Greensill access to Covid loans: five key questions for Chancellor as Recovery Loan Scheme launches

Labour has called on Chancellor Rishi Sunak to urgently explain why he granted Greensill Capital access to a government-backed Covid loan scheme even though the Treasury knew it was exempt from safeguards imposed on other banks.

In a letter to Sunak, Labour’s Shadow Chancellor Anneliese Dodds calls for urgent answers to five key questions ahead of the launch of the Recovery Loan Scheme, the Government’s latest Covid loan scheme.

The letter also asks if the Chancellor will “commit to opening a full, transparent and thorough investigation into the chain of events that saw Greensill awarded lucrative supply chain contracts, the freedom of Whitehall and the right to lend millions of pounds of government-backed Covid loans”.

The questions are:

· What input was received from outside Government into the design of the CLBIL scheme?

· Which Government department was responsible for formulating the criteria for lenders to be accredited under the CLBILs scheme?

· Were any concerns communicated within HM Treasury or between HM Treasury and the British Business Bank upon Greensill Capital’s accreditation as an approved CLBILS lender?

· What other lenders who are not regulated by the Bank of England or the Financial Conduct Authority were accredited under the CLBILs scheme, or under the new Recovery Loan Scheme launching today?

· When was HM Treasury informed that the British Business Bank had opened an internal investigation into the decision to accredit Greensill Capital as a CLBILs lender?

The collapsed lending firm was the only financial technology firm approved to administer the Coronavirus Large Business Interruption Loan Scheme last June.

It was not regulated by the Financial Conduct Authority or the Bank of England. The Treasury has admitted that it was aware Greensill was not subject to the capital adequacy and stress tests that applied to other lenders on the scheme to protect public money.

Anneliese Dodds MP, said:

“The Treasury knew the rules that protect public money used to back bank-run lending schemes didn’t apply to Greensill.

“Despite this, the Chancellor granted it the right to lend millions of pounds in government-backed Covid loans.

“The public will be appalled to hear how much of their money may have been put at risk by the Conservatives’ cosy connections to Greensill Capital.

“That’s why we need a full, transparent and thorough investigation into this affair.”

Ends

Notes to editors

The government has confirmed that Greensill was not regulated by either the Bank of England or the Financial Conduct Authority: https://questions-statements.parliament.uk/written-questions/detail/2021-03-22/hl14467

The Recovery Loan Scheme, announced at the March 2021 Budget, launches today: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/recovery-loan-scheme/

Full text of the letter to Rishi Sunak:

Dear Chancellor of the Exchequer,

On 31 March, the Shadow Chancellor for the Duchy of Lancaster and I wrote to the Cabinet Secretary raising concerns regarding the process by which Greensill Capital was accredited as a lender under the Coronavirus Large Business Interruption Loans Scheme (CLBILS). As you will know, Greensill Capital recently collapsed, potentially putting millions of pounds of taxpayer money at risk.

In recent days, we have learnt that yourself and other HM Treasury ministers were lobbied via text message by employees of Greensill Capital, who sought access to Covid-19 business support schemes, including the Covid Corporate Financing Facility. We have also learnt that this follows a series of contracts being awarded without competition to Citibank and to Greensill for the provision of supply chain financing services to the public sector, against the advice of senior civil servants.

Finally, in answers to written parliamentary questions, we have learned that Greensill was accredited to lend under CLBILS despite not being regulated by the Bank of England or Financial Conduct Authority, meaning the company has not been required to or carried out any capital adequacy or stress tests prior to being accredited for CLBILS.

As a result, several questions remain unanswered about Greensill Capital’s access to taxpayer’s money:

· Which Government department was responsible for formulating the criteria for lenders to be accredited under the CLBILs scheme?

· What other lenders who are not regulated by the Bank of England or the Financial Conduct Authority were accredited under the CLBILs scheme, or under the new Recovery Loan Scheme launching on the 6^th April?

· What input was received from outside Government into the design of the CLBIL scheme?

· Were any concerns communicated within HM Treasury or between HM Treasury and the British Business Bank upon Greensill Capital’s accreditation as an approved CLBILS lender?

· When was HM Treasury informed that the British Business Bank had opened an internal investigation into the decision to accredit Greensill Capital as a CLBILs lender?

As well as wider questions about the use of supply chain financing in the public sector:

· Does the Government consider itself to be subject to its own Prompt Payment Code? If so, can you explain why the Government is entering into supply chain financing schemes in the first place?

· How much has Greensill Capital and Citibank earned from the supply chain financing scheme for NHS pharmacists awarded to these companies by the Government, both from the contracts and via interest charges?

· Other than the Pharmacy Earlier Payment Scheme, has the Government contracted for any other supply chain financing schemes relating to payment of its own suppliers since 2012?

· Do you agree that supply chain financing schemes come at an additional cost to the public purse that could be averted by ensuring Government pays suppliers in good time?

Most importantly, will you commit to opening a full, transparent and thorough investigation into the chain of events that saw Greensill awarded lucrative supply chain contracts, the freedom of Whitehall and the right to lend millions of pounds of government-backed Covid loans.

I am sure you will agree that the public deserve prompt answers to these questions, to reassure them that taxpayer money has been spent wisely.

Yours sincerely,

Anneliese Dodds MP

Shadow Chancellor of the Exchequer