[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Friday, 10 March 2006, 12:10 GMT
Rover loan 'was election bribe'
Chief Executive of St. Modwen Bill Oliver (far left) and chairman of Nanjing Automobile Association Mr Wang Hongbiao (far right) exchange gifts watched by the leader of Birmingham City Council
There are hopes that car production could resume at Longbridge
The Labour Party should pay back the 6.5m the government gave MG Rover before its collapse in the run-up to the last election, say the Tories.

The cash was used to cover wages during Rover's talks with a potential partner but the National Audit Office says most of it will probably never be repaid.

Tony Blair said "no-one would have forgiven" the government if it had not tried to save as many jobs as possible.

But the Tories say Labour's real motive was to prevent bad pre-election news.

The NAO report said not all of the cash was wasted as money used to help Rover workers find new jobs was well spent.

But it said 5.2m would probably never be recovered and the chances of securing a deal with Rover's Chinese partner had been "remote".

Responding to the NAO's report, Mr Blair said: "We were doing everything we can, and should have done everything we can, to preserve as many jobs at Rover as possible."

People would have complained bitterly if ministers had refused to go "every inch of the way to try and save the jobs", he argued.

'Delaying bad news'

But Conservative shadow industry secretary Alan Duncan called the government's bridging loan "a total abuse" and said it should be regarded as being part of the Labour Party's election expenses.

"It is quite clear that this 6.5m was, I think, the misuse of taxpayers' money for political purposes," he told BBC Radio 4's Today programme.

"It is quite clear that the government was trying to use this money to buy time to delay bad news and as far as I'm concerned the Labour Party ought to pay it back out of the their own funds."

The department is confident it did a good job in challenging circumstances

Lib Dem industry spokesman Edward Davey said: "It is now crystal clear that Ministers knew the 6m payment to Rover was a futile pre-election gesture.

"Such a waste of taxpayers' money, at such a politically sensitive time, raises questions about Labour's economic competence and political integrity."

The claims were rejected by Trade Secretary Alan Johnson, who said the Rover loan had come between 10 and 15 April 2005 - the election was on 5 May.

There was always the prospect that the company would collapse before the election - as it had, he said.

MG Rover - the last British-owned mass-production carmaker - went into administration in April 2005 with debts of 1.4bn leading to the loss of about 6,000 jobs.

'High risk'

The spending watchdog says the prospect of selling Rover as a going concern had been "remote".

"We therefore doubt whether the Department of Trade and Industry obtained sufficiently good value for the loan, of which 5.2m will probably not be repaid," says the report.

NAO chief Sir John Bourn said it had been "particularly important" the government could respond effectively to the company's problems as the local economy and communities had relied heavily on MG Rover.

Most computers will open PDF documents automatically, but you may need to download Adobe Acrobat Reader.

"This was no easy task. The department did well to identity a series of scenarios that it might face," Sir John said.

But he added: "The department's decision-making could, however, have been easier if it had been founded on earlier and more comprehensive contingency planning for other scenarios that could well take place, and in this case did."

'Good job'

The DTI welcomed the report , saying that it was confident it had done a "good job in challenging circumstances".

The TUC said it supported government intervention in special cases such as MG Rover, arguing it might work in future cases.

MG Rover has since been bought up by Chinese firm Nanjing Automotive for an unknown sum.

Last month, the group signed a 33-year lease for the Longbridge site and said it planned to restart production of the MG TF sports car in 2007, employing between 600 and 1,000 workers.

The lease has a six-month get out clause, allowing Nanjing to walk away if it is unable to confirm a viable long term future for the site.

The BBC is not responsible for the content of external internet sites


Americas Africa Europe Middle East South Asia Asia Pacific