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Dr. Cable: That is an effective coda to this part of the debate and I shall leave it at that. May I move on to two areas that are specific responsibilities of the Department of Trade and Industry?

Mr. Peter Snape (West Bromwich, East): Will the hon. Gentleman give way before he moves on?

Dr. Cable: Happily.

Mr. Snape: Does the hon. Gentleman accept that, for 30 years until the mid-1990s, Britain's exchange rate--compared with those of virtually the rest of the world--continued to decline, yet this country's manufacturing industry also sadly continued to decline? He is long on problems, like most of his party. Has he any solutions?

Dr. Cable: The hon. Gentleman has totally missed the point about history. Of course the exchange rate declined, but British inflation was relatively high. The real exchange rate, which is what matters for competitiveness, was uncompetitive for much of that time, as he knows perfectly well.

Let me move on to the two issues that concern the DTI. One is the European Commission. The Government have argued that the apparent or prospective failure of the bid was not central to BMW's decision, but there are important issues here. This country has been remarkably conceited about European policy on state aids. There is a

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widespread belief, which has been echoed in interventions from around the Chamber, that our manufacturers observe the rules and the rest of the European Union does not. Over the years, Governments of both parties have clamoured for a state aids regime that is honest and tough, and a Commissioner who reflects those values. In this context, it is abundantly clear that Mr. Monti is both and he is exercising his toughness by casting a beady eye over the application.

I draw that point out again because in an Adjournment debate two months ago I was censured by a Minister for questioning the validity of the argument about the Hungarian migration. I was told that that was scaremongering and a dangerous line of argument that would imperil this crucial state aid application. We need to register clearly that whatever comes out of this, the European Commission has handled the episode entirely correctly and in the way that any British Government would expect of a commission concerned with stamping out damaging state aids.

The hon. Member for Tiverton and Honiton raised, in a partially correct way, the issue of DTI responsibility and the relationship with the Competition Commission inquiry into car prices. She was correct that there is a problem of joined-up government. The Government, for good reasons, embarked on an exercise to protect consumers. It is becoming clearer, as time passes and prices are more transparent, that car prices in Britain are significantly higher than in Europe, which is wrong, and that monopoly profit has been earned somewhere along the chain.

It may or may not be true that that depressed car sales last year. It is true that, when a competitive market for cars is introduced, a substantial profit margin will be taken from somewhere else. Some of that profit margin will be taken from many British companies that purchase company vehicles on the cheap, but a large part will be taken from the profit margins of the car industry, which has benefited from that regime.

I do not criticise the Government for embarking on that exercise. They were absolutely right to place emphasis on consumer protection. However, they should have been aware that the inquiry would significantly undermine the profit forecasts of many British manufacturers, including Rover.

Our primary concern should be for people in the west midlands, whose future is placed in peril by imminent decisions. I hope that we will quickly move on from the debate about who lost Longbridge to a more forward-looking debate about how we provide structural help to a region that has become overdependent--as Clydeside and the coal-mining areas did before--on an industry whose prospects in the current European economic environment are not good.

5.27 pm

Mr. Richard Burden (Birmingham, Northfield): Yesterday in Prime Minister's questions, I said that the entire midlands area was holding its breath, waiting on the BMW board meeting that was to take place today. We now know the result. The responsibility for what looks like befalling Longbridge and other large parts of the Rover group is that of BMW. The day after the announcement in 1994 about BMW taking over Rover,

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I met its then chairman, Bernd Pischetsrieder. He assured me that BMW was in for the long haul, knew the investment requirements of Rover and would make the company a success. I believe that Bernd Pischetsrieder was being straight with me but I know also that, from that day on, every time there was speculation about the future of Rover and BMW not being in it for the long haul, BMW assured me personally, the Government and--most important of all--the people who worked for Rover and its suppliers that BMW was in for the long haul and had a long-term commitment to Rover and to Longbridge in particular.

We know that BMW faced difficulties, but in negotiations over two years, it struck me that there were three essential elements in Rover having a bright future--and BMW did not disagree. First, workers at Longbridge and the other Rover plants needed to change their working practices and adopt greater flexibility. The workers delivered ground-breaking agreements on working practices. They have done everything that BMW asked of them and more.

Secondly, the whole process had to receive the backing of government at all levels in the UK. That has been delivered as well. Local partners--from Birmingham city council to the chamber of commerce and the training and enterprise council--got behind Longbridge and put together a package negotiated with BMW to deliver their side of the bargain. Despite what has been said by Opposition Members, my right hon. Friend the Secretary of State has behaved impeccably and has shown commitment on behalf of the Government by delivering the £152 million package and showing faith in the Rover group and BMW.

The third element was BMW itself. It is true that, in the first years of its involvement, it made a major investment in the Rover Group: about £500 million a year. It is also true that BMW committed itself to a further £1.5 billion of investment at the Longbridge plant. That commitment, however, has not been honoured, and the responsibility lies with BMW and with BMW alone.

I do not think that we should allow any evasion, and I was disappointed that Conservative Members tried to shift the responsibility. Let me take up some of the issues that they raised. First, let me deal with the European Commission, and the reference to the grant.

It is regrettable that the European Commission takes such time over applications--I have a less sanguine view in that regard than the hon. Member for Twickenham (Dr. Cable)--although it must be said that it has taken less time over this application than over others. We should remember, however, that the European Commission agreed and announced in December that it would embark on a formal inquiry. At that stage, we wanted to know what time scales were involved. There was speculation; it could take up to 18 months. The Commission said that it would take up to six months. That was clearly regrettable, but there was no suggestion then, and there is no suggestion now, that it constituted a fundamental barrier to BMW's continuing its investment and standing by Longbridge. In implying something else, Conservative Members are being disingenuous, or else they have lost the plot in regard to what is going on with BMW and Longbridge.

The strength of sterling was also raised. Anyone who represents a manufacturing area--anyone who knows companies involved in exports, particularly to Europe--

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is aware of the difficulty that that is causing to our manufacturers, but it is no excuse for what BMW has done. The losses announced at the BMW board meeting were not a bolt from the blue; they had been predicted for months.

If BMW or anyone else argues that the strength of sterling was the make or break element for BMW, it should be remembered that BMW prides itself on being a pan-European company. That means that it produces in Germany as well as in the United Kingdom, and that it benefits from the weakness of the euro when importing its vehicles to the United Kingdom and when exporting them to the United States. Perhaps BMW could have been more aggressive and dynamic in exporting classic cars such as the Rover 75 to the United States: if it had done that earlier, the cars would have sold very well.

It grieves me to say this, because I have been supportive of BMW for years, but it has a responsibility for what has happened, and that needs to be recorded.

Mr. Geoffrey Robinson: Does my hon. Friend agree that production of cars in the United Kingdom is some 40 per cent. lower than it is in Germany? Does that not more than negate the exchange-rate argument?

Mr. Burden: My hon. Friend makes a good point.

I hoped that we would be able to secure a degree of cross-party agreement on the important issue of how we could get behind Longbridge and plan for the future, but if Conservative Members are going to criticise the way in which my right hon. Friend the Secretary of State has handled the grant application, or the way in which he has handled the matter overall, they will be sitting in some rather fragile glass houses. It was they who sold off the Rover Group to British Aerospace for a song. It was they who, when the company had an asset base worth in excess of £250 million, wrote off debts totalling £800 million. The company was declaring a pre-tax profit of £65 million, and how much did they sell it for? They sold it for £150 million. That was crass incompetence and against European rules; the previous Government were found out about that.

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