Government faulted for loan to MG Rover

Government faulted for loan to MG Rover

	Published : Fri, 10 Mar 2006 15:05 By : David Simms Print this Story

LONDON: Britain's spending watchdog the National Audit Office in a report said 5.2 million pounds, given in April 2005 as loan by the government's department of trade and industry to the crashing car company MG Rover to keep it in business, while talks with a Chinese collaborator was on, will probably never get repaid. The report said the multi-million pound attempt to help rescue the company was probably not good value for the taxpayer.

NAO said the government gave a 6.5-million-pound loan to the company even when it was clear that the prospect of achieving a deal with the Shanghai Automotive Industry Corporation was remote. "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 pounds will probably not be repaid," the report said.

The NAO report also reveals that only half of the figure -- 3 million pounds -- was spent on wages for the employees. A large chunk of the remainder -- 1.2 million pounds -- was used to pay fees for the administrator of the company, PricewaterhouseCoopers, for a week's work.

The 72-page report also highlighted how 170 million pounds were allocated by the government and other public bodies to help workers find jobs. Latest estimates are that 146 million pounds of this package will be spent in job finding efforts.

The report also criticised Customs & Excise for not making adequate checks before agreeing to extending the company's right to waive VAT and other payments, costing 18 million pounds. The department was aware of weaknesses in the financial information supplied by the company, but it decided against seeking further information, said the report.

The opposition Conservative party had considered the Rover deal, especially the advance of cash for propping up the company, as an attempt to bribe voters before the general election in 2005.

Alan Duncan, the Tory trade spokesperson, said the loan was an attempt by the government to buy a few weeks to get it through the general election.

The department of trade and industry defended its decision, saying it gave the administrators more time to prepare redundancy payments to staff. A spokesperson of the department said the department offered the loan to the administrators to give them a week to see if a sale could be made to save jobs.

Prime minister Tony Blair said no one would have forgiven the government if it had not tried to save as many jobs as possible. "We were doing everything we can, and should have done everything we can, to preserve as many jobs at Rover as possible," he said reacting to the report.

MG Rover has since been bought by Chinese firm Nanjing Automotive for an unknown sum. The company has signed a lease agreement for Rover's Longbridge site indicating it is planning to restart production of the MG TF sports car there, giving job opportunities for 600 to 1,000 workers.