Labour puts pressure on Sunak over Greensill Capital affair

The UK’s main opposition party on Friday called on the government to explain why Greensill Capital was approved to provide loans through a Covid-19 support scheme last year, despite it being clear at the time that the company was in financial trouble.

Labour also demanded UK chancellor Rishi Sunak publish all records of text messages, calls and informal meetings connected to pandemic support schemes as the political furore over lobbying by former prime minister David Cameron for the company grows.

The supply-chain finance company, which went into administration last month, was accredited by the British Business Bank to join the Coronavirus Larger Business Interruption Loan Scheme (CLBILS) in June.

While the BBB was the gatekeeper for the CLBILS scheme, Sunak has conceded that its criteria for accreditation were set “in consultation” with the Treasury and the business department.

The BBB’s sign-off came almost three months after official documents, released late on Thursday evening under a Freedom of Information request, showed the Treasury was aware Greensill was struggling.

Treasury minutes dated March 30 noted that the company’s founder Lex Greensill was “gravely concerned” that “‘many tens of thousands’ of SMEs would not be getting paid sometime this week”.

Separately, in minutes from a call with Bank of England officials on March 17 involving Cameron, Lex Greensill had admitted his company was “coming under significant pressure” because investors had “stopped” buying supply-chain finance investment products.

Cameron was central to efforts to try to get Greensill access to the government’s emergency loans programme last year. The most senior official in the Treasury, Sir Tom Scholar, on Thursday told MPs he had been approached by the former prime minister asking for changes to Covid-19 debt schemes to benefit Greensill. 

Cameron also lobbied the Bank of England’s deputy governor Sir Jon Cunliffe directly over the central bank’s Covid-19 support scheme, documents released this week showed.

His call for Greensill to be admitted into the BoE scheme, and for the Treasury to lift the threshold on Covid-19 loans, were both rejected.

Labour’s Anneliese Dodds, the shadow chancellor, said the chancellor needed to explain why the Treasury allowed the BBB to accredit Greensill even when officials had been aware that the company was “deep in the red” three months earlier.

“Hundreds of millions of pounds of taxpayer cash were put at risk by that decision,” she said. “The chancellor can’t keep ducking this.”

Dodds added: “Greensill were sending the begging bowl from the Bank of England to the Treasury because they were desperate to get access to taxpayer credit to support their faltering business model. Any claim to the contrary just doesn’t stand up to scrutiny given media reports at the time.”

But Charles Roxburgh, a senior Treasury official, earlier this week said he could not have had “perfect foresight” about the fact Greensill would fall into administration in March 2021.

Two text messages released by Sunak showed the chancellor “pushed” Treasury officials to consider Cameron’s proposals. Dodds said Sunak must clarify precisely what he said to those officials.

Sunak has argued that lenders taking part in emergency Covid-19 loan schemes did not need to be regulated by either the BoE or the Financial Conduct Authority. Three such non-bank lenders, including Greensill, participated in CLBILS.

At the time the BBB was under pressure to accredit as many lenders as possible given the huge volume of companies suffering from financial stress as the government imposed its first pandemic lockdown. 

The BBB opened an investigation into Greensill Capital’s compliance with the terms of the scheme in October 2020.

Those close to the process said the investigation should be completed next month. The decision of that investigation will be crucial for the government, which could be on the hook for up to 80 per cent of the loans handed out by Greensill unless the collapsed group was found in breach of the terms of the scheme. 

The BBB said it audited all accredited lenders “to ensure their compliance with scheme rules”, adding: “If serious non-compliance is identified, the bank is entitled to take remedial action.”

It declined to comment further on Greensill “given there is an ongoing investigation”.

The Treasury declined to comment.