British government offers Tata Steel multimillion-pound loan to persuade it to remain in the UK

The British government offered Tata Steel the Indian company a multimillion-pound loan to persuade it to remain in the UK, and to keep the Port Talbot steel plant open, after not getting assurances that any prospective  buyer would keep the plant open for more than three years. Tata Steel is offered a state loan of hundreds of millions of pounds on “commercial terms” which could replace an existing £900m loan from Tata’s parent company to Tata Steel UK. The 130, 000 members of British Steel pension scheme will have benefits watered down, and £2.5m reduction in long-term liabilities of the pension scheme by raising pensions in line with the CPI not RPI inflation rate.

The government is looking at the scheme so that pensions  to rise by the lower consumer prices index rate of inflation instead of the retail price index which could cut £2.5bn from long-term liabilities. However, there are concerns in Whitehall that changing the law for one pension fund could set an alarming trend for hundreds of other pension schemes. Both proposed loan and the pension changes risk setting the UK on a collision course with Brussels over state aid rules.

Tata, who had been planning to sell the plant after incurring heavy losses – at one point losing up to £1m per day. The company had already sold its Scunthorpe plant for £1 to Greybull Capital. Last year Tata’s UK operations paid almost £200m in debt interest