Tories accuse Labour of election 'bung' to MG Rover

Shadow Trade and Industry Secretary Alan Duncan has accused the Labour party of using taxpayers' money to bribe voters to remain loyal in advance of the 2005 general election.

The Shadow Trade and Industry Secretary said the provision of a £6.5 million bridging loan to the collapsing car company MG Rover in April last year was nothing more than a "bung" designed to buy the government time until the country had been to the polls.

He levelled the charge after the National Audit Office described the multi-million pound loan as poor value for taxpayers' money, and warned that the money will never be repaid.

MG Rover went into administration on April 8 2005, when its proposed deal with the Chinese company SAIC collapsed. The subsequent closure of MG Rover’s plant at Longbridge in the West Midlands resulted in the loss of almost 6,000 MG Rover jobs, with potentially serious adverse consequences for the local economy.

On April 2005 10, with MG Rover in administration, the Department of Trade and Industry announced a loan of £6.5 million to sustain the business for a week while the administrators sought to sell the Company as a going concern. If a sale could not be achieved, the loan was intended to assist the position of MG Rover’s workforce to be resolved in an orderly manner.

The loan was arranged by the Department of Trade and Industry, under the then Secretary of State Patricia Hewitt, in an attempt to keep Rover going while talks took place with SAIC.

The NAO report stated: "Given the messages coming from SAIC's advisers, the prospect of achieving a going concern sale was remote. We therefore doubt whether the department obtained sufficiently good value for the loan, of which £5.2 million will probably not be repaid."

Mr Duncan said: "I've been watching the MG Rover saga for six years and much of the pain is entirely of the government's making.

"This £6.5 million did nothing to give any real help. It was no more than a bung to buy the government a few weeks to get them through the General Election. The person in the firing line on this is Patricia Hewitt, and I'm afraid her past is now catching up with her.

"It's quite clear that this £6.5 million was a misuse of taxpayers' money for political purposes. The government was trying to use this money to buy time and delay bad news. As far as I'm concerned, the Labour Party ought to pay it back out of their own funds. It was a total abuse."

Liberal Democrat Trade and Industry Secretary Edward Davey said: "It is now crystal clear that Ministers knew the £6 million 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.

"Rover would only have been saved if the government had worked with the company far earlier, before it used up the cash that came from BMW."

The report wasn’t entirely critical of the official response however. Sir John Bourn, Head of the NAO, said: “When the Company collapsed in April 2005, the various agencies at local level responded well to meet the immediate large increase in demand for their services. The prompt processing and payment of statutory redundancy pay and social security benefits helped many former employees and their families at a particularly stressful time."

(GB)