MG Rover

– in the House of Lords at 3:04 pm on 15 June 2005.

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Photo of Baroness Miller of Hendon Baroness Miller of Hendon Spokespersons In the Lords, (Also Shadow Secretary of State for Scotland - Not In Shadow Cabinet) 3:04, 15 June 2005

asked Her Majesty's Government:

What parts of the inquiry by the Financial Reporting Council into the collapse of MG Rover are not included in the terms of reference of the inquiry now being made under the Companies Acts; and when those parts will be published.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, before I answer the Question, I should declare an interest as a former partner in Price Waterhouse and, as such, I hope, a future pensioner of PWC, the administrators of MG Rover.

The Companies Act inspectors have been asked to examine all the issues raised by the Financial Reporting Council in its report to the Secretary of State.

Photo of Baroness Miller of Hendon Baroness Miller of Hendon Spokespersons In the Lords, (Also Shadow Secretary of State for Scotland - Not In Shadow Cabinet)

My Lords, bearing it in mind that the collapse caused the loss of 6,000 jobs directly and many others indirectly and that £427 million disappeared down a black hole while the four directors received £40 million for salaries and pension rights, may I clarify whether I understand exactly what the Minister said in his reply? Will the Government, by one means or another, report on all the matters in those two reports in full and unequivocally? Will they ensure that nothing is hidden or concealed, particularly with regard to the role of the DTI in the sale of Rover to Phoenix?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

In short, my Lords, yes. The FRRP report obviously looked at the question of compliance with accounting requirements under the Companies Act, and the report was submitted to the Secretary of State. I should make it clear that that report will not be published. The Secretary of State has been advised that releasing it would be prejudicial to those potentially affected by it and to the regulatory process. However, the Secretary of State has specifically requested that the report of the inspectors be delivered in a form that can be made public. The remit of the inspectors is to examine the issues raised in the FRRP report, as well as all the issues leading up to the appointment of the administrators.

Photo of Lord King of Bridgwater Lord King of Bridgwater Conservative

My Lords, when the Chancellor of the Exchequer went to Beijing and sought to persuade the Chinese to purchase MG Rover, was he aware of the enormous liabilities that have now become apparent, which the Chinese would have inherited? In view of the huge resources that the DTI applied to the automotive industry, if he was not aware of them, why not?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, as regards what the DTI was aware of, in view of some of the rumours that were circulating during 2004 it was working closely with the company to try to understand exactly how matters were progressing. The DTI and others worked hard to try to achieve a joint venture agreement with the Chinese company Shanghai Automotive because that was seen as being in the best long-term interests of MG Rover. I do not know who was privy to what with regard to the detailed liabilities of MG Rover, but the report that has been requested should bring those matters fully to the attention of the Secretary of State and, it is to be hoped, into the public domain.

Photo of Lord Razzall Lord Razzall Spokesperson in the Lords, Trade & Industry

My Lords, will the Minister accept that the House will not be reassured by his answers so far? Will he accept that the form of Companies Act inquiry that the Government have chosen has been much criticised in recent years, particularly after the experience in, to name but three, the Guinness, Maxwell and TransTec cases? Will he accept that that is primarily because of the length of time that such inquiries take to report and the freezing of public comment during that period to protect the legal rights of individuals who are the subject of the inquiry?

Will the Minister also accept that there is a suspicion that this form of inquiry has been chosen by the Government to freeze for years public discussion of the issues to avoid potential embarrassment to Her Majesty's Government?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, I reject the latter assertion. That is not the Government's position. Do inspections take too long? Sometimes they can. The Secretary of State has requested that the report is brought forward as quickly as possible. It is in everybody's interest—certainly in the interest of the public—to make sure that the job is done thoroughly. That is why a speedy report that can be put into the public domain has been requested.

Photo of Lord Carlile of Berriew Lord Carlile of Berriew Chair, Draft Mental Health Bill (Joint Committee), Chair, Draft Mental Health Bill (Joint Committee)

My Lords, can the Minister reassure the House that the current Companies Act report will be prepared in a sufficiently short time not to undermine the position of any possible future inquiry, if appropriate, by the Serious Fraud Office, bearing in mind the reasonable time guarantee given by the European Convention on Human Rights?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, I am sure that the inspectors will be well aware of those issues as they undertake their report. Obviously, how they go about it and the time frame in which it is delivered is a matter for them and not the Government. However, I repeat, we have asked for it to be produced expeditiously.

Photo of Lord de Mauley Lord de Mauley Deputy Chief Whip, Whips, Spokespersons In the Lords, (Also Shadow Secretary of State for Scotland - Not In Shadow Cabinet)

My Lords, does the Minister agree, notwithstanding what other noble Lords have asked, that it is essential that the conduct of Ministers and their advisers at the DTI over the whole of the past five years, particularly their decision to back Phoenix and not Alchemy, should form a central part of the inquiry into the collapse of MG Rover?

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Government Whip

My Lords, the powers of the inspector to take evidence are quite wide. I believe that they should encompass the sort of things that the noble Lord requested. On what happened in 2002, I should make it clear that the Government's role was not to run the negotiations between BMW and the potential acquirers. The Alchemy bid for low-volume sports car production failed because it could not agree terms with BMW. I remind the House that, at the time, the Phoenix bid had cross-party support. Mrs Angela Browning, then shadow Secretary of State for Trade and Industry, said when this was debated in the House of Commons:

"We welcome the fact that the Phoenix bid has been secured. We are particularly encouraged that it attracted financial support from the market".—[Hansard, Commons, 9/5/00; col 646.]

Dr Vincent Cable said in the same debate:

"May I add a warm welcome to the announcement, and extend congratulations to Mr Towers and his team . . . in the face of much scepticism?".—[Hansard, Commons, 9/5/00; col. 648.]

He said that the announcement was "unambiguously excellent news".