Richard Burden MP, whose constituency includes the Longbridge car plant, has welcomed the publication of the National Audit Office report into the closure of MG Rover.
Mr Burden said today:
“The NAO has produced a balanced and comprehensive report which rightly underlines the significance of MG Rover to the economy of the West Midlands and the pace of events which led up to the closure of the plant in the spring of last year.
Anyone who argues that Government should take a hands-off approach to industrial change should read this report. It shows clearly why government has a responsibility to actively engage with strategically important companies like MG Rover whose fortunes are intertwined with the prospects for our manufacturing bases and on which depend the jobs of many thousands of people.
The government was right to do what it could to help MG Rover conclude their negotiations with Shanghai successfully, including offering bridging finance and tax deferrals to allow them the time to do so. If they had failed to provide that support, the chances are that the company may have collapsed earlier, with millions of pounds of tax revenues still being lost to the Exchequer and thousands of people thrown out of work without the immediate assistance that the MG Rover Task Force was able to provide in April 2005.
As things turned out, despite these efforts, negotiations between Shanghai Automotive and the Phoenix consortium collapsed anyway, and the Government was right to identify that this made it impossible to finally provide the bridging finance that would have been available if there had been a deal on the table. But none of this negates the importance of the efforts made by ministers up to that point.
When negotiations collapsed between Phoenix and SAIC, there was still a good deal of uncertainty about the Chinese company’s intentions from then on. They clearly no longer wished to pursue a deal with Phoenix but they pointedly did not close the door completely on a possible link up with MG Rover’s Longbridge plant. Indeed they continued to express interest in some kind of arrangement with a partner throughout the following two months. As the report points out, the prospect of a deal between SAIC and the administrators after April 8th may have been remote but in my view the government was entirely justified in making £6.5m loan available to keep Longbridge a going concern for one week to explore those possibilities. There were over 6,000 jobs at stake at the plant, and thousands more in the supply chain. The Government would have been rightly attacked if the chance of securing such a deal had been lost because it had been unwilling to do what it could to facilitate it.
I supported the loan at the time and I stand by that today. My recollection is that prominent Opposition politicians also backed it at the time. Any complaints from them about it from the comfort of one year on will have little credibility.
The most ludicrous suggestion I have heard is that the Government knew that the company could not be saved but still paid the loan as a political ploy by Labour to win votes at the election. The loan was made available for one week only from April 10th. The General Election was in early May. How on earth could pushing the date of the company’s collapse one week closer to polling day be to Labour’s advantage at the General Election?
The Report also rightly draws attention to the excellent work undertaken by all the agencies involved in the Rover Task Force to mitigate the effects of closure: the rapid processing of unemployment and redundancy payments, the support given to companies in the supply chain, the advice, training and other opportunities made available to employees who lost their jobs. That again would not have happened unless the Government had been actively engaged and prepared to put the resources in. The efforts of the Task Force have helped ensure that today over 4,000 people are back in work.
I am pleased that the report also draws attention to the fact that the knock-on effect of closure on the regional economy in 2005 was far less serious than it would have been in 2000 when BMW pulled out. That shows how important it was for MG Rover to have remained in existence during that time. It allowed the time for companies in the supply chain to diversify and many received important help from programmes like the Accelerate programme, a partnership between industry and government. It also allowed MG Rover itself the time to try to find a partner that could secure its longer term survival. The fact that no deal was secured does not mean it was not worth trying. And 6,000 people at the plant remained in work for 5 more years than they would otherwise have done.
There are legitimate questions to be asked about the period of Phoenix’ stewardship of Longbridge between 2000 and 2005 and I do not wish to pre-empt the findings of the DTI Inquiry into that matter. But nobody should forget that when Phoenix took over in 2000, the choice for Longbridge was Phoenix or closure. The previous bidder, Alchemy partners had already pulled out of negotiations with BMW when they had exclusive negotiating rights.
It is important to look forward as well as back. The Report identifies some key recommendations about how government intervention could be approached in future case, building on the valuable experience of the MG Rover collapse.
For my constituents and the people of South West Birmingham, there is still a great deal to be done. 4,000 employees are in new jobs but 2,000 are still out of work. Even for those back in work, many face the consequences of a drop in pay. That is why it is so important that the Task Force’s latest recommendations are put into effect. These include targeted packages designed to help overcome barriers to re-employment, to redevelop and regenerate the Longbridge site, and to raise the levels of skills and aspirations in South West Birmingham for the future.
And equally it means helping to equip our automotive base to move up the value chain to compete in future in areas where we remain strong such as performance engineering.
It is no accident that the report of the MG Rover Task Force which was also published this week is called “The Work Goes On”.
