Blair's first industry test

Rover crisis hit Labour heartlands

By BBC News Online political correspondent Nick Assinder

BMW's decision to sell off Rover was a traumatic event for Tony Blair's government.

It represented a major challenge to much of the philosophy which underpinned New Labour thinking - raising questions as to whether the government should intervene to rescue Rover.

And, probably more damaging, it threatened to undermine support for the government in the very heartlands it was desperate to keep on board.

One year on and these questions continue to dog the government as jobs are lost at steel giant Corus.

Previous Labour governments would have been expected to throw their weight behind the vital Midlands' workforce and offer all sorts of "incentives" for the firm to delay the inevitable.

After all, these are the metal bashers who can decide whether a Labour government lives or dies.

But it appeared that New Labour had serious trouble getting a grip on the Rover crisis.

Calls for Byers' head

Tony Blair's New Labour party was a different beast from previous Labour governments. It boasted about having learned the lessons of 1980s Thatcherism and agreed that it was not up to governments to get involved in the business decisions of international capitalists.

The prime minister was quoted time and again saying that it was not his job to rescue ailing companies.

No intervention

The only thing a government could do was to create the best possible conditions for such firms to prosper, he declared.

In other words, BMW's decision had nothing to do with them. Ministers would do their utmost to ameliorate the effects of the planned sell-off - but they could not intervene further.

So, the party that once believed in retaining car production in state hands had now decided it could not "buck the markets".

It was not a policy shift that troubled most New Labour supporters until the Rover affair erupted.

Suddenly, the full impact of that ideological shift was brought home to them with a bang.

If that wasn't bad enough, the way BMW handled it only made matters worse.

To many observers, the government was treated like a bit-part player. BMW apparently dropped hints it was about to pull the plug but did not take Trade Secretary Stephen Byers completly into its confidence.

On the line

For a brief while, Mr Byers' job appeared to be on the line as he attempted to explain the government's ignorance and impotency.

As with subsequent industrial crises, such as Motorola and Corus, ministers pleaded with the companies involved to think again - but finally bowed to the inevitable.

The best they could do was offer hand outs in an attempt to keep some sort of economic activity alive in the areas hit by the job losses.

The realists in the government insist they know where their limitations lie - and that trying to sway the business decisions of global enterprises is beyond their remit.

But, a year after the Rover crisis, others are still dismayed at the impact of the Rover affair.

The company may still be there but, they argue, that is not as a result of anything the government did.

What worries them most is that so-called heartlands voters who were already sceptical about "New" Labour were left with the feeling that their government could not - or would not - go to the barricades for them.