Rishi Sunak Imposes "Value for Money" Conditions on Steel Sector Aid

Rishi Sunak, the UK Chancellor, is set to apply strict "value for money" tests to any taxpayer-backed aid for the steel sector and other big energy users. This move comes after Boris Johnson, the Prime Minister, expressed support for a rescue plan in principle, despite concerns from the Treasury. The plan, proposed by Business Secretary Kwasi Kwarteng, aims to mitigate the impact of soaring gas prices on energy-intensive industries. However, tensions between Kwarteng and the Treasury have led to delays in implementing the plan.

Key Takeaways:

• The Treasury will apply strict "value for money" tests to any taxpayer-backed aid for the steel sector and other big energy users.
• The loan scheme will be similar to the Coronavirus Large Business Interruption Loan Scheme, which had restrictions on dividend payments and bonuses.
• Companies will be expected to demonstrate that they have made efforts to mitigate the impact of rising gas prices, such as hedging against price increases.
• Shareholders and owners are expected to bear the burden of supporting the companies, with the taxpayer only providing a last resort solution.
• The Treasury is unlikely to support industry proposals such as state subsidies to bring energy costs down, as these would require significant taxpayer funding.
• There is concern within the Treasury about providing taxpayer support to companies with wealthy foreign owners.

Statistics:

• The Coronavirus Large Business Interruption Loan Scheme had underwritten bank loans, leaving the taxpayer on the hook if the loanee company went bust.
• Companies under the scheme faced restrictions on dividend payments and bonuses.
• The steel sector in the UK operates two major sites, Port Talbot and Scunthorpe, owned by Tata Steel of India and China's Jingye Group, respectively.

Sources:

• The Times Radio (Steve Barclay, Cabinet Office Minister)
• The Times (rietorical notes)