SNP ministers are facing questions about how they potentially made themselves liable for the multi-million pound clean-up costs of two steel plants they owned for only a few moments.

The opposition parties branded it "amateur hour".

The Scottish Government agreed in March 2016 to act as the intermediary in the sale of the Clydebridge and Dalzell mills in Lanarkshire to help save 140 jobs.

Ministers agreed to buy the plants from Tata Steel subsidiary Longs Steel UK for £1 then “immediately” sold them for £1 to Liberty House in a so-called “back to back agreement”.

However SNP trade minister Ivan McKee today revealed that in the process taxpayers were potentially landed with future environmental remediation costs if Liberty collapsed.

The Government admitted the deal had been “untested due to the novel approach of the transaction in the UK”, and discussions with Tata Steel were "continuing".

But it also stressed that “many factors” would need to coincide before the indemnity could kick in, and that so far there was no sign of that, and that the businesses were operating well.

At Holyrood, Mr McKee was asked repeatedly how much the potential clean-up costs might be, but dodged the question, merely saying there was no “current” cost.

He admitted that at the time the deal was struck, the Scottish Government took the view that the arrangement complied with European state aid rules.

However, in light of the collapse of Greensill Capital - one of the key funders to the GFG Alliance that ultimately owns the steel works - the contract was reviewed amid concerns that GFG could also collapse.

He said the Scottish Government now considered that the clause that could leave taxpayers liable for clean up costs did not comply with state aid rules after all. 

He said: “This clause granted an enduring indemnity from Scottish Ministers to Longs Steel, whereby Scottish Ministers would be liable to cover the cost of certain liabilities arising from Tata Steel’s ownership of the Lanarkshire plants.”

He said he had identified that the clause was “no longer valid”.

However the decision does not rest with him. 

As the Scottish Government’s own website states: “The European Court of Justice has sole competence over what is and what isn’t state aid.”

In order to get a determination, the Scottish Government now plans to ask the UK Government to refer the matter to the European Commission.

If the clause is ruled illegal state aid, it could be invalidated and no longer apply.

However if it is not deemed state aid - as the Scottish Government originally thought - it could remain enforceable.

Mr McKee said: “The rescue deal facilitated by the Scottish Government in 2016 was agreed at pace and in good faith to maintain employment at Dalzell and Clydebridge. 

“Without our intervention the likelihood of anyone being employed producing steel plate in Scotland today would be very slim. The decision to support the steel industry in Scotland was, and still, is the right thing to do.  

“The contract arrangement has now been re-examined as part of the ongoing contingency planning process and it is considered that the clause providing the indemnity to Tata Steel may represent State aid, even though no money has, or may ever, change hands.

“In the interests of transparency we have made the interested parties aware of these findings. 

“However, it is important to emphasise that this matter does not affect the integrity of the wider agreement struck in 2016 or impact Liberty Steel’s ownership and running of the steelworks.

“We will continue supportive dialogue with Tata Steel and the company has access to our officials as it requires. 

“Most importantly we will continue to support the production of steel plate in Scotland and help our steel communities to prosper and to harness new opportunities that develop.”  

Labour MSP Daniel Johnson said the clean up costs of the Ravenscraig steel works came to £70million twenty years ago, and asked how it was possible the issue was not identified in government due diligence.

Tory MSP Jamie Halcro Johnson demanded "full transparency" from the Government on the situation as it progressed, noting ministers had previously exposed taxpayers to a possible £586m liability over GFG's Lochaber aluminium smelter. 

He said: “The Dalzell steel deal is just the latest example of SNP ministers committing millions of pounds of taxpayers’ cash with scant regard to necessary scrutiny.

“The SNP have admitted that they may have broken state aid rules over this contract, but they can’t or won’t tell us when they were first advised the deal they signed might not have been lawful.

“The Minister desperately tried to dodge crucial questions over the deal, and this is all too typical of an SNP Government which hides behind commercial sensitivities to avoid transparency.

“It is essential that the SNP finally come clean about when they were told the deal might be unlawful and just how much public money could be at stake.”

Scottish Liberal Democrat economy spokesperson Willie Rennie said:  “This is another industrial intervention balls up from this government. It’s amateur hour.  

"What does this say to companies who may be interested in doing business with this government in future? 

“How can they trust the government to deliver on its agreements?

"I know the minister wishes nothing will go wrong, but he needs to be frank about the potential consequences. 

"The minister must urgently clarify if this will have any impact on the deal or the jobs in Lanarkshire."

A spokesperson for Audit Scotland said the matter would not feature in the Scottish Government's annual accounts, which are due out tomorrow.

"We are aware of this issue, which has no impact on the Scottish Government's 2020/21 accounts."