Government criticised over Rover crisis

Last updated at 08:21 10 March 2006


The Government was criticised today over the way it dealt with the crisis at car giant MG Rover, after an official report said that a multi-million pound attempt to help rescue the company was probably not good value for the taxpayer.

The National Audit Office said £5.2 million of a loan given to the firm by the Department of Trade & Industry to keep it in business while talks with a possible Chinese partner continued, will probably never be repaid.

The report said that the prospect of achieving a deal with the Shanghai Automotive Industry Corporation was "remote".

The DTI gave a bridging loan of £6.5 million but Rover collapsed last April with the loss of 6,000 jobs, and thousands of others in supply companies.

The NAO report said: "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 £5.2m will probably not be repaid."

Tory MP Edward Leigh, chairman of the Public Accounts Committee, said the closure of the car firm, just weeks before last year's General Election, was a "high risk" problem for the DTI.

He said: "Today's report reveals that while the Department made extensive efforts to manage these risks it could and should have been far more effective at contingency planning for what was always likely to become a fast moving crisis.

"Its failure to do this led to the direct loss of £5.2 million of taxpayers' money which it is impossible to recover from the £6.5 million bridging loan made to the administrators.

"The blunt truth is there was no real prospect of selling a going concern and taxpayers did not get value for their money."

The high cost of the carmaker's demise was spelt out in the report, which detailed how £170m has been allocated by the Government and other public bodies to help workers find jobs.

Latest forecasts are that £146 million of the package is likely to be spent, with efforts continuing to find work for the estimated 1,700 ex-workers still unemployed.

The report also said that some of Rover's tax liabilities may prove to be irrecoverable, and there is likely to be a large call on the Pension Protection Fund to cover part of the shortfall in Rover's pension scheme.

The DTI will also have to meet the cost of an investigation into the affairs of the MG Rover group, which stood at £3.1 million earlier this year, it was disclosed.

The report said that the DTI could have drawn up a comprehensive set of plans earlier, and added that the Department now recognised that lessons could be learned from the Rover crisis.

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