Tories call for inquiry into Mittal loan

Lakshmi Mittal had a letter of support from Tony Blair

Iain Duncan Smith is leading calls for a inquiry into why the government backed a loan for a leading Indian businessman and Labour party donor so he could buy a steel works in Romania.

The Conservative leader said the way the government had handled the disclosures about the loan looked like a "trail of cover-up and deception".

The Tory leader was speaking after the Department of International Development (DFID) confirmed its officials supported the £70m loan from the European Bank of Reconstruction and Development (EBRD) for businessman Lakshmi Mittal.

All through the week we've had differing stories

Iain Duncan Smith

Mr Duncan Smith said: "All through the week we've had differing stories - now an inquiry is necessary."

Last week it was revealed that Prime Minister Tony Blair had written to his Romanian opposite number in support of Mr Mittal's bid to buy the steel works.

The letter was written just a month after Mr Mittal donated £125,000 to the Labour Party.

A DFID spokeswoman confirmed that it had told the UK representative on the EBRD to support the loan, describing the bid by the Indian tycoon's LNM Holdings company as a "very good project".

Duncan Smith is calling for an inquiry

However ministers in the department, which is headed by International Development Secretary Clare Short, had not been consulted, the spokeswoman added.

Downing Street has repeatedly defended Mr Blair's decision to write to his Romanian counterpart Adrian Nastase in support of the bid just a month after Mr Mittal donated money to the Labour Party.

The prime minister's official spokesman denied claims Downing Street had lied over the controversy and Mr Blair himself told his cabinet on Thursday all the allegations were nonsense.

This latest example of Tony Blair's support for this foreign competitor is simply extraordinary

Adam Price
Plaid Cymru

Downing Street stresses Mr Blair signed the letter on the advice of the UK's ambassador to Romania, who has said it was intended to express support for British involvement in what was seen as Romania's privatisation of the decade.

The ambassador did not know about any donation, Number 10 says.

An early draft of the letter reportedly indicated Mr Mittal was a "friend" of the prime minister, but that reference was removed by someone in Downing Street before Mr Blair signed it.

Welsh Nationalist party Plaid Cymru is tabling parliamentary questions over why Mr Blair was helping a competitor to Corus, formerly British Steel.

Foreign competitor

Spokesman Adam Price told the Sunday Telegraph: "This latest example of Tony Blair's support for this foreign competitor is simply extraordinary.

"Why was similar help not extended to Corus, which has shed thousands of jobs?"

Mr Blair's claim that he was simply "celebrating" the success of a British company has also been criticised because the subsidiary of LNM involved is registered in the Dutch Antilles and employs less than 1% of its workforce in the UK.

The company does, however, have a London headquarters.

Europe minister Peter Hain described the controversy as a "storm in a teacup".

Mr Mittal, an Indian citizen who lives in Hampstead, London, and pays personal tax in the UK, gave £125,000 to the Labour Party during the general election campaign last year.