Answers demanded from Scottish Government over taxpayer exposure to Dalzell state aid rules

Ministers have been tasked with answering more than 20 detailed questions around a potential multi-million pound bill for the taxpayer linked to the Dalzell steel plant.

Scottish Liberal Democrat MSP Willie Rennie has tabled questions covering the scandal, which emerged last month when business minister Ivan McKee said the Scottish Government may have broken state aid rules during the deal.

The Government owned the plant for mere moments during the “back-to-back” sale of the facility for £1.

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Scottish ministers 'may have broken state aid rules' around Dalzell steel plant ...
Leader of the Scottish Liberal Democrat Party Willie Rennie looks on while First Minister Nicola Sturgeon speaks in the Scottish Parliament.

The Scottish Government agreed an indemnity clause while brokering the deal between Tata Steel and Liberty Steel, owned by Sanjeev Gupta, in 2016 for the purchase of the steel slab plant.

Ministers have claimed this clause is no longer valid due to it potentially breaching state aid laws, although Tata Steel said the contract remained “valid and binding in all aspects”.

Costs, such as for environmental clean-up, would likely only be covered by the Government should Liberty Steel go bust.

However, it was during contingency planning for such a scenario after the collapse of the steel company’s main backer, Greensill Capital, when the clause was deemed to be invalid by officials.

The Government is now facing a litany of questions over the scandal, which was dubbed an “industrial failure” by the Scottish Liberal Democrats.

Ministers have been asked to explain how much the taxpayer could end up paying, whether it will release details of its agreement with Tata Steel, and whether it has assessed the potential of legal action against it by the steel giants in a series of written questions in Holyrood.

Mr Rennie said: “Hot on the heels of the scandals at BiFab and the Lochaber aluminium smelter, this is another industrial failure from the Scottish Government.

“First they drew up a contract that breached state aid rules and then they claimed there is no risk to taxpayers’ money, but refused to release key documents in full. Why would the Scottish Government go to the trouble of redacting information which they claim does not exist?

“Major investors will be questioning whether the Government is a reliable and competent partner, which in turn has major implications for jobs here in Scotland. If this Government was a private sector operator, they would have crashed and burned years ago.”

A Scottish Government spokesperson said: “As part of the rescue deal facilitated by the Scottish Government in 2016, which prevented closure of the Dalzell and Clydebridge steel works, saved more than 100 jobs and retained steel plate production in Scotland, ministers agreed to indemnify the former owner Tata Steel against any future claims relating to the sites.

“It is now considered that the arrangement may not comply with state aid rules and would therefore be unenforceable. This means that in the unlikely event of the indemnity ever being called upon, no money would be paid out by the Scottish Government.

“The issue was identified during contingency planning undertaken in response to the administration of Greensill Capital UK. We pro-actively informed the Scottish Parliament and all other interested parties as quickly as possible after advice had been sought, prepared and considered.

“There is no impact on the ongoing operation of the steel plants by Liberty Steel or any cost to the Scottish Government as a result of this matter.”

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