SNP face demand to 'open the books' over deals with steel magnate after secrecy over payment promise

SNP ministers are facing demands to “open the books” over their dealings with steel magnate Sanjeev Gupta after they refused to say whether his company had broken a promise made in exchange for a huge taxpayer-backed funding guarantee.

Mr Gupta’s GFG Alliance, which is in crisis following the collapse of its main financial backer Greensill Capital, had been due to make a substantial ‘milestone payment’ into a Scottish Government-controlled ‘project account’ by March.

Cash in the account, which had a balance of £8 million as of February, is supposed to be used to invest in its Lochaber estate which Mr Gupta took over with taxpayer support in 2016.

However, both the Scottish Government and GFG have refused to say whether the payment, due seven weeks ago, had been paid.

Opposition MSPs accused the SNP of showing contempt for transparency and said their secrecy fuelled suspicion that taxpayers are set to be exposed for huge losses.

Willie Rennie, the Scottish LibDem leader, said: "The Scottish Government seem to regard the idea of transparency and scrutiny with nothing but contempt.

"Their record on major projects like this is dire. They should open the books and allow the public to see whether payments have been made on time and as promised.

"It's hard to have confidence that this project will ever produce the promised jobs when the Scottish Government is unable to say whether basic conditions are being met."

When Mr Gupta took over the Lochaber site, which includes the UK’s last aluminium smelter and a hydro-electric plant, in 2016 he was backed by a huge 25-year Scottish Government funding guarantee.

It commits the government to purchasing energy from the hydro plant should the smelter ever shut down, and is estimated to be worth between £14m and £32m per year.

In exchange for the guarantee, Mr Gupta pledged to build a large alloy wheels plant as part of a wider investment it was claimed would create 2,000 jobs and revitalise the local economy.

However, he later scrapped the wheels factory plan, claiming it was no longer viable. Scaled-back proposals, agreed by SNP ministers, saw GFG promise to instead build aluminium recycling and water canning plants.

The 'project account' was a 'key aspect' of the revised plans and was intended to act as an added safeguard for ministers, with withdrawals only allowed with their permission.

GFG said it would lodge incremental investment funds into the account and Fergus Ewing, who was sacked from the cabinet this week, said in February “the next milestone payment [is] due by the end of March 2021”.

Mr Gupta, whose Liberty Steel company also owns the Dalzell steelworks in Motherwell, is currently seeking alternative financing for his empire, following the collapse of Greensill in March.

However, he was dealt a further blow last week when it emerged that his businesses were under investigation by the Serious Fraud Office, over suspected fraudulent trading and money laundering.

The GFG Alliance has said it will fully cooperate with the probe.

Paul Sweeney, the Labour MSP, said: “The continued secrecy of the Scottish Government over their potential exposure to the GFG Alliance of up to half a billion pounds is completely unacceptable.

“It simply serves to further heighten suspicions about the huge risk faced by Scottish taxpayers to what is increasingly looking like an elaborate ponzi scheme.

“The Government must immediately open the books on all of its dealings with Gupta and the murky GFG Alliance, as well as preparing a contingency plan for the likely failure of the group in the coming weeks.”

A spokesman for the Scottish Government said: “The milestone payments are inter-company payments related to planned investment at the Lochaber smelter and the business is continuing to progress those plans.

“No withdrawals have been made from the project account since the Finance and Constitution Committee was updated in February.”

GFG declined to comment.