aside is the name Tim Haywood. He was at the slap-up meal in June 2017 too. His name should be noted as he was later suspended from his job as a city fundmanager at GAM Holdings and fined by the Financial Conduct Authority for failing to manage conflicts of interest. Conflicts of interest involving key Gupta financial backer Lex Greensill (later caught up in the Westminster lobbying scandal alongside David Cameron). Haywood was caught accepting “gifts and entertainment, including travelling on a Greensill private aircraft, but failed to record them in a timely manner”.
These are the people that SNP government minister Fergus Ewing was having dinner dates with, having failed to follow the ministerial code at the time. And did you notice I wrote ‘dates’? That is because it is also now known that Ewing would enjoy a total of four meals within just six months with this sidekick of the tax row boss Lex Greensill.
At the very least the Fergus Ewing dinner-dates suggests a concerning level of closeness between the Scottish Government and the business interests of a billionaire. The public interest is not served by senior ministers having unofficial meetings with businessmen they have ‘facilitated’ deals with. Hundreds of millions of taxpayers’ money are pinned down in liabilities and Fergus Ewing thought it appropriate to meet with them, no minutes taken, no civil servants present and no record to be found?
Indeed, the subsequent silence in the intervening years from the First Minister only underscores that this is a Government far too eager to satisfy the wishes of billionaire businessmen whom they consider friends.
Just why did Fergus Ewing break the ministerial code to meet with Mr Gupta? What was discussed? How can we verify what is claimed was said at the meeting? Why did the First Minister completely ignore all of this at the time?
Resisting Transparency
The true scale of Scottish Government-Gupta dealing did not come fully to light, however, until the journalists at the Financial Times (FT) successfully battled to force the Scottish Government to come clean.
In 2020 the FT was digging into a taxpayer backed “guarantee” that Ms Sturgeon’s government had offered Sanjeev Gupta to enable him to buy the last remaining aluminium smelter in Britain at Lochaber, near Fort William – and two hydro plants nearby in 2016.
This deal involved the SNP government providing Sanjeev Gupta with a 25-year guarantee of power purchases by Sanjeev Gupta’s company from another company … which just so happened was owned by Sanjeev’s daddie. This allowed the now-collapsed finance company Greensill Capital to transform this contract into £295m of debt, which carried the same credit rating as UK sovereign bonds, ultimately providing the funding for Gupta’s acquisition.
If this looks utterly dodgy to you, you are not alone. After all, when the FT probed Ms Sturgeon’s government as to the true scale of this “guarantee” in a freedom of information request, it refused to answer.
The collapse of Greensill Capital and the Serious Fraud Office investigations into GFG had plunged Gupta’s business empire into a liquidity crisis (still unfolding). Ms Sturgeon’s “guarantee” to Sanjeev was now highly politically controversial, thus her government refused to disclose the true extent of liabilities.
Sturgeon had her government cite ‘commercial sensitivities’ as an excuse to duck the FT’s request to know how much were Scottish taxpayers potentially on the hook for, but in response the FT journalists appealed to the Information Commissioner. In June 2020 the Information Commissioner’s Office ordered the Scottish Government to tell the FT the details.
As if this blatant resistance of transparency were not bad enough, it is now clear that Nicola Sturgeon’s government refused the FT’s FOI while knowing it would likely lose (as it did) in an appeal before the ICO.
The FT explains that “it looks like the Scottish Government turned down an FOI at the review stage, and potentially earlier, while knowing that if taken to appeal at the ICO it was likely to lose”. Which is interesting since it raises the question if Ms Sturgeon’s government knew it was on shaky ground with its line of argument.
If so, the SNP government can be accused credibly of adopting this anti-transparency tactic in the hope the FT would give up and not appeal. Or perhaps Ms Sturgeon’s government merely hoped to waste time at taxpayers’ expense to delay the release of politically-sensitive information? Either way, it tells us this SNP government is allergic to accountable politics or transparency.
And the cost of the taxpayer guarantee to Sanjeev Gupta the SNP didn’t wish you to know about? A gross cost of £586m.[1]
Götterdämmerung?
Sadly, for our First Minister, all fairy-tales have beginnings, middles and endings. Hers with Gupta is no different. You see, Sanjeev Gupta has proved less the ‘white knight’ riding in to save the day and more a huge headache for taxpayers and the SNP politicians once-upon-a-time so eager to help him. GFG Alliance is under investigation by the Serious Fraud Office. Its critical financial backer Greensill Capital has crumbled, and when Greensill Capital collapsed it had racked-up an incredible $5bn of debt exposure to Gupta’s businesses. All of this has sparked a liquidity crisis inside the billionaire’s empire.
Now, the auditors King & King are resigning – under investigation themselves – from responsibilities relating to Gupta’s Scottish businesses.
The auditors have filed letters at Companies House, claiming that they were prevented from completing a full audit due to insufficient evidence from the Gupta businesses in question. The letters state that King & King were “unable to complete” overdue audits for the year ending 31 March 2020.
The letters, dated 17 August 2022 and signed by King & King partner Milan Patel, cite, “a lack of sufficient information and evidence” around several key areas. Firstly, relating to the Serious Fraud Office investigation into Gupta. Secondly, concerns raised about the Gupta companies abilities to even fund themselves for 12 months following approving their financial statements. And thirdly, for the “recoverability of related party balances”.
Put simply, the auditors for the Aluminium site at Lochaber have resigned themselves of all responsibilities amid reports of concerns that Gupta’s companies within the GFG Alliance umbrella can barely sustain themselves for 12 months amid its liquidity crisis.
What does all of this mean? It means taxpayer liabilities Ms Sturgeon’s government negotiated are less theoretical than we may wish. But listening to the SNP, there is nothing to see here. When I asked for a comment concerning the Fort William smelter’s books not being audited since 2020 I was informed
- “The Lochaber business continues to perform well with strong order books”.
But how can the Scottish Government claim the books are strong for a company whose auditors are fleeing responsibility amid investigations? Questions arise that Ms Sturgeon, always so eager to take the credit throughout the SNP-Gupta dealings, to answer:
- When did the Scottish Government first learn that the auditors King & King were resigning?
- What were the assurances the Scottish Government has received that the accounts for the Gupta businesses at Lochaber and Dalzell are accurate?
- Are the amounts of assurances received sufficient to render Ms Sturgeon happy and satisfied?
- What is the Scottish Government’s view of the risk of a GFG Alliance collapse?
Ultimately the scale and scope of this story is epic. The zeppelin-like political personality of the First Minister – so long dominating our politics – is trapped in a tale of political cynicism and breath-taking naivety. A depressing story where the leader of an electorally successful personality-cult is exposed as politically cynical and fawningly deferential to billionaire businessmen in return for political headlines.
The SNP Government’s relationship with Sanjeev Gupta goes beyond merely facilitating a deal to save jobs. It bent the rules to the point of admitting potentially breaching state aid laws. Ministerial codes went allegedly ignored, taxpayer liabilities mounted up – and all in the absence of any coherent industrial strategy. Indeed, Sanjeev Gupta would even sponsor an SNP conference event in 2018 – such was his contentment with the overly generous treatment he received from Ms Sturgeon.
As Willie Rennie of the Scottish Liberal Democrats put it:
- “The only ‘art’ the Government have mastered is to let cynical political interests fold to the pressures of big business. Now they’re having to admit that.”
The real truth here is we have a Scottish Government far too naive and incompetent when faced with seasoned billionaire businessmen who know what they want; and a First Minister putting her own political needs before policy or taxpayer needs.
