When private bankers show better judgment than government ministers, taxpayers should be very worried indeed
WHILE THE COLLAPSE of Greensill Capital in 2021 sent shockwaves through international financial circles, its aftershocks continue to reverberate through Scotland’s public finances. At the centre of this ongoing crisis sits Sanjeev Gupta, the self-styled “saviour of steel,” whose business empire now lies in tatters – and Scottish taxpayers are left holding a bill that could one day reach nearly £600 million.
The scale of this potential liability should be a source of national scandal, yet the full extent of the Scottish Government’s exposure has only come to light through dogged journalism and reluctant transparency. The question that demands an answer is this: how did Scotland’s civil service and SNP ministers fail so spectacularly in their due diligence when private sector bankers could see the warning signs clearly?
A web of unpaid debts and alleged fraud
Sanjeev Gupta’s troubles are global in scope. His companies still owe $1.2 billion in loans from Greensill’s collapse, with creditors now pursuing him across multiple jurisdictions. But the problems run deeper than the threat of insolvency.
Credit Suisse bankers became so concerned about Gupta’s operations that they commissioned a private intelligence firm to investigate. The resulting Diligence Report claimed Gupta was “a central player” in a web of companies that made trades which were “simply fake.” The report’s claims concluded that “Liberty Steel and Sanjeev Gupta were clear participants in the fraud,” detailing fake documents, hidden related party deals, and losses totalling $4.4 billion to UAE banks alone. However, a lawyer for Gupta’s GFG when asked questioned the report stating on the record, “Diligence did not speak to Mr Gupta or Liberty, nor are they a law enforcement agency with formal powers of investigation”.
It should be noted however that regulatory fallout facing Sanjeev Gupta has been swift in the past. In the UK, Weylands Bank—purchased by Gupta—was censured by banking regulators after lending large sums to Gupta-connected parties and has now been forced to return money to depositors. Gupta also now faces official fraud investigations in multiple countries, including the UK and France.
Through it all, Gupta maintains his innocence, stating: “I refute any suggestion of wrongdoing.” But for Scottish taxpayers, his protestations offer cold comfort given the scale of their potential exposure.
Scotland’s costly embrace
The Scottish Government’s entanglement with Gupta began with what appeared to be industrial salvation. When Gupta acquired the Lochaber Aluminium smelter, the SNP government provided long-term guarantees that created potential taxpayer liability of between £575-£586 million according to 2021 reporting.
But the deal’s generosity extended beyond the headline figure which the Scottish Government attempted to hide from voters. Buried within the arrangements was a 25-year energy supply purchase guarantee to a company which it just so happens is owned by Gupta’s father—a detail that raises questions about the thoroughness of the Scottish Government’s negotiations and oversight.
SNP Government judgement is even more questionable regarding the Ravenscraig site in Lanarkshire. Here, the Scottish Government has admitted to potential violations of state aid laws concerning cleanup responsibilities. Then-Minister Ivan McKee came clean to parliament, confessing in December 2021: “We are advised that there is one specific part of the contract arrangement that has arisen during our contingency work that may not comply with state aid rules.”
The potential liability for that potential illegality totals £70 million, but the real scandal is how the deal was structured: taxpayers are landed with environmental cleanup costs while Tata Steel escapes responsibility as the site was flogged off, and Gupta secured ownership with what can only be described as what appears to be overly generous government support.
Adding insult to injury, Scottish Enterprise – a Scottish Government public body – provided Gupta with a £7 million loan to facilitate his “breakneck purchases” across Scotland. That a billionaire industrialist required public money to complete his acquisitions should have been a red flag visible from space. But the SNP had elections to win, so political self-interest trumped oversight and due diligence.
A failure of governance
Perhaps most damaging to public confidence is how these deals were negotiated. SNP ministers, including then-minister Fergus Ewing, met with both Greensill and Gupta himself without any civil servants present—surely a clear violation of ministerial codes designed to ensure proper oversight and accountability.
The SNP government has proved content to allow ministerial codes to be breached if it meant keeping the under-investigation Sanjeev happy. It is a matter of record that former SNP Government Minister Fergus Ewing had not one but four slap-up meals which were arguably in total contravention of the ministerial code.
In 2017 Fergus Ewing at the time a Minister in Nicola Sturgeon’s government – enjoyed a posh dinner date with Sanjeev Gupta, Lex Greensill, Jay Hambro and Tim Haywood. This took place in the up-market Cail Bruich restaurant located in Glasgow. There were no civil servants present and no minutes were taken, despite Ewing’s government facilitating major taxpayer backed deals involving those present.
Since those meetings, Lex Greensill’s outfit has folded through insolvency, Tim Haywood was later suspended from his job as a city fund manager at GAM Holdings and fined by the Financial Conduct Authority for failing to manage conflicts of interest. And Sanjeev Gupta is being pursued for unpaid loans running into the billions as official fraud probes get underway across multiple jurisdictions.
This raises profound questions about the political independence of Scotland’s civil service after 18 years of SNP governance. Why was no ministerial direction required for these budget-busting commitments? Why did no senior civil servant demand additional safeguards or independent verification of Gupta’s financial position? Why was there no on-the-record protest of dinner-deals without civil service participation?
The contrast with the private sector is stark and embarrassing. That a group of Credit Suisse bankers, spending their own money on due diligence, uncovered what the Scottish Government apparently could not or would not see is incredible.
Private sector actors could identify Gupta as a potential participant in alleged fraud, off their own dime and bat. What does this say about the competence and diligence of those managing Scotland’s public finances?
A culture of secrecy
Throughout this debacle, the Scottish Government’s instinct has been to hide rather than illuminate. Officials attempted to resist transparency requests and fought against Financial Times (FT) reporting that sought to reveal the scale of taxpayer exposure the SNP Government had committed the public to.
When the FT was investigating and uncovering the SNP-Sanjeev Gupta Lochaber deal, and the 25-year power purchase guarantee with daddy Gupta, the Scottish Government cited ‘commercial sensitivities’ as an excuse to duck the FT’s freedom of information (FOI) requestions. The FT wanted to know how much Scottish taxpayers were potentially on the hook for, but the SNP Government stonewalled. In response FT journalists appealed to the Information Commissioner. In June 2020 the Information Commissioner’s Office ordered the Scottish Government to tell the FT the details.
As if this blatant resistance of transparency was not bad enough, it turns out now that the SNP administration defied the FT’s FOI while knowing it would likely lose (as it did) in an appeal before the ICO.
The FT explains that “it looks like the Scottish Government turned down an FOI at the review stage, and potentially earlier, while knowing that if taken to appeal at the ICO it was likely to lose”. Which is interesting since it raises the question if the SNP government knew it was on shaky ground with its line of argument.
If so, the SNP government can be accused credibly of adopting this anti-transparency tactic in the hope the FT would give up and not appeal. Or perhaps the SNP government reflexively was playing for time at taxpayers’ expense to delay the release of politically sensitive information? Either way, it tells us this SNP government is allergic to accountable politics or transparency.
And the cost of the taxpayer guarantees to Gupta the SNP didn’t wish you to know about? The liabilities reach nearly £600m.
This culture of secrecy serves no one but those who made these questionable decisions. Scottish taxpayers deserve to know the full extent of their potential liabilities and how their government came to be so comprehensively outmanoeuvred by a businessman now facing fraud investigations across multiple continents.
Questions that demand answers
The Gupta affair represents more than just a financial scandal—it’s a case study in governmental failure that demands thorough investigation. Key questions remain unanswered:
How could the Scottish Government’s due diligence be so inferior to that of a group of private sector bankers who were operating off their own dime? What safeguards, if any, were put in place to protect taxpayer interests?
Why were ministers meeting key figures without civil service oversight? Why has the civil service never required any ministerial directions concerning SNP-Gupta deals which landed Scottish taxpayers with risk and exposure to a man under multiple fraud investigations?
And what steps are being taken to prevent similar lapses in governance in future?
The SNP government promised to be different in 2007, to operate to higher standards of transparency and competence. The unravelling Gupta affair proves otherwise. When a government shows less judgment than private bankers with less access to the facts and less transparency than offshore shell companies, it’s time for serious accountability.
Scottish taxpayers deserve better than to find themselves unwitting bedfellows with a man whom investigators have described as operating potentially fraudulent schemes. They deserve a government that exercises proper due diligence before committing hundreds of millions of pounds of public money. Most of all, they deserve the truth about how their representatives came to make such spectacularly poor decisions with their money.
The bill for the SNP’s industrial strategy is still being calculated, but one thing is already clear: the price of poor judgment in government is always paid by the taxpayers who trusted them to do better.
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