Business secretary Jonathan Reynolds issued a ministerial direction to allow the government to intervene quickly to prevent a British Steel shutdown earlier this month.
The ministerial direction was requested by Department for Business and Trade permanent secretary Gareth Davies, who said he agreed with the decision to take control of the British Steel blast furnaces in Scunthorpe but could not provide assurance over the value for money and the feasibility of the intervention due to the need for speed.
MPs were recalled to parliament on Saturday, 12 April to debate emergency legislation to take over control of British Steel after the company’s owners Jingye announced plans to close the Scunthorpe blast furnaces immediately.
The steel industry (special measures) bill was approved by MPs the same day, giving the government the power to direct steel companies in the UK and thus save British Steel from closure.
Yesterday afternoon, DBT published a letter from Davies recommending the ministerial direction to allow the government to act quickly, alongside Reynolds’s response.
In his letter, Davies said the ministerial direction was needed to allow the government to act quickly to ensure the blast furnaces were kept running. Davies noted that "once a blast furnace is cooled, it is hard, if not impossible, for it to be restarted" and agreed that the move was "in the wider public interest".
Davies said he had assessed the emergency legislation against the four tests set out in the Treasury's Managing Public Money guidance, but could not complete a full assessment “given the need to act urgently".
His assessment found that the intervention met the regularity and propriety tests, but not the value for money and feasibility tests.
On feasibility, he said: "The need to act urgently means we are not able to undertake the usual full due diligence before taking control of the site. We do not know what acts the current owners will take before we assume control. Also, there is high degree of uncertainty over the supply of raw materials needed to maintain operation of the blast furnaces. Given the high degree of uncertainty, the feasibility test is not met."
On value for money, he said: "We are not able to have full assurance on the operating costs, likely revenues and balance sheet in advance of taking control. Given the high degree of uncertainty, the value for money test is not met."
Davies added: “To be clear, I am not saying that the intervention is unfeasible or poor value for money. It is just at this point we do not have the necessary evidence. Once you have issued a direction, I will ensure that the policy is rapidly implemented.”
Responding, Reynolds said: “I note that we both agree that this action is in the wider public interest but I recognise that your assessment suggests there are some doubts as to whether the intended action meets certain tests described under Managing Public Money due to the current lack of information and uncertainty about the state of the Scunthorpe site.
“We are also agreed on the need to act at speed. As a result, I am formally directing you as Accounting Officer to intervene urgently to maintain operation of British Steel’s blast furnaces.”