Labour seeks to turn up the heat on Sunak over Greensill

Chancellor Rishi Sunak was on Tuesday urged by Labour to commit to a “full, transparent and thorough investigation” into how collapsed finance group Greensill Capital was given the right to dispense tens of millions of pounds of government-backed Covid-19 loans to companies.

Sunak is under pressure to answer questions about the Treasury’s role in an affair which saw Greensill accredited as a lender under one of the government’s coronavirus loan schemes, even though it was exempt from safeguards imposed on other banks.

Shadow chancellor Anneliese Dodds said: “The public will be appalled to hear how much of their money has been put at risk by the Conservatives’ cosy connections to Greensill Capital.”

So far much of the political focus around the dealings of Australian financier Lex Greensill, founder of the eponymous finance group, has been on former prime minister David Cameron, who was an adviser to the company.

Dodds wants to put Sunak, who was lobbied directly by Cameron, under greater scrutiny, notably over a decision to allow Greensill Capital to dispense loans under the government’s Coronavirus Large Business Interruption Loan Scheme.

In a letter to Sunak, Dodds said parliamentary written answers had confirmed that “Greensill was accredited to lend under CLBILS despite not being regulated by the Bank of England or Financial Conduct Authority”.

She added this meant that Greensill was not subject to the capital adequacy and stress tests that applied to most other lenders accredited to lend under CLBILS.

Dodds has asked Sunak to explain which government department formulated the criteria for lenders to be accredited under the scheme and whether the Treasury communicated any concerns to the state-owned British Business Bank, which administers the programme.

A Treasury official said that the accreditation process was run independently by the British Business Bank. “It’s not a requirement to be regulated by the financial regulators to lend under the schemes,” added the official.

While other lenders such as Barclays could issue CLBILS loans worth up to £200m, companies using supply chain financing — including Greensill — were limited to a cap of £50m.

Greensill asked that its cap be raised to £200m. That demand was rebuffed, with Charles Roxburgh, a senior Treasury official who held nine meetings with Greensill Capital, saying £200m would represent “significant exposure”.

However, even at the lower limit, Greensill was still able to lend millions of pounds through multiple loans to companies linked to Sanjeev Gupta, the steel tycoon behind the GFG Alliance, which has several UK assets.

Dodds has also asked Sunak why Greensill was allowed to insert itself between the government and its suppliers, including NHS pharmacies.

Dodds asked Sunak why — if Whitehall was subject to its own prompt payment code — Greensill was needed to offer swift payments to suppliers in exchange for a cut, when the government could just pay on time.

The Treasury is expected to give a full response to Dodds’ questions in the coming days.

Meanwhile the government’s new recovery loan scheme was launched on Tuesday, offering businesses more state-backed borrowings to support them as the economy starts to reopen.

Sunak said: “As we safely reopen parts of our economy, our new recovery loan scheme will ensure that businesses continue to have access to the finance they need as we move out of this crisis.”

The scheme, also administered by the British Business Bank, will make loans available through what the government called “a diverse network of accredited commercial lenders”.

Almost all of the 18 companies initially allowed to offer loans through the scheme are UK-licensed banks, with the exception of Ebury, which is controlled by Spanish bank Santander, and Skipton Business Finance, which is owned by a building society.