Westminster Hall Debate on MG Rover


Richard Burden (Birmingham, Northfield) (Lab): I am grateful for the opportunity to introduce this debate on an issue of huge importance not just to my constituents but to the whole of the midlands and beyond. At the start, I congratulate my hon. Friend the Deputy Minister for Women and Equality on her appointment to the Front Bench.

Last Friday I attended a meeting held by the administrators PricewaterhouseCoopers for MG Rover’s creditors. The creditors heard that they were unlikely to get much, perhaps even any, of their money back. I doubt that many will have been surprised by that, but there was a clear message from that meeting that they wanted some answers. My constituents, and the 6,100 former MG Rover workers, also want some answers.

The problem is not so much the fact that MG Rover was unable to survive. Everybody knew that for a long-term future, the company needed a partner. That was clearly and openly stated when Phoenix took over in 2000. It was equally clear at that time that there was never any guarantee that that would happen. The issue is much more the manner in which the collapse took place, and what led up to it. Why did the talks with the Shanghai Automotive Industry Corporation, which had been presented as far advanced, finally come to nothing? What happened about intellectual property rights, and had people been misled? Was there something fundamentally wrong with how Phoenix Venture Holdings had structured the businesses and run their affairs?

I am pleased that the Secretary of State has launched a thorough investigation. I know that some had political motives for rubbishing that investigation before it had even started, but I do not think that my constituents will be any more prepared to allow themselves to be used for such party political posturing than they were during the election. They simply want the truth, so I ask the Minister to confirm today that there will be no no-go areas for the investigation, and that the intention is for its results to be made public.

I advise some caution on the part of those who are now attacking the fact that Phoenix ever took over Longbridge following BMW’s withdrawal in 2000, but who welcomed it, or even claimed credit for it, at the time. On the other side of the fence, I also urge some humility on the part of the “we told you so” brigade, including people who for a variety of reasons—some probably linked to
self-interest—lobbied against Phoenix in 2000 and who relentlessly briefed against the company in public and in private thereafter.

Of course there were real questions, which emerged over the past four years, about the actions of the Phoenix directors. I have asked them a number of those questions to their faces in the past four years, but I must say that the endless scattergun stream of anti-Rover stories that have appeared in the press probably ended up getting in the way of proper scrutiny rather than promoting it. It also undoubtedly encouraged a bunker mentality on the part of the company. Whatever the Phoenix four may have been responsible for, I also believe that the endless public belittling of MG Rover by

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its detractors played a role in depressing both sales and confidence and in hastening the company’s demise. Make no mistake, there is still real anger about that among former MG Rover employees.

I would also caution against the selective amnesia of those who claim that Phoenix took over Rover only because the Government somehow forced BMW to choose it in preference to a rival bid from the Alchemy venture capital firm. It is true that the Government, supported by the unions and local politicians including me, encouraged BMW to talk to Phoenix and seriously consider its bid rather than maintain exclusive negotiations with Alchemy.

However, we must remember that the Phoenix deal was done overnight on 8 and 9 May 2000. Alchemy had pulled out of its negotiations with BMW on 28 April, when it still had exclusive negotiating rights, so when Phoenix took over in May, the alternative was closure, with many more thousands of job losses even than there have been this year. Although the Phoenix deal meant that MG Rover workers had five years’ pay that they would not have had if the plant had closed in 2000, one of the tragedies and injustices of the collapse has been that those workers have now lost their jobs, having bought the time for others to keep theirs.

Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): May I emphasise the fact that in West Bromwich, West an enormous number of second, third and even fourth-tier suppliers have said that that five years has enabled them to diversify their markets? That means that the potential impact in my constituency is significantly less than it would have been four or five years ago.

Richard Burden : There is consensus among serious commentators that the closure or massive downsizing of Longbridge in 2000 would have led to a great many job losses. I pay tribute to the work done by Advantage West Midlands, the Industry Forum, the suppliers and the manufacturing advisory service in encouraging the supply base to diversify.

Mr. Jim Cunningham (Coventry, South) (Lab): I served on the Trade and Industry Committee at that time, and it was obvious to us that had Alchemy taken over, there would have been a bigger catastrophe than there is now. Five years down the road, people tend to forget what the circumstances were. We spent many hours on the issue—hon. Members can look at the report. It was not something that we took lightly. We went to the site and spoke to everybody concerned, and it became apparent that despite press statements to the contrary, Alchemy was perceived to be an asset stripper.

Richard Burden : I am grateful to my hon. Friend. Had the Alchemy deal happened, it would not have been in the interests of Longbridge, the company or the supply chain. However, we should remember that there was no Alchemy deal on the table when the Phoenix deal was done. The choice was between Phoenix and closure.

I am sure that the Phoenix directors would like to be remembered for having helped to buy the time that we have been talking about, during which the region pursued a brave but ultimately unsuccessful strategy.

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However, it is difficult to square that with some of the subsequent decisions, which meant that the company’s failure cost the employees a lot more than their jobs.

The car leasing policy that was promoted internally left employees exposed to unsustainable debts in the event of company failure, and failure meant that employees’ pensions could be put at risk. The company’s suppliers know only too well that the risks were transferred to them from Phoenix—as do the retailers, who found themselves with responsibility for stock worth a lot less than the debts that Phoenix had encouraged them to incur with finance companies.

Having left others so seriously exposed to the effects of failure, the Phoenix directors appear to have systematically insulated themselves from those effects through the proceeds of multi-million pound loan notes and pension pots. That is not morally sustainable. The gains that the Phoenix directors awarded themselves should be put to work for the benefit of those who have lost so much, and whose needs are, to speak bluntly, greater than those of the Phoenix four.

Mrs. Caroline Spelman (Meriden) (Con): I congratulate the hon. Gentleman on having secured this important debate. What happens to the existing pensioners depends on how the situation plays out. I am sure that, like me, the hon. Gentleman has constituents who retired between 2000 and 2004 and who will be very badly hit if the pension fund is drawn into the Pension Protection Fund. Will he join me in calling on the Minister to consider that injustice towards approximately 200 pensioners who retired during that time, and whose pension terms will be fundamentally altered from what, during the intervening years, they were led to believe that they would retire with?

Richard Burden : The hon. Lady pre-empts something that I was going to say a little later—but I am not sure whether 200 is the correct number for those affected by the Phoenix pension fund. In fact, several of those people would be secure in the BMW pension fund, but the principle behind the issue that she raises is important.

I am pleased that the Phoenix directors appear to be taking up a suggestion that I put to them last year at the Trade and Industry Committee by putting the remaining assets of Phoenix Venture Holdings into a trust for employees. It would also be useful to know if any funds are left in the company Techtronic. However, if the Phoenix four are concerned about how history will judge them, which I am sure they are, they also need to contribute from what they awarded themselves.

It would be arrogant for anyone with an involvement in or after 2000 not to consider whether the courses of action that we took then were the right ones, or for anyone to take the view that it was all everyone else’s fault. I do not believe, however, that the unions, or any of us, were wrong to look for an alternative to the massive downsizing or closure of Longbridge. Nor do I believe that it was wrong to try to buy time for the region to adjust, or to allow time for a partner to be sought to secure the future of Longbridge. The Labour Government were right not to turn their back on Rover in 2000, as the Tories turned their backs on so much

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manufacturing in the 1980s. Indeed, what has happened in the past five years does not indicate that there was too much Government intervention in 2000. Perhaps there should have been more.

The days of old-style intervention and nationalisation are long gone, and rightly so, but I ask Ministers to consider the possibility that those of us who have argued at different times in the past five years for the Government to consider acquiring a strategic stake in the company, or other forms of leverage, may have had a point. Perhaps that could have played a role in allowing greater transparency and more investment in new products without falling foul of European Union rules, and perhaps even boosted MG Rover’s credibility in its search for international partnerships.

Public authorities should reflect on how their own procurement policies hastened MG Rover’s demise. Why do we so rarely see a British police car that has been built in Britain, such as a Rover or a Jaguar, when one would never see a French police car built anywhere but France, or a German police car built outside Germany?

I do, however, pay tribute to the speed with which the Government reacted to the failure of MG Rover—paying employees’ wages while attempts were made to restart negotiations with SAIC, establishing the MG Rover taskforce and building on the lessons of 2000—and to the preparations made since then. Credit is also due to the members and partner agencies of the task force, led by Advantage West Midlands, for the fact that it moved so quickly to bring Jobcentre Plus, the learning and skills council, the colleges, the Department of Trade and Industry and other agencies to process redundancy payments, to draw up individual training plans and to assist with job search for employees affected, all while working with business to provide support to give companies in the supply chain a breathing space to react to the collapse. I am sure that the Minister will give the figures on that, so I shall not take up time doing so here.

I also pay tribute to all those, including Birmingham city council’s neighbourhood office staff and the staff of other statutory agencies and the voluntary sector, who have staffed helplines and provided support at a human level to the employees. Particular mention, however, must be made of the contribution made by the trade unions, especially by stewards who were also employees of MG Rover and of other affected companies, and who have experienced the same uncertainties and pain as those whom they are trying to help and advise.

Let us not forget the families of MG Rover workers, led by Gemma Cartwright, whose efforts remind us all that this is not only about Longbridge the workplace, but about the communities that rely on it. Most of the challenges that they face still lie ahead. I hope that everyone will do what they can to build on the support that they have established.

Before I finish, I shall mention some of the issues that remain to be resolved and some of the lessons for the future, which I ask the Minister to address in her winding-up speech. Conflicting provisions in benefit rules and redundancy regulations have been shown to get in the way of doing the right thing by employees with regard to pay in lieu of notice and in the speedy processing of protective awards claims. Those provisions have also been a disincentive to people

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obtaining new jobs until they know that the awards have been paid. That cannot be right, and needs to be addressed.

We need to reconsider the operation of barriers, such as the 16-hour rule in particular, that prevent people on benefits from accessing training. There has been a creative approach to that with those affected by the MG Rover collapse, but a more fundamental review is required if we are to promote rather than restrict flexibility and security in the labour market, and if we are to breed a culture that actively encourages people on benefits to learn and retrain rather than discouraging them. The taskforce needs to track how successful the training input is in creating opportunities for people to return to work. Incidentally, I also ask the Minister to ensure that the money for the exercise comes through properly, and does not get caught up in bureaucratic boundary disputes between Departments.

Thirdly, what happened to MG Rover has underlined why the Government were right to establish the Pension Protection Fund, but has also highlighted issues regarding the PPF rules. That relates to the point that the hon. Member for Meriden (Mrs. Spelman) made. I am pleased that Ministers have made it clear that they are determined to overcome the problems, and like the hon. Lady, I ask them to address the potentially perverse impact on people who have already taken early retirement.

MG Rover is an issue of significance to the entire west midlands and beyond. Many of the challenges for component manufacturers are yet to be felt, as emergency assistance starts to come to an end. The epicentre, however, is south-west Birmingham, whose identity has always been intertwined with Longbridge. It is an area with a massive concentration of MG Rover workers and their families, which means that it faces extraordinary challenges ahead, not just for months but for years. Although a lot has been done to diversify the west midlands and reduce its reliance on MG Rover in the past five years, a lot more remains to be done in the areas immediately surrounding the plant.

It is surprising that despite the instability of MG Rover, south-west Birmingham is one of the few areas of the city that is not designated as a regeneration zone by the regional development agency. That creates ongoing problems for the area in accessing regeneration and other investment. The funding mechanisms available to south-west Birmingham need to reassessed, to upskill the people and to provide real opportunities, including physical opportunities, for redevelopment. Such issues should be at the forefront of Ministers’ minds when they make decisions—for example, about how the Lyons review is implemented. I hope that they will respond positively to the exciting suggestion of creating a national centre for nanotechnology at the Longbridge site, and to the ideas about how the royal centre for defence medicine in Birmingham can develop.

As for the future of car making at Longbridge, I ask Ministers to bear in mind the fact that the administrators have confirmed that three credible bidders are interested in MG sports car-based production, and that two may be interested in more extensive car production. Nobody should raise false hopes about the scale of what may be possible, and I do not want to do that. However, I would be grateful if my hon. Friend the Minister would confirm that the

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Government will do everything they can to help retain sustainable car production at Longbridge, particularly as it becomes increasingly clear that the Shanghai Automotive Industry Corporation’s acquisition of certain intellectual property rights for Rover cars and Powertrain engines means that a possible, if different, joint arrangement with a car producer at Longbridge could still make a great deal of sense. If my hon. Friend the Minister could give some comfort on that subject, I am sure that people in Longbridge and throughout the west midlands would be very pleased to hear it.

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Richard Burden

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I was Labour Member of Parliament for Birmingham Northfield between 1992 and 2019 and a former Shadow Transport Minister. I now chair Healthwatch in Birmingham and Solihull, and the West Midlands Board of Remembering Srebrenica. I also work as a public affairs consultant. I am an effective community advocate and stakeholder alliance builder with a passion for human rights. I am a trustee of the Balfour Project charity and of Citizens Advice Birmingham, and a former Chair of Medical Aid for Palestinians.

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