Previous SectionIndexHome Page

14 Jun 2005 : Column 25WH—continued

MG Rover

11 am

Richard Burden (Birmingham, Northfield) (Lab): I am grateful for the opportunity to introduce this debate on an issue of huge importance not just to my constituents but to the whole of the midlands and beyond. At the start, I congratulate my hon. Friend the Deputy Minister for Women and Equality on her appointment to the Front Bench.

Last Friday I attended a meeting held by the administrators PricewaterhouseCoopers for MG Rover's creditors. The creditors heard that they were unlikely to get much, perhaps even any, of their money back. I doubt that many will have been surprised by that, but there was a clear message from that meeting that they wanted some answers. My constituents, and the 6,100 former MG Rover workers, also want some answers.

The problem is not so much the fact that MG Rover was unable to survive. Everybody knew that for a long-term future, the company needed a partner. That was clearly and openly stated when Phoenix took over in 2000. It was equally clear at that time that there was never any guarantee that that would happen. The issue is much more the manner in which the collapse took place, and what led up to it. Why did the talks with the Shanghai Automotive Industry Corporation, which had been presented as far advanced, finally come to nothing? What happened about intellectual property rights, and had people been misled? Was there something fundamentally wrong with how Phoenix Venture Holdings had structured the businesses and run their affairs?

I am pleased that the Secretary of State has launched a thorough investigation. I know that some had political motives for rubbishing that investigation before it had even started, but I do not think that my constituents will be any more prepared to allow themselves to be used for such party political posturing than they were during the election. They simply want the truth, so I ask the Minister to confirm today that there will be no no-go areas for the investigation, and that the intention is for its results to be made public.

I advise some caution on the part of those who are now attacking the fact that Phoenix ever took over Longbridge following BMW's withdrawal in 2000, but who welcomed it, or even claimed credit for it, at the time. On the other side of the fence, I also urge some humility on the part of the "we told you so" brigade, including people who for a variety of reasons—some probably linked to self-interest—lobbied against Phoenix in 2000 and who relentlessly briefed against the company in public and in private thereafter.

Of course there were real questions, which emerged over the past four years, about the actions of the Phoenix directors. I have asked them a number of those questions to their faces in the past four years, but I must say that the endless scattergun stream of anti-Rover stories that have appeared in the press probably ended up getting in the way of proper scrutiny rather than promoting it. It also undoubtedly encouraged a bunker mentality on the part of the company. Whatever the Phoenix four may have been responsible for, I also believe that the endless public belittling of MG Rover by
14 Jun 2005 : Column 26WH
its detractors played a role in depressing both sales and confidence and in hastening the company's demise. Make no mistake, there is still real anger about that among former MG Rover employees.

I would also caution against the selective amnesia of those who claim that Phoenix took over Rover only because the Government somehow forced BMW to choose it in preference to a rival bid from the Alchemy venture capital firm. It is true that the Government, supported by the unions and local politicians including me, encouraged BMW to talk to Phoenix and seriously consider its bid rather than maintain exclusive negotiations with Alchemy.

However, we must remember that the Phoenix deal was done overnight on 8 and 9 May 2000. Alchemy had pulled out of its negotiations with BMW on 28 April, when it still had exclusive negotiating rights, so when Phoenix took over in May, the alternative was closure, with many more thousands of job losses even than there have been this year. Although the Phoenix deal meant that MG Rover workers had five years' pay that they would not have had if the plant had closed in 2000, one of the tragedies and injustices of the collapse has been that those workers have now lost their jobs, having bought the time for others to keep theirs.

Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): May I emphasise the fact that in West Bromwich, West an enormous number of second, third and even fourth-tier suppliers have said that that five years has enabled them to diversify their markets? That means that the potential impact in my constituency is significantly less than it would have been four or five years ago.

Richard Burden : There is consensus among serious commentators that the closure or massive downsizing of Longbridge in 2000 would have led to a great many job losses. I pay tribute to the work done by Advantage West Midlands, the Industry Forum, the suppliers and the manufacturing advisory service in encouraging the supply base to diversify.

Mr. Jim Cunningham (Coventry, South) (Lab): I served on the Trade and Industry Committee at that time, and it was obvious to us that had Alchemy taken over, there would have been a bigger catastrophe than there is now. Five years down the road, people tend to forget what the circumstances were. We spent many hours on the issue—hon. Members can look at the report. It was not something that we took lightly. We went to the site and spoke to everybody concerned, and it became apparent that despite press statements to the contrary, Alchemy was perceived to be an asset stripper.

Richard Burden : I am grateful to my hon. Friend. Had the Alchemy deal happened, it would not have been in the interests of Longbridge, the company or the supply chain. However, we should remember that there was no Alchemy deal on the table when the Phoenix deal was done. The choice was between Phoenix and closure.

I am sure that the Phoenix directors would like to be remembered for having helped to buy the time that we have been talking about, during which the region pursued a brave but ultimately unsuccessful strategy.
14 Jun 2005 : Column 27WH
However, it is difficult to square that with some of the subsequent decisions, which meant that the company's failure cost the employees a lot more than their jobs.

The car leasing policy that was promoted internally left employees exposed to unsustainable debts in the event of company failure, and failure meant that employees' pensions could be put at risk. The company's suppliers know only too well that the risks were transferred to them from Phoenix—as do the retailers, who found themselves with responsibility for stock worth a lot less than the debts that Phoenix had encouraged them to incur with finance companies.

Having left others so seriously exposed to the effects of failure, the Phoenix directors appear to have systematically insulated themselves from those effects through the proceeds of multi-million pound loan notes and pension pots. That is not morally sustainable. The gains that the Phoenix directors awarded themselves should be put to work for the benefit of those who have lost so much, and whose needs are, to speak bluntly, greater than those of the Phoenix four.

Mrs. Caroline Spelman (Meriden) (Con): I congratulate the hon. Gentleman on having secured this important debate. What happens to the existing pensioners depends on how the situation plays out. I am sure that, like me, the hon. Gentleman has constituents who retired between 2000 and 2004 and who will be very badly hit if the pension fund is drawn into the Pension Protection Fund. Will he join me in calling on the Minister to consider that injustice towards approximately 200 pensioners who retired during that time, and whose pension terms will be fundamentally altered from what, during the intervening years, they were led to believe that they would retire with?

Richard Burden : The hon. Lady pre-empts something that I was going to say a little later—but I am not sure whether 200 is the correct number for those affected by the Phoenix pension fund. In fact, several of those people would be secure in the BMW pension fund, but the principle behind the issue that she raises is important.

I am pleased that the Phoenix directors appear to be taking up a suggestion that I put to them last year at the Trade and Industry Committee by putting the remaining assets of Phoenix Venture Holdings into a trust for employees. It would also be useful to know if any funds are left in the company Techtronic. However, if the Phoenix four are concerned about how history will judge them, which I am sure they are, they also need to contribute from what they awarded themselves.

It would be arrogant for anyone with an involvement in or after 2000 not to consider whether the courses of action that we took then were the right ones, or for anyone to take the view that it was all everyone else's fault. I do not believe, however, that the unions, or any of us, were wrong to look for an alternative to the massive downsizing or closure of Longbridge. Nor do I believe that it was wrong to try to buy time for the region to adjust, or to allow time for a partner to be sought to secure the future of Longbridge. The Labour Government were right not to turn their back on Rover in 2000, as the Tories turned their backs on so much
14 Jun 2005 : Column 28WH
manufacturing in the 1980s. Indeed, what has happened in the past five years does not indicate that there was too much Government intervention in 2000. Perhaps there should have been more.

The days of old-style intervention and nationalisation are long gone, and rightly so, but I ask Ministers to consider the possibility that those of us who have argued at different times in the past five years for the Government to consider acquiring a strategic stake in the company, or other forms of leverage, may have had a point. Perhaps that could have played a role in allowing greater transparency and more investment in new products without falling foul of European Union rules, and perhaps even boosted MG Rover's credibility in its search for international partnerships.

Public authorities should reflect on how their own procurement policies hastened MG Rover's demise. Why do we so rarely see a British police car that has been built in Britain, such as a Rover or a Jaguar, when one would never see a French police car built anywhere but France, or a German police car built outside Germany?

I do, however, pay tribute to the speed with which the Government reacted to the failure of MG Rover—paying employees' wages while attempts were made to restart negotiations with SAIC, establishing the MG Rover taskforce and building on the lessons of 2000—and to the preparations made since then. Credit is also due to the members and partner agencies of the task force, led by Advantage West Midlands, for the fact that it moved so quickly to bring Jobcentre Plus, the learning and skills council, the colleges, the Department of Trade and Industry and other agencies to process redundancy payments, to draw up individual training plans and to assist with job search for employees affected, all while working with business to provide support to give companies in the supply chain a breathing space to react to the collapse. I am sure that the Minister will give the figures on that, so I shall not take up time doing so here.

I also pay tribute to all those, including Birmingham city council's neighbourhood office staff and the staff of other statutory agencies and the voluntary sector, who have staffed helplines and provided support at a human level to the employees. Particular mention, however, must be made of the contribution made by the trade unions, especially by stewards who were also employees of MG Rover and of other affected companies, and who have experienced the same uncertainties and pain as those whom they are trying to help and advise.

Let us not forget the families of MG Rover workers, led by Gemma Cartwright, whose efforts remind us all that this is not only about Longbridge the workplace, but about the communities that rely on it. Most of the challenges that they face still lie ahead. I hope that everyone will do what they can to build on the support that they have established.

Before I finish, I shall mention some of the issues that remain to be resolved and some of the lessons for the future, which I ask the Minister to address in her winding-up speech. Conflicting provisions in benefit rules and redundancy regulations have been shown to get in the way of doing the right thing by employees with regard to pay in lieu of notice and in the speedy processing of protective awards claims. Those provisions have also been a disincentive to people
14 Jun 2005 : Column 29WH
obtaining new jobs until they know that the awards have been paid. That cannot be right, and needs to be addressed.

We need to reconsider the operation of barriers, such as the 16-hour rule in particular, that prevent people on benefits from accessing training. There has been a creative approach to that with those affected by the MG Rover collapse, but a more fundamental review is required if we are to promote rather than restrict flexibility and security in the labour market, and if we are to breed a culture that actively encourages people on benefits to learn and retrain rather than discouraging them. The taskforce needs to track how successful the training input is in creating opportunities for people to return to work. Incidentally, I also ask the Minister to ensure that the money for the exercise comes through properly, and does not get caught up in bureaucratic boundary disputes between Departments.

Thirdly, what happened to MG Rover has underlined why the Government were right to establish the Pension Protection Fund, but has also highlighted issues regarding the PPF rules. That relates to the point that the hon. Member for Meriden (Mrs. Spelman) made. I am pleased that Ministers have made it clear that they are determined to overcome the problems, and like the hon. Lady, I ask them to address the potentially perverse impact on people who have already taken early retirement.

MG Rover is an issue of significance to the entire west midlands and beyond. Many of the challenges for component manufacturers are yet to be felt, as emergency assistance starts to come to an end. The epicentre, however, is south-west Birmingham, whose identity has always been intertwined with Longbridge. It is an area with a massive concentration of MG Rover workers and their families, which means that it faces extraordinary challenges ahead, not just for months but for years. Although a lot has been done to diversify the west midlands and reduce its reliance on MG Rover in the past five years, a lot more remains to be done in the areas immediately surrounding the plant.

It is surprising that despite the instability of MG Rover, south-west Birmingham is one of the few areas of the city that is not designated as a regeneration zone by the regional development agency. That creates ongoing problems for the area in accessing regeneration and other investment. The funding mechanisms available to south-west Birmingham need to reassessed, to upskill the people and to provide real opportunities, including physical opportunities, for redevelopment. Such issues should be at the forefront of Ministers' minds when they make decisions—for example, about how the Lyons review is implemented. I hope that they will respond positively to the exciting suggestion of creating a national centre for nanotechnology at the Longbridge site, and to the ideas about how the royal centre for defence medicine in Birmingham can develop.

As for the future of car making at Longbridge, I ask Ministers to bear in mind the fact that the administrators have confirmed that three credible bidders are interested in MG sports car-based production, and that two may be interested in more extensive car production. Nobody should raise false hopes about the scale of what may be possible, and I do not want to do that. However, I would be grateful if my hon. Friend the Minister would confirm that the
14 Jun 2005 : Column 30WH
Government will do everything they can to help retain sustainable car production at Longbridge, particularly as it becomes increasingly clear that the Shanghai Automotive Industry Corporation's acquisition of certain intellectual property rights for Rover cars and Powertrain engines means that a possible, if different, joint arrangement with a car producer at Longbridge could still make a great deal of sense. If my hon. Friend could give some comfort on that subject, I am sure that people in Longbridge and throughout the west midlands would be very pleased to hear it.

11.19 am

Miss Julie Kirkbride (Bromsgrove) (Con): I, too, congratulate the hon. Member for Birmingham, Northfield (Richard Burden) on securing this debate. We share the Rover car plant between our two constituencies. The past few months have been gruesome in my constituency and elsewhere in the west midlands, although really it is the past few years that have been gruesome, as we have watched the slow death of MG Rover since BMW pulled out in 2000.

It is worth going back over the history, because, as the hon. Gentleman will not be surprised to learn, I rather dispute his view of how we got to where we are now, and of the decisions that the Government took. In 2000, when BMW announced that it was going to sell the car plant if it could, the then Secretary of State said that he had no idea that the Rover car company was in such great trouble. It beggars belief that anyone could be Secretary of State for Trade and Industry and not be aware of the difficulties of Britain's only domestic car maker. Nevertheless, that is what the right hon. Member for North Tyneside (Mr. Byers) said at the time. There is no question but that the Government, in a flat panic to try to put a sticking plaster over the difficulties that had been created by that announcement, ordered BMW to sell the car plant to Towers and the Phoenix consortium.

When the hon. Member for Birmingham, Northfield says that there was no deal on the table to be done by Alchemy and Jon Moulton, because he pulled out before that period at the end of April—

Mr. Jim Cunningham : Will the hon. Lady give way?

Miss Kirkbride : In a minute.

Jon Moulton did not bother when it became clear that the Government were going to have that car plant sold to Towers and the Phoenix consortium. He had better things to do with his time than be the Government's puppet. I would be grateful if the hon. Member for Coventry, South (Mr. Cunningham) would tell me whether he thinks that the Phoenix consortium directors and Mr. John Towers are asset strippers—the term he used to describe Jon Moulton.

Mr. Cunningham : I shall answer the hon. Lady's question if she will answer mine: what proof has she that the Government ordered BMW to sell the company?

Miss Kirkbride : It is interesting that the hon. Gentleman does not want to comment on the other business, about asset stripping.

Mr. Cunningham : We can come back to that later.
14 Jun 2005 : Column 31WH

Miss Kirkbride : Proof is always difficult to get from this Government, because they try to hide from it most of the time. However, it is worth reviewing what was said at the time by the then Secretary of State, the right hon. Member for North Tyneside. He said that he was happy, and continued:

How very prescient that was, certainly when it came to Mr. Towers' own pocket.

The right hon. Gentleman continued:

That is as near as it possibly can be to proof that there was a stitch-up by the Government.

Mr. Cunningham : That is why it is vital that we have a proper inquiry—so that any information that comes out is independent of political motives.

Miss Kirkbride : I am certainly very keen on the inquiry. We will have to see what it comes up with, but given the nature of other inquiries that have taken place, I am not holding my breath about whether we will get to the truth. Nevertheless, we will take a great interest in the inquiry's findings, and I hope that justice is done as a result.

Lynne Jones (Birmingham, Selly Oak) (Lab): My recollection is that the hon. Lady was vocal in welcoming the Phoenix deal. I do not recall her suggesting that Alchemy's alternative proposals would have been a better deal, or saying that it had decided that it had no chance because of the Government's overbearing disposition. Does she really think that the Government can tell a company such as BMW what to do? Come on.

Miss Kirkbride : The hon. Lady should look at the Hansard report of the exchanges at the time, because she will notice that I am careful with what I say about John Towers. I say precisely nothing—

Steve McCabe (Birmingham, Hall Green) (Lab): No change there, then.

Miss Kirkbride : It was always obvious what was going to happen. If the hon. Lady does not live in the real world enough to know that given the number of cars that BMW sold in Britain, the Government would have an influence on how it behaved over its withdrawal from Rover, she too is clearly not qualified to be Secretary of State for Trade and Industry. She needs to understand how this works.

Mr. Khalid Mahmood (Birmingham, Perry Barr) (Lab): Will the hon. Lady give way?

Miss Kirkbride : I have given way enough for the time being. I have only got to what happened five years ago, and there is a lot more to say.
14 Jun 2005 : Column 32WH

Richard Burden : I have had my turn and I do not want to take up a lot of time, but the hon. Lady referred to the 2000 Hansard, and I have a copy of that. Her comment in response to the Secretary of State's statement was:

She was also reported in The Herald on 10 May as follows:

Miss Kirkbride : The hon. Gentleman can say as much as he likes, but he will notice that in nothing I said about the takeover by the Phoenix Consortium did I endorse it. We always knew that we would end up here. As he should know, when people are unemployed it would be churlish not to say that the possible end to unemployment is heartening. He is a politician, and if he does not understand the meaning of words, I fear that there is no lesson I can give him on that subject either.

Let us go back to another point that the hon. Gentleman made. He said that during the last five years—

John Hemming (Birmingham, Yardley) (LD) rose—

Miss Kirkbride: I hope that the hon. Gentleman will forgive me. I will give way at some point, but I must make some progress. During those five years the Government gave very little help to the Rover car company. They bought 28 cars under the Rover marque—

Mr. John Spellar (Warley) (Lab): On a point of order, Mr. Benton. Is there a time limit on speeches in this debate that would prevent interventions?

Mr. Joe Benton (in the Chair): I intended, when the present speaker had sat down, to draw attention to the fact that quite a few hon. Members had indicated a desire to speak. In fairness to the Minister, I will start the wind-up speeches at 12 o'clock. The rest is up to hon. Members.

Miss Kirkbride : Before I was interrupted, I was pointing out that the Government Car and Dispatch Agency had only 28 Rover cars.

John Hemming rose—

Miss Kirkbride : I am sorry, but I shall not take any more interventions for the time being, as it is not fair to other hon. Members who wish to take part in the debate. [Interruption.] My hon. Friend the Member for Meriden (Mrs. Spelman) says that I have been very generous. I agree.

Just this morning I got an answer from the Minister in charge of the Motability scheme, and it is interesting to note that there is little support for our domestic car maker there either. Of 171,638 Motability cars bought with the help of Government funds last year, just 2,606 were bought from Rover.
14 Jun 2005 : Column 33WH

The company creaked on. There was a possible deal to be done with the Chinese, who basically took the Government and the PVH directors to the cleaners. They bought the intellectual property, but without the car plant, and without the future of production at Longbridge. When the Chancellor of the Exchequer went to China and failed to produce a deal, the writing was on the wall that the company would close, because without a foreign investor, it simply could not carry on.

Ministers were left in something of a dilemma. The clock was ticking towards a general election, and they did not want the whole thing to blow up just beforehand. Sadly, it became clear to them that if they could not hang on to the situation, it was much better to let it blow up early in the general election rather than closer to polling day on 5 May.

I am sure that Labour Members will not believe me, but they might believe the business editor of The Birmingham Post, John Duckers, who also made this point. In his article of 22 April he wrote that when Ministers returned from China, the Government determined that they must not have a Rover crisis breaking in the days immediately before polling day. They dared not risk that happening, so they decided to dump the ailing car giant well ahead of polling day.

John Duckers went on to quote a highly placed source:

I agree with that, bearing in mind the fact that the previous Secretary of State announced that the company would be going into receivership before the board had even decided that it would. The Government's complicity in this is clear. [Interruption.] I am not surprised that Labour Members are having a fit about complicity in selling Rover to the PVH consortium, because the record of what PVH has done, and John Towers in particular—

Several Hon. Members rose

Miss Kirkbride : I will not give way. I have quite enough to say, and it is worth putting it on the record, because it is important.

The reason why the Government do not want to admit any culpability is that the

as the Financial Times puts it, that surrounds the whole episode can be laid firmly at the door of the Government and the Towers consortium. The Financial Times leader of Saturday 9 April says that it is the story of

the PVH directors—

That is exactly what the directors did. The £427 million that BMW left for the company was put into a separate account for the benefit of the directors. Then
14 Jun 2005 : Column 34WH
the car-making plant was charged interest on the loan that it took from the £427 million. They set up a separate little company for the car loan book, in which they have a 50 per cent. share, along with the bank, and of course they sold the entire site of Longbridge from under the feet of the company. The point is that now that the company is in administration—although obviously, we hope that some resurrection can take place—they simply do not own the land on which the car production facility sits, and St. Modwen would dearly love to use the land for something other than making cars, which has not been seen to make much money recently.

John Towers and his fellow directors stand firmly in the dock accused of greed, asset stripping and taking the company, the employees and the Government for a ride. There is no question about that. Indeed, one particular fact says it all. As we all know, the car company was owned by BMW. Last year, BMW made £2 billion, but its chairman, Helmut Panke, earns less than John Towers pays himself in a company that has never made a penny during the five years for which he has been in charge.

It is interesting to note that when the previous Secretary of State was at the Birmingham motor show in May 2004, she defended the sums that the Rover directors had been awarding themselves. She said:

Quite what risks the PVH directors took, I find it difficult to establish, but their greed is clearly established, as is their £16.5 million personal pension pot.

Meanwhile, the other Rover car workers still face the worry about what will happen to their pension savings. That is one issue that I hope the Minister will do more to clarify, because there is considerable uncertainty. I have received written answers saying that the Government "believe" or that it is "expected" that something will happen, but there is no certainty that the Pension Protection Fund will kick in to protect the pension savings of the people represented by me and by many other hon. Members in the Chamber. We would like more clarity on that subject.

As my hon. Friend the Member for Meriden said, we would also like the Minister to make clear the position of the workers who retired early, who feel particularly vulnerable about the application to the Pension Protection Fund. If that is the way forward, it will severely reduce their expected living standards.

I would also be grateful if the Minister could establish for us how there can be an application to the Pension Protection Fund when the holding company of PVH is not in administration. My understanding is that until it is, there can be no application to the pension protection fund. How will we be able to engineer the moment when such an application can be made, as private assets are involved? What happens if the holding company does not go into administration? What happens to the Rover workers' pension savings, and how can we ensure that people receive the money that they have saved for their retirement? Some clarity on that issue would be particularly helpful.
14 Jun 2005 : Column 35WH

I understand that an inquiry is going on, but I should also be grateful if the Minister clarified whether the pension pot provided for the directors could be included in the general pension pot, so that everyone had to share the shortfall in the payout at the end of the day. Although I represent many Rover workers, I also represent many other people who are not Rover workers, but whose pensions will be subject to a levy to cover the shortfall at the plant's pension scheme.

Although I welcome that, it is grossly unfair to put a levy on other workers' pensions because funds have been stolen from the pension fund and the Rover company's assets, which rightly belong to the creditors for payment of the liabilities, and to the pension fund. It is important that we fill that pot as much as possible from the potentially stolen assets, to ensure that when we pay out on what is effectively an insurance policy, the arrangement is fair, and someone else has not run off with the money and forced the rest of us to pick up the pieces. I should be grateful if the Minister talked about that.

I, too, pass on my thanks for the efforts that have gone into the taskforce. I thank all the people who manned the phone lines, organised the training and tried to establish job opportunities for people. The Minister will be aware that at the moment the job situation still looks rather bleak; slightly more than 500 people have jobs, but 6,100 people are unemployed. I hope that that situation will change and that people will be in a position to find new well-paid jobs when the redundancy money finally comes through. However, at the moment the picture is not as good as we might have hoped, bearing in mind the efforts that have been made.

Will the Minister set out exactly how much money has been paid from Government funds into the taskforce? I understand that at yesterday's meeting there was a fair amount of muttering about the fact that moneys had not been forthcoming, and there was a view that the impetus from the Government had disappeared, as some weeks had passed since the general election.

Will the Minister clarify how much money has been paid over? A steady stream of my constituents have been expecting to have some training, which has not been forthcoming. They have not even been put on a training course. A good example of that arrived by e-mail just yesterday. Someone who wants to take a plastering course that costs approximately £400—to learn a skill that seems highly relevant, as there is a shortage of plasterers in our region—is being turned down by the learning and skills council, which is part of the taskforce. There have been significant problems with how training has been forthcoming for many workers, although there have been some success stories.

Mr. Mahmood : Will the hon. Lady give way?

Miss Kirkbride : I feel that I am eating into other people's time—[Hon. Members: "You certainly are."] I shall simply say that I would be grateful if the Minister clarified the money position as well.

What of the future? The hon. Member for Birmingham, Northfield made great play of saying that there was no future other than Phoenix Venture
14 Jun 2005 : Column 36WH
Holdings and the activities of the directors. However, had Alchemy taken over back in 2000, there would have been a £50,000-plus pay-off for the workers. Some 2,000 people would have been employed in making MG sports cars, and suppliers would have produced component parts for MG sports cars made at Longbridge.

It is pretty sad that because we now have a fire sale, as opposed to an organised sell-off of the car plant and its land, we may well not see the resurrection of car making—not even under the very successful MG sports car brand—on the site at all. That is particularly bitter-sweet, because this year is the original Austin works' 100th anniversary, which will be celebrated in Cofton park in my constituency. The company was the pinnacle of British engineering, innovation and design over the past 100 years, and it is very sad that this particular year should see its demise. Because this is effectively a fire sale, it will be particularly difficult to resurrect the company. Nevertheless, we hope that that will be the case, and that we will have something more to celebrate by 8 July, with that niche player coming back into the market.

11.40 am

Steve McCabe (Birmingham, Hall Green) (Lab): I begin by congratulating my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on securing this important debate. I want to focus on the issue of training and its evaluation, which has been raised by other Members, but there are a few points that I want to make first.

I welcome the inquiry; it is important that we should know exactly what happened. Some of the arguments have been put in context today: things sound different when one reads the quotes that people gave at the time. Those of us with slightly longer memories hope that the inquiry will also recall how Rover came to be in the hands of BMW in the first place, and how the tie-up with Honda—one of Rover's most successful periods—was severed by the actions of the Conservative Government, in what workers in the area would describe as industrial vandalism. I hope that the inquiry will look at the whole picture.

I welcome what the taskforce and the regional development agency appear to have achieved in the short period of two months or so. I was intrigued to hear the hon. Member for Bromsgrove (Miss Kirkbride), a member of the taskforce, ask about the training components. I hope to find, when I read the minutes, that she has been asking such demanding questions there too, because it would be a bit pointless if she were only asking them here, when she has been afforded such an opportunity elsewhere. I look forward to seeing the taskforce's work.

Many of us were at a meeting with the representatives of the taskforce last week in the House of Commons, at which I was interested to hear that it intends to write up the whole experience, so that for the future we will have a model of what can be done if we have to face job losses on this scale again in any part of the country. That is a welcome process, and I look forward to reading about it.

We will be able to read about the input and the actions of the taskforce. Welcome though those are now, we do not know what will happen to the affected people, many of whom are to receive further training—some short-
14 Jun 2005 : Column 37WH
term, some in higher education—which I also welcome. I believe that the hon. Lady said that slightly less than 10 per cent. of those people have found new jobs, but we do not know what will happen to the larger mass of affected people—those employed by MG Rover or related industries—and their families, many of whom live in my constituency.

We should look systematically at what happens to such people. I did not think that the answer afforded by taskforce representatives at last week's meeting was wholly convincing. It is not enough to assume that learning and skills councils will track the outcomes of training for those employees. If we are to have a report on Rover, what happened at the outset and what the taskforce did, we need to know about the outcomes, too.

There is an argument, which I hope that the Minister will consider, for a systematic study of what happens to Rover workers and their families. I should like to know what training they had, how many of those training episodes had a successful outcome, how many people started small businesses, and how those businesses had fared by the end of, say, two years. I would also like to know how many people were forced to leave the area, as that will have implications for further work needed in similar situations. It is not sufficient to rely on the learning and skills council, not least because, as has been pointed out, about 40 per cent. of Rover workers do not live in Birmingham, so the work would involve more than one LSC.

Mr. Jim Cunningham : Does my hon. Friend agree that, in addition, we must consider the number of redundancies, how the suppliers have been affected and whether adequate training facilities are available—and whether a six-week training course is long enough?

Steve McCabe : The short answer is that I do not know—but that is the point. I agree with my hon. Friend that if we are to hear the whole story and get the full picture, we need more than an inquiry and a taskforce report; we need the Government to agree to a systematic follow-up of the Rover workers and their families. Only then will we be able to answer questions about training, relocation, new starts, new businesses and types of training intervention. I would say that that has to be a formal piece of work. My instinct would be to give it to a university equipped to handle such a task.

It will not be satisfactory simply to have an inquiry into what happened and a report on the inputs of the taskforce. If we are serious about it, we will need to know what lessons must be learned. We must follow up those workers—those 6,000 people and their families. We must know where they end up, what happens to them and what interventions are successful. I strongly urge the Minister to give serious consideration to make that part of the total picture of the Rover experience.

11.47 am

John Hemming (Birmingham, Yardley) (LD): Those who have seen "The Rotters' Club" on the television or read the book may understand a little more about my links to MG Rover. Jonathan Coe, the author of the book, which is semi-autobiographical, travelled on the same bus as me to school in my teenage years, and we used to pass the Longbridge plant. The historic importance of Leyland and MG Rover in Birmingham cannot be denied.
14 Jun 2005 : Column 38WH

My history with the Phoenix consortium goes back to 2000, when I brought it together. The original arrangement was that I would chair the consequent company, but from the first meeting on 31 March 2005, in the offices of Old Mutual—previously Albert E. Sharp—it was clear that John Towers did not want any community or workforce scrutiny on the board, and although there was agreement for the work force to have shares, they ended up disfranchised and the shares were essentially worthless. In April, community scrutiny was pushed out using the argument that BMW would not do the deal if community representatives remained involved. I considered what might be needed to enforce a scrutiny process in 2003; I got no external support, but did receive legal threats from one of the Phoenix Venture Holdings directors.

I have been known not to be positive about John Towers and his leadership of the company for five years. However, it is wrong simply to blame the directors for today's situation. Errors were made, but it took quite a few cooks to spoil this particular broth.

The insolvency caused massive problems in the west midlands, not least because it was unexpected. The deal with Shanghai Automotive Industry Corporation had been running smoothly for some time. It involved a payment of more than £200 million to MG Rover, which would have enabled us to discover the holy grail of a stable and profitable company working as part of an international manufacturing partnership, which is what everyone sought.

Insolvency is a complex aspect of company law. The issue that matters is not whether a company is insolvent on a particular day, but whether the directors believe that it will be able to pay its debts. The important legal issue is wrongful trading; if the directors believe that the company would be wrongfully trading because it could not pay its debts, it should go into some form of insolvency. If they believe that things can come good, however, it can continue trading.

At a board meeting held on 17 December 2004, it was recognised that the company was balance-sheet insolvent, and therefore depended on the SAIC deal being likely to happen in order to continue trading. A letter of intent was signed on 17 December 2004 that specified completion milestones. SAIC had paid £37 million in September 2004 and £30 million on 13th January 2005. There were people from Birmingham who had gone across to China. The deal was going forward. The intellectual property is of no value without the people who know how to do things. One could not do anything in isolation.

This is where the Department of Trade and Industry got involved. Obviously, the company was burning cash, and a bridging loan was needed to handle its position until the Chinese Government could go through the regulatory processes and agree the deal. A due diligence exercise was undertaken by the DTI's accountants and lawyers, and the facility was approved in principle. Loan documentation was prepared and circulated. Within that period, on 28 February 2005, a revised letter of intent was signed by SAIC, Nanjing Automotive, the company and PVH, agreeing to a further cash amount of £201.5 million, which would be paid progressively over a period.
14 Jun 2005 : Column 39WH

On 8 April in Shanghai—which was 7 April in Birmingham—the DTI indicated to the Phoenix directors that they did not think that the conditions they had set for providing the loan would be achieved. Without the loan, the deal with SAIC could not go through. As soon as the deal with SAIC was unlikely to happen, the company was in wrongful trading. That is the key issue: how we got from a position in which a deal would have sorted everything out, to one where it went all wrong.

There were a few very odd things that came from the DTI—and this is where, to an extent, I agree with the hon. Member for Bromsgrove (Miss Kirkbride), although I disagree with her idea that we always knew we would end up here. I very much agree with what the hon. Member for Birmingham, Northfield (Richard Burden) said about there being no no-go areas for the inquiry, and the idea that nationally, MG Rover has been talked down. It was not the case that we always knew that we would be here. It would have been entirely possible for the deal with SAIC to continue. The fact that the interest there remains shows that that was entirely possible.

I now come to the odd behaviour of the Department of Trade and Industry. The first thing was going public about the bridging loan on 1 April. That was a massively sensitive piece of information. It had the effect of undermining credibility in the company, of increasing the working capital requirement by about £50 million, and of leading traders to refuse to trade with the company the following week. That information should not have been made public.

Secondly, the DTI announced that the company was going into administration. It is not up to the DTI to make that sort of decision. It is not up to the DTI Minister to tell the company to go into administration. Ministers may have a view, but they should keep it to themselves. They should not hold a press conference saying that the company is going into administration. It is a decision for the board to take.

Mrs. Spelman : Does the hon. Gentleman agree that the inquiry should find out why the then Secretary of State for Trade and Industry jumped the gun by announcing the company had gone into receivership before the board had made that decision?

John Hemming : Yes, I do.

There are three questions that the DTI needs to answer. Given the very real evidence that the bridging loan had been agreed and documented, what caused the U-turn and its subsequent disastrous results? Second, why did the DTI publicly undermine the credibility of the company, and in effect prevent it from trading? Third, why were DTI Ministers calling for the company to go into administration, and why was an announcement made by the then Secretary of State for Trade and Industry and Tony Woodley that the company was going into administration?

Mr. Jim Cunningham : Does the hon. Gentleman think that it was right and proper for Tony Woodley to be there?

John Hemming : I have a lot of time for Tony Woodley. He has always worked very hard for his
14 Jun 2005 : Column 40WH
members. Whether he should have been there or not, the fact is that the announcement should not have been made by the DTI in the first instance. It was a totally inappropriate public announcement. Tony Woodley, however, has always tried to work as best he can to try to help the business to survive, so I would not wish to criticise him.

Steve McCabe : I am sorry to have to clarify this again, but I am intrigued that the hon. Gentleman's view now appears to be that the DTI made a number of mistakes that undermined the company. Does he accept that on the Lib Dem website, as early as 2003, he was quoted as saying that he had doubts and suspicions about the way in which directors were extracting money and assets from the company? He was looking at the possibility of legal action to remove them from overall control. Are we now to forget his feelings and anxieties of that time? Is not it reasonable to think that the DTI might have shared some of his suspicions?

John Hemming : If the hon. Gentleman had been listening to my speech earlier, he would have heard me mention that. I have always made the point that, putting aside the issue of money having been taken out of the company, the deal in question could have been done. We did not have to end up here. The DTI showed no interest in the governance issues at the time. My concern is about the behaviour of the DTI in undermining the company's trading position, doing a U-turn on the bridging loan, and doing a lot of damage throughout the process.

Mr. Brian Jenkins (Tamworth) (Lab): My difficulty is that I can remember the events unfolding. As far as I recollect, until the time when the Chinese walked out of the room, the bridging loan was in place; the condition of the bridging loan was that the Chinese should sign the agreement. However, it was not just another loan; it was not just more money being pumped into the company. If I believed for a moment that a company whose directors knew it to be insolvent was apparently being given the backing of the Government, with an extra loan, to continue hoodwinking all its suppliers and its workers, I would be seriously concerned. Apparently, they are damned if they do and damned if they do not. Which is it?

John Hemming : The complexity of the law is an important point in that respect. Someone is wrongfully trading if they think that things are going to go wrong. If they think that things will come good, and if they have good evidence for that, they are not wrongfully trading. The point that the hon. Gentleman raised is exactly the one that the inquiry needs to consider. Did SAIC actually pull out of the deal? When I was talking to Tony Woodley after the company went into administration it was clear that it was still talking to SAIC, which was still interested in trying to do a deal and had not lost interest in the commercial side of the business. My understanding is that concerns were raised by the advisers to the DTI about the stability of the residual business, and that that had caused some concerns with SAIC. However, as hon. Members are aware, because we have discussed it today, there were not any problems with the stability of the residual business.

We are talking about an inquiry. I agree with the hon. Member for Birmingham, Northfield that there should not be any no-go areas. We must consider what actually
14 Jun 2005 : Column 41WH
happened: what switched the business from being solvent to being insolvent—from non-wrongful trading to wrongful trading. That is the critical issue to be determined.

I may be wrong, but my understanding is that a precondition had been established by the DTI that the funds needed to go into an escrow account from SAIC. There were challenges, in that China has a different governmental system, and it is necessary to get authority from the Government to do certain things. We all know that Governments take a little time to handle such things, and that in itself can cause substantial problems. If the DTI says, "You must do this now," and they say, "We can only do it in three weeks' time," there is a problem.

Mr. Jim Cunningham : The hon. Gentleman is jumping from blaming the DTI to blaming someone else, while persuading us that we need an inquiry. There is something that I do not understand: around November, Government officials were in China and discussions were taking place. From then to May it was six or seven months. How long does it take, in such a situation, to know whether the business can or cannot be done? My understanding is that the Chinese were not interested after they found out that there were certain problems with the company. As for the loan that was always available, how long is a piece of string? Why jump in and out of blaming the DTI or others? The hon. Gentleman should confine himself to his original premise. Let us have an inquiry, and cut out all the rumour and innuendo, because I know no better than he does what really happened.

John Hemming : Until the inquiry has taken place, we will not be 100 per cent. certain. There is information from many different sources. It remains true that discussions with SAIC continued after the company had gone into administration. That shows that there were still merits in terms of commercial viability.

Mr. Cunningham : I follow that—but logically, does it not tell people that perhaps, even at that late hour when everything looked impossible, the Government and the other parties involved still wanted to see whether there was another last chance? It seems as if somebody was determined to sort the problem out and get some sort of deal. We can speculate until the cows come home, but until there is a proper inquiry, we will all be playing on hunches and saying all sorts of things, when we have no fundamental basis for doing so.

John Hemming : We can agree on the fact that we need a proper inquiry with no no-go areas. We have no problem with that. I could say much more, but it is probably appropriate that I should finish at this point. I apologise for going on at such length, but I have taken interventions.

Sir John Butterfill (in the Chair): I call the hon. Member for North Norfolk (Norman Lamb).

12.1 pm

Norman Lamb (North Norfolk) (LD): You will not be aware of what has gone on in the debate so far, Sir John, as you have only just taken the Chair, but one issue that
14 Jun 2005 : Column 42WH
must be considered is limiting the length of speeches in these debates, because many people have strong views and it is important that they should have the opportunity to be aired fully.

This has been an important debate and I congratulate the hon. Member for Birmingham, Northfield (Richard Burden) on securing it. He was right to say that there should be no no-go areas in an inquiry, and that the findings must be made public so that we can examine precisely what went wrong. I also accept his view that for those who seek to criticise the Government, there is a danger of speaking with the benefit of hindsight, to dissociate themselves from what went wrong.

I do not know the full truth of what happened, particularly in the period leading up to the acquisition of MG Rover by the Phoenix consortium. We have heard the competing claims of the hon. Members for Birmingham, Northfield and for Bromsgrove (Miss Kirkbride). That is why it is important to have a full inquiry that examines the period and goes right back.

The hon. Member for Birmingham, Hall Green (Steve McCabe) raised legitimate concerns about a period before that which I mentioned. Reference was made to the acquisition by BMW in the first place, and how the Honda association collapsed. Many people saw that as a valuable association that might well have secured the future of MG Rover.

There has been public debate since the tragic collapse of the company. It is worth making the point that as we argue over who is to blame and what went wrong, we ought to focus on the fact that more than 5,500 people lost their jobs, and on the impact not only on them, but on their families and the local economy, which can be devastating. The point made by the hon. Member for Birmingham, Hall Green about the importance of examining whether the retraining is adequate, and whether the structures to support it are in place, is as important as examining the history.

The focus so far has been on the potential culpability of the Phoenix four, whether there was wrongdoing, and the extent to which they may have profited from MG Rover. The contrast between their situation and that of the work force is stark. The Financial Reporting Council raised issues that properly require further investigation. I have no real idea whether anything sinister was involved, because so far the FRC report remains secret. It is important that at some stage, preferably sooner rather than later, it is brought into the open so that we can see what its initial conclusions are.

A former director, Peter Stevens, has weighed in with accusations of naivety, muddle, mismanagement and waste. While it is right to investigate the role of the Phoenix four, there is a danger of heaping all the blame at their door when in reality the fate of Rover may—I stress the word "may"—have been sealed before they acquired the car maker. I fully accept the point made by my hon. Friend the Member for Birmingham, Yardley (John Hemming) that a deal with the Shanghai Automotive Industry Corporation could still have worked as a long-term association. However, many analysts reached the conclusion that the situation for Rover had looked pretty bleak for some time.

We are faced with a large number of inquiries. On top of the FRC inquiry, we have the current inquiry launched by the Secretary of State and the likelihood of
14 Jun 2005 : Column 43WH
two Select Committee inquiries. The National Audit Office is also thinking about pursuing an inquiry. If all these inquiries are to be of lasting value, everybody must learn lessons. Centrally, the inquiries must also explore the role of Government.

The strongest charge against the Government was made in The Economist, which described Rover as

It asserted that pinning the blame on the Phoenix four was missing the real target. The blame, according to the article, lay first with the laws of economics, and secondly,

That is the charge against the Government. I do not know the full story. Again, that is why an inquiry is so important.

As for the economics, when the company collapsed, the world's car industry had the capacity to produce some 80 million cars and light vehicles a year, but was producing only 60 million a year. That is massive overcapacity. Most of that spare capacity is in Europe and the United States, where costs are higher and sales growth is slower than elsewhere. One could say that inevitably, a medium-sized company like MG Rover was most vulnerable in that harsh economic environment. However, many analysts have concluded that the fate of MG Rover as a volume car maker was sealed a long time ago.

It is important to examine what happened in 2000. As we have heard, at that time there were two competing suitors, Alchemy and Phoenix. That is a crucial period. I have heard and listened carefully to what the hon. Member for Birmingham, Northfield, who was very much involved at that time, has said. It is important to examine and make public exactly what happened between March, when Alchemy was in pole position, and May, when Rover was sold to the Phoenix group.

The Alchemy option, superficially, was hardly attractive. Only 20 per cent. of jobs would have been saved. But was it the only viable option for the long term? I do not know the answer, but that is a question we need to ask if we are to learn lessons from this sad story. Did the Government intervene, as some allege, swapping sides in the face of public protest? Did they favour a bid that saved jobs in the short term, but had no plan or direction to make the company viable in the long term?

What of the role of John Towers? In March 2000 he was appointed to the taskforce established to consider options for the failing company, as BMW was rapidly losing interest. Towers then became the head of the taskforce, proposing a "project Phoenix". By the beginning of April, Towers had stepped down from the DTI task force to head the Phoenix consortium officially. We all know the outcome. Did the Government interfere or intervene in a way that ultimately damaged any long-term prospect of car making in the west midlands? Those are the reasons why, ultimately, we need a full inquiry.
14 Jun 2005 : Column 44WH

It is worth finishing with a more positive point. Many commentators have talked about the death of the British car industry. In fact, the car industry is healthy. It just happens not to be British owned. A lot of cars are being made in this country, in plants that are remarkably productive. The future, in many respects, is quite bright. We must balance that against the tragedy of this particular story. We all ought to be learning lessons here. We all ought to look at what happened over the years, at whether any of us reached wrong conclusions, and at what lessons can be learned for the future.

12.10 pm

Charles Hendry (Wealden) (Con): I echo the congratulations to the hon. Member for Birmingham, Northfield (Richard Burden) on securing the debate, and on the eloquent and sincere way in which he introduced it. It is a shame that we have to discuss the topic in an Adjournment debate in Westminster Hall, as it should have been the subject of a statement by the Secretary of State soon after the House returned. This was probably the biggest economic and industrial issue affecting the country while Parliament was dissolved for the general election, and it is shocking that the Secretary of State did not come to the Dispatch Box to set out clearly what had happened and give the House a chance to question him on it.

As we have seen from today's debate, there has been a catalogue of mistakes that go back over many years and have resulted in the terrible tragedy that we see before us. Although hon. Members have spoken from different perspectives, what has come across is the fact that they are all speaking with a genuine interest in their constituents—people who were employees of Rover or whose livelihood depended on it—and with a tremendous commitment to their communities.

Above all, the issue is tragic for the work force, who have lost their livelihood and find that their pensions are under threat. As my hon. Friend the Member for Meriden (Mrs. Spelman) said, it is tragic for those who have already retired and now face tremendous insecurity, as they do not know how their pensions will be paid. It is a tragedy, too, for the creditors and dealers, some of whom will be driven out of business. A number have already closed down, and it is likely that others will follow—people who did nothing other than their best to sell Rover cars.

Of course we welcome the rescue package, but we would be grateful if the Minister could clarify whether all the money is new money or whether it has been diverted from other funding packages that were already in place in Birmingham and the west midlands more generally, or elsewhere. I also endorse the call from the hon. Member for North Norfolk (Norman Lamb) that the Financial Reporting Council report should be published. When it was handed over to the Secretary of State, it was made clear that it contained issues that the Department of Trade and Industry would want to address. The House should see exactly what Sir Bryan Nicholson's report concluded, so that we can understand fully what more needs to be assessed.

We welcome the decision to have a full investigation, but the inquiry must also consider the actions of the DTI and to what extent they might have contributed to the closure of Rover. After all, it is only just over a year ago
14 Jun 2005 : Column 45WH
that the former Secretary of State defended the £31 million bonuses paid to the Phoenix four, in words that bear repeating:

Would the Minister care to endorse those words today, or has she changed the Department's mind from paying tribute to John Towers and his colleagues in such a fulsome way?

The report needs to consider historically what happened when Phoenix took over. As has been explained today, we want to know the detail of why the Phoenix solution was preferred to Alchemy. We also need to know why the BMW pension fund was not ring-fenced, so that the people who were entitled to expect that they would benefit from it can understand why the money is not available.

The main issue that the investigation should look into is the handling of the situation as it moved towards its final stages. It is my understanding that in the early hours of Tuesday 5 April, directors of MG Rover and solicitors were meeting at Longbridge. When they finished that meeting, they believed that they had an agreement for the £100 million loan. It is also my understanding that the then Secretary of State had cleared time in her diary later that Tuesday to announce formally that the £100 million loan had been agreed. It is also clear that the DTI press office briefed the media earlier in the week that the loan was almost in the bag. The press coverage that resulted from that actually made matters worse: it increased the pressure on the company as more creditors came forward seeking to be paid.

What happened to change the Government's mind on the loan between the early hours of Tuesday 5 April and the Secretary of State's decision later that day to cancel the formal announcement of the loan package? Will the Minister confirm that the Government changed the nature of the loan that they were prepared to provide, and it became a loan for two months rather than six months? Will she confirm that when that was made clear to Shanghai Automotive Industry Corporation, it backed out of the deal because that was not acceptable?

Will the Minister also confirm that at about 9 o'clock on Thursday 7 April, PricewaterhouseCoopers was informed of the likelihood that it would be called in, not as a receiver, but to advise the company on its situation? Will she confirm that just one hour later, the Secretary of State announced on national television that MG Rover had entered administration? In the words of John Duckers, the business editor of The Birmingham Post,

What happened during that hour? Which other parties had been informed of the insolvency before the Secretary of State declared it on national television?

Will the Minister publish a report, or even better a transcript, of the discussions that took place that Thursday evening between the Secretary of State, or other DTI Ministers and officials, and senior Rover management? Is not it the case that Mr. Towers told the then Secretary of State, "If the loan is not agreed, we will
14 Jun 2005 : Column 46WH
have to call in the receivers," not, "We are calling in the receivers"? That is a fundamental difference. As the Minister will be aware, the Secretary of State's announcement would in any case have brought about the collapse of Rover, because by Friday morning, the demands from creditors had made receivership inevitable.

Finally, does the Minister understand the cynicism of people such as John Duckers, who believe that it suited the Government's purpose to bring forward the closure of the company so that it happened in the early stages of the election campaign, not in the middle or final stages? To counter those suspicions, will she arrange for the internal documents from the DTI, the Treasury and No. 10 to be made public so that the full process and the timings can be understood?

This is one of the biggest industrial disasters of recent years. Of course, massive responsibility lies in the hands of the directors of Phoenix Venture Holdings, but the Government's hands are not clean either. Nothing less than a full inquiry into the role of the company and Ministers, with all the findings made public, will reassure MG Rover's former employers and its creditors that the Government acted in the company's best interests. I urge the Minister to agree to that demand today.

12.17 pm

The Deputy Minister for Women and Equality (Meg Munn) : I congratulate my hon. Friend the Member for Birmingham, Northfield (Richard Burden) on securing this important debate. His work and consistent advocacy on behalf of his constituents and others who have been affected should be commended.

First and most importantly, I want to express my profound sympathy for all those who have been affected. The appointment of administrators to MG Rover on 8 April was a huge blow to the company's employees, their families, the local community and companies that did business with MG Rover. The impact of its failure has been felt up and down the supply chain among suppliers and retailers. It has been felt most deeply in the west midlands, including in my hon. Friend's constituency and the constituencies of other hon. Members present, but it has also spread to other parts of the country.

The shock was all the greater because for most of the employees, the collapse of MG Rover was somewhat unexpected at that point. Although the company's fundamental difficulties were well known, and the DTI had been tracking its fortunes since autumn 2004, the hopes of a deal with the Shanghai Automotive Industry Corporation had been strong until that week. There was no reason to doubt the seriousness of the corporation's intent. Indeed, the Government had made it clear to the corporation and the Chinese Government that we supported a joint venture in principle and were ready to provide a short-term bridging loan.

However, we were prepared to offer that loan only on certain conditions. Those included that we were sure the deal would be done, that the money could not be siphoned off and that the loan would be repaid. The DTI, the shareholder executive and others worked round the clock to see whether a deal could be done to save the company and the jobs that went with it.
14 Jun 2005 : Column 47WH

The company had been publicly pressing for a loan, and taxpayers' money was involved. The loan would also have had to be declared to the European Commission. There was no prospect of its remaining a secret, nor would that have been right. To respond to some of the questions asked by the hon. Member for Birmingham, Yardley (John Hemming), as the then Secretary of State said, in the end SAIC made it clear that—

John Hemming : Will the hon. Lady give way?

Meg Munn : I am sorry, but I cannot give way; I have many questions to answer, and I fear that I will not get through them all if I do.

In the end SAIC made it clear that it was not confident of the future solvency of MG Rover, so there was no reasonable prospect of a deal. The Government stood ready to issue bridging finance of more than £100 million, but without a deal there was no possibility of a bridging loan, and SAIC indicated that such financing would not have resolved its concerns. It is not correct to say that the period for the loan changed from six months to two. The collapse of the deal led to MG Rover and Powertrain going into administration on 8 April. At that point it was clear that the Chinese would not proceed with the deal as contemplated. It was also clear that the Government would be unable to advance a substantial bridging loan, so the directors of MG Rover were obliged to put the business into administration.

On 7 April the then Secretary of State spoke several times to John Towers—who made it clear that the directors had no option but to put the companies into administration—and she made the statement that evening. The administrators were called in on the morning of 8 April. That was inevitable, and would have happened whether the Secretary of State had made that statement or not. However, the development, unwelcome as it was, presented new possibilities for the sale of the company without the historical liabilities that had been among the key stumbling blocks in the way of the proposed SAIC deal.

Over the weekend of 9 and 10 April, the Government decided to make a loan of £6.5 million to the administrators. That allowed options for the sale of the company as a going concern with an available work force to be pursued for a further week. It was a justified and proportionate decision, taken in the light of the information available at the time about potential purchaser appetite. Sadly, it became clear during that week that a quick deal with certain liabilities excluded would not be forthcoming, and the administrators were forced to make most of the employees redundant. The fate of the assets is still in the hands of the administrators, and it is not for me to speculate how and to whom those assets will now be sold. The Government will be supportive of any proposal presenting a viable economic future for parts of the MG Rover business.

As soon as the fact of administration was known, the Government put into place a contingency plan that we had been developing over the course of several months in case the deal was not done. Some of this was announced by the then Secretary of State on 8 April and
14 Jun 2005 : Column 48WH
some the following week, on 15 April, once it became clear that SAIC would not immediately buy the business as a going concern. In total, the Government allocated £150 million to that support package.

The former Secretary of State also set up the MG Rover taskforce led by Advantage West Midlands. That brought together stakeholders from across the region, including my hon. Friends the Members for Birmingham, Northfield and for West Bromwich, West (Mr. Bailey) and, until he became a DTI Minister, my hon. Friend the Member for Dudley, South (Ian Pearson), as well as the hon. Member for Bromsgrove (Miss Kirkbride), to advise Government and local agencies on how best to respond and deliver the emergency package.

The response was rapid: on Monday 11 April a range of measures was in place. They included the MG Rover Jobcentre Plus hotline; a planned emergency package of support to help workers to find new jobs and develop new skills; a website giving advice and contact details; a package of tailored support for companies in MG Rover's supply chain; a telephone hotline for companies; a meeting at Birmingham chamber of commerce to help with proposals; and a helpline established by Birmingham city council. That work has continued over the succeeding weeks, delivering what the employees are entitled to with great efficiency. For example, the redundancy payments service paid each claim an average of 3.2 days ahead of its target of six weeks.

The way in which the Rover taskforce, Advantage West Midlands, Business Link and so many others responded was nothing short of magnificent. In the first month alone, £1.5 million was paid out to safeguard more than 2,000 jobs in the supply chain, nearly 10,000 calls were taken by the Jobcentre Plus hotline and nearly 5,000 new job vacancy opportunities were offered through the employer hotline. As of 10 June some 5,500 individuals from MG Rover and its suppliers have contacted Jobcentre Plus. Some 649 of those individuals have been placed in jobs by Jobcentre Plus, and others may have found work independently. Some 2,510 have training plans, and 2,219 of those have been booked on courses. Some 461 have started training.

In response to the question asked by the hon. Member for Bromsgrove, I should say that up to £50 million is available for training for workers made redundant at MG Rover and its suppliers. Money is not an issue with training places, although I understand that there is some difficulty about the availability of training staff, which needs to be followed through. For training, some £5 million, drawn from forecast underspend in 2005–06, has come from the DTI, £5 million has come from the Department for Work and Pensions, £10 million has come from the European Social Fund, and priority access to the existing £25 million has come from the employer training pilots in the west midlands and nationally. I hope that that goes some way towards answering the question asked by the hon. Member for Wealden (Charles Hendry).

HM Revenue and Customs has spoken to more than 400 companies to discuss deferring VAT, national insurance and PAYE. Almost 50 deferrals have been agreed, amounting to more than £4.7 million, and more than 2,900 employees from 154 supply chain companies have benefited from the wage replacement fund.
14 Jun 2005 : Column 49WH
A transition loan fund has been set up and is operating. The fund is for companies that have been damaged significantly by the collapse of MG Rover, but have a viable business plan that needs additional finance in the short to medium term to enable them to respond to the traumatic event.

My hon. Friend the Member for Birmingham, Northfield asked about tracking the impact of training. I agree that it is vital to track that impact, which is why we have asked the MG Rover taskforce to report after six months on the lessons learnt and make recommendations to the Government. I listened to the proposal advanced by my hon. Friend the Member for Birmingham, Hall Green (Steve McCabe), and am sure that the DTI will consider the issue further.

My hon. Friend the Member for Birmingham, Northfield expressed several concerns today, the first of which related to benefits and the 16-hour rule as a disincentive to train. He will know that this is an issue primarily for the Department for Work and Pensions, but I can tell him that financial support is available, through the allowance payment system, to jobseekers who need to access specific training provision to help them to return to work. Allowance payments can be made to people accessing work-focused provision through Jobcentre Plus and its partner organisations. Former MG Rover workers who have been referred to work-focused provision are currently being supported in that way.

Our preliminary analysis of redundancy pay in lieu of notice in insolvency cases is that very few workers will receive less than the statutory £280 a week as payment in lieu of notice, despite the statutory need to mitigate damages.

The Pension Protection Fund will protect members of defined benefit schemes by paying compensation if their employer becomes insolvent and the pension scheme is underfunded. We are very aware that this is a worrying time for Rover workers, but pensioners are currently receiving their pensions in full, and we believe that it remains a question of when, not whether, a PPF assessment period will start. That is the start of the PPF's formal involvement in the scheme. At the moment, the Rover scheme has not yet entered an assessment period because one of the participating employers is still solvent.

In the final minute available to me, I shall discuss the issues of the investigation. On 31 May 2005, the current Secretary of State for Trade and Industry appointed inspectors to investigate and report on the affairs of the MG Rover group, including Phoenix Venture Holdings and MGR Capital Ltd. The public interest requires that the issues raised by the financial reporting review panel and by developments after 2003 when the last accounts were published be investigated by independent inspectors.

The Secretary of State has asked that the inspectors report as quickly as possible, in a form that will enable the report to be made public. The inspectors will decide what is relevant to investigate, and the DTI will co-operate fully with the inspectors.

Next Section IndexHome Page