The Government has been put under pressure to publish full details of its decision to axe a loan to a Sheffield engineering firm following the disclosure that ministers were lobbied by a major Tory Party donor.
Labour MPs reacted with anger after it emerged that Andrew Cook urged against granting the £80m loan to Sheffield Forgemasters just weeks before it was withdrawn by the Conservative-Liberal Democrat coalition.
In an email to Business Minister Mark Prisk, Mr Cook - who runs a rival Yorkshire steel business - claimed the loan offered by the former Labour government was “probably unnecessary and possibly illegal under EU rules”.
He stressed too that he had been “the largest donor to the Conservative Party in Yorkshire” since Mr Cameron became Tory leader in 2005.
Shadow business secretary Pat McFadden has written to Business Secretary Vince Cable demanding to know if he was aware of Mr Cook’s email when he took the decision to withdraw the loan.
Mr Cook has previously provided Mr Cameron with thousands of pounds worth of private flights via engineering firm William Cook Holdings, of which he is chairman. He and his company have also given more than 700,000 to the Tories in cash donations, according to Electoral Commission records.
Labour MPs called for an inquiry into the affair and raised questions about relations between Mr Cook and the Prime Minister. Rotherham MP Denis MacShane said Mr Cameron and his deputy, Mr Clegg, had already “slurred” Sheffield Forgemasters by wrongly claiming its owners would not dilute their shareholdings.
In a statement, Mr Cook said he had previously offered to help provide the funding Sheffield Forgemasters needed and regarded support for private business to be a “misuse of public funds”.
On 17 June, the Government cancelled the loan as part of its cross-Whitehall programme of cuts. It had been offered by former business secretary Lord Mandelson in March.
Sheffield Forgemasters, which specialises in steel forgings and castings, said this week it had been forced to suspend work on a hi-tech press for nuclear power plant components. After the cancellation of the state loan, it could not easily find a private finance alternative, it said.