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In the next half an hour I will talk not about the success story of the UK motor industry today, but about what happened to one company, and about the impact of what happened on a community and a region.
April 2015 will mark 10 years since the collapse of MG Rover. None who lived through that time—I am pleased to be joined by my right hon. Friend Mr Spellar—will ever forget April 2005. The effect was most keenly felt by employees of MG Rover, more than 6,000 of whom lost their jobs, and it was felt by whole families. However, it went further than that: it was about the identity of an entire area.
The collapse of MG Rover happened in the middle of an election campaign. When elections are on, it is usually difficult to get any politicians thinking or focusing on anything else. However, for all of us involved in events at Longbridge in 2005, the election was a sideshow. What was important was just being there at Q gate at Longbridge; and working with the city council, the taskforce and the Government to see if the administration of MG Rover could be prevented from becoming liquidation—and, if not, dealing with the consequences. All this happened in what should have been the centenary year of car making at Longbridge.
Part of me wants to say that I never experienced anything like that before. However, for many of us this was the second time we had been through something like this at Longbridge. In spring 2000, without warning, Rover Group’s then owner, BMW, announced that it was pulling out. Longbridge was to be sold to a firm of venture capitalists called Alchemy, led by Jon Moulton. If that Alchemy deal had gone ahead in 2000, Rover would have been rapidly downsized to become a small manufacturer of MG sports cars.
The west midlands as a whole, and the Government, pressed BMW to at least consider alternatives. The Government intervened to create a Rover taskforce, to bring the region together: it united Government, universities, businesses, local authorities and trade unions. I was one of two Members of Parliament on that taskforce. Its task was to see how the region could accommodate downsizing a company on whose future the supply chain, and swathes of midlands industry, was then dependent. Within weeks it was clear that it could have been worse.
Negotiations between BMW and Alchemy collapsed. Rover at Longbridge was at risk of closing altogether. Nobody knows exactly how many jobs would have gone if that had happened—20,000 jobs, perhaps more. Of course, it did not collapse. An alternative to Alchemy stepped in, in the form of the Phoenix Consortium. I will say a little bit more about that in a while.
The fact is, though, that Rover’s remaining in existence for the next five years bought the west midlands time to diversify, and to modernise its automotive and manufacturing base in a programme initiated by the Rover taskforce—and it worked. By the time MG Rover collapsed in 2005, job losses across the region were less than 10,000—less than half of what they would been five years before. However, people who lost their jobs in 2005 were still 100% unemployed; and if they worked for MG Rover, they lost pretty well everything, including their job, buying five years so that thousands of others in the west midlands could keep theirs. That is why there is still a debt to be paid to former MG Rover workers that has not been paid.
That brings me to the Phoenix four. They took over Longbridge on the crest of unprecedented public support. Given that we faced closure, or downsizing with Alchemy, what Phoenix offered made sense: stabilising the company; pricing products more realistically; looking for partners, or a partner, on whom the long-term survival of that company depended; and buying the regional economy the time it needed to adjust.
Getting a partner nearly worked, too. A deal with Shanghai Automotive Industry Corporation was so close towards the end of March 2005 that I was preparing to join the then Secretary of State at Longbridge at a press conference, to announce that negotiations over in China had been successfully concluded. It did not happen. Arguments continue to this day, and will no doubt continue for much longer, about why not. There is not the time now to go into theories about that.
I want to say something about the Phoenix four and what their stewardship of MG Rover involved. We now know, from the Department for Business, Innovation and Skills inspectors’ report, that the four had been engaged in creating a spider’s web of companies and deals that made them millions, but left employees utterly exposed when collapse came. They promised that Phoenix would be a stakeholder effort—that employees would have shares and a stake in the company—but the only shares they gave employees rapidly became worthless, while they kept profitable bits of Phoenix and related companies for themselves. Oh yes, and they even compensated themselves for giving worthless shares to their own employees.
Then there was the cruellest deception of all: the promise of a trust fund for the benefit of employees, which would divide up the assets of the remaining Phoenix companies if MG Rover collapsed. However, even as the Phoenix four were making that promise, they knew that they had taken money out for themselves from those companies and had effectively mortgaged what was left to the banks. Employees have never seen a penny, and the trust fund that was theoretically set up has now been wound up. Again, I say today to the Phoenix four—to John Towers, Peter Beale, John Edwards and Nick Stephenson—“Put your hands in pockets. Your employees did all you asked of them, and you owe them.”
Of course, the Phoenix four did not operate alone. The well known accountancy firm, Deloitte, advised them on many of their deals. That led to inquiries and eventually a fine of £14 million being imposed by the Financial Reporting Council—a record in the history of the FRC. Recently, Deloitte appealed and won some aspects of the appeal. No doubt its fine will be reduced, although we do not know exactly by how much. However, Deloitte was still found guilty on several other counts, particularly relating to conflicts of interest. One key aspect on which it won its case with the FRC was its contention that it is really too much to expect an accountancy firm to identify a broader public interest in such cases. My initial reaction was, “Have I heard that right?” If it is too much to expect Deloitte to take the public interest into account, does that not show that significant reforms to corporate governance rules are needed? I am working on some ideas in that regard with Aston university’s Professor David Bailey.
Looking back at MG Rover specifically, closer scrutiny by Government of corporate governance arrangements set up by Phoenix—perhaps insisting, in the early 2000s, on having somebody on the board—may have helped avert some of what the Phoenix four got up to in the meantime. Even if the Phoenix four continue to refuse to prise open their wallets, the Financial Reporting Council could show an example. Most of the fine payable by Deloitte, whatever it is, should go to former MG Rover workers and the communities that are affected, even 10 years later. It is an overwhelming moral case. Will the Minister think about that, consult colleagues and, I hope, endorse that request to the FRC?
Most MG Rover employees got other jobs within a year of the collapse. Some real success stories of individual employees came out of it, but many found themselves in insecure jobs, paid less than when they were at Rover. They were vulnerable when the financial crash came in 2008-09. Those who lived closest to the plant were often the worst affected. That says something about not only the dominance of one company in the Longbridge area, but longer-term changes happening in the south-west Birmingham economy. We see echoes of those changes in suburbs of other cities, too. Those changes have impacted on skill levels and aspiration, and ultimately they affect the life chances of people growing up there.
Yes, a lot of good work is going on—there is a renaissance in parts of the Longbridge area, where the development firm St Modwen is a major player—and yes, we even still make cars at Longbridge. Shanghai Automotive’s European technical centre, under the banner of MG, is based at Longbridge. Those things are good, but they are not enough. Shocking recent figures from the TUC show that my constituency is the worst blackspot in the country for the proportion of residents earning less than a living wage. Local people deserve better and they deserve more from Government, whoever is elected in May.
Beyond the Longbridge area, the work that the Rover taskforce did between 2000 and 2005 was important in diversifying the regional supply chain. When Longbridge collapsed in 2005, the speed with which that taskforce was brought together again by the Government was impressive. It included the organisation of retraining, the re-engagement of former MG Rover workers in other parts of the automotive industry and in other industries, and the sorting out of problems with banks over car lease schemes, payments, benefits and redundancy issues. It sorted out mechanisms for emergency financial support for otherwise viable companies hit by major cash-flow problems by the collapse of MG Rover. It is still quoted as a model internationally, and the financial support packages devised in the west midlands in 2005 became a model when the general crash hit the UK in 2008-09.
As important as anything to the employees concerned is that when MG Rover collapsed in 2005, their pensions went with it. Were it not for the Labour Government’s pension protection legislation, which came into law just days before, many more ex-MG Rover workers would be facing poverty in retirement. The Pension Protection Fund did not happen by accident; active government made it happen. Will the Minister please learn lessons from that? Will he talk to colleagues at the Department for Work and Pensions to look again at whether the PPF indexing arrangements are as fair as they can be? Will he reflect on how the fragmentation of agencies, the way in which the DWP works today and the current funding of further education would all get in the way of developing the kind of response that there was in 2005?
Will the Minister do the MG Rover test on local enterprise partnerships? In the Greater Birmingham and Solihull area, we have a good LEP, but how many LEPs today could perform the central co-ordinating role that the regional development agency, Advantage West Midlands, did during the two Rover crises in 2000 and 2005? If the LEPs would not react with the same speed and efficiency in bringing partners together, we need to work out what needs to be done. Will the Minister reflect on that?
I leave the Minister with another request, which is to think about what the coalition Government’s employment law reforms would have done had they been in place when MG Rover collapsed. The company went into administration in 2005 and ultimately went into liquidation. There was no money in the pot for redundancy payments. It meant that employees had to apply through their trade unions to employment tribunals for protective awards to ensure that they could get their statutory payments for redundancy from the Government’s national insurance fund, and for protective awards to get even eight weeks of their contractual entitlements from the redundancy payments service. Thank goodness that the trade unions were there to help them with that, but thank goodness, too, that this Government’s employment reforms were not in place.
Under the Employment Tribunals and the Employment Appeal Tribunal Fees Order 2013, which was brought in by this Government, employees would have had to pay £1,500 even to issue a claim at an employment tribunal, and £5,700 to get their cases heard. A total of £7,200 would have probably had to be paid out to get the cases heard properly and resolved—paid by employees who had just lost everything. Guess what? Under the 2013 reforms, when the employer is insolvent, employees cannot get those fees back, even if they win their case, unless they get special dispensation. That cannot be right. Such situations can and do happen to other firms, including firms with no union to represent employees.
Even employees working in a small firm that went bust would have to pay more than £2,000 just to get their statutory redundancy pay and eight weeks’ contractual entitlements paid by the redundancy payments service, so will the Minister take a step back, think about that, and review that order and that law? I would like him to say that the 2013 order will be repealed, but even if he is not prepared to do that, I hope he will at least agree that the fees should be waived where an employer is in administration, receivership or liquidation. The MG Rover story is an example of where that could make a real difference to lives. The MG Rover story gives more than 6,000 individual reasons why the Minister should do that.
It is a pleasure to serve under your chairmanship, Mr Weir. I congratulate Richard Burden on securing a debate on a matter that is of such painful importance to so many of his constituents and the communities he represents.
It is perhaps rare but also important that we do not just talk about what is happening today and over the next six weeks—it is easy for us all to become caught up in that—but that we look back at the past and try to make sure that we are always learning lessons from things that went wrong to ensure that they do not happen again. It is obvious that the collapse of MG Rover and the closure of the Longbridge plant was a devastating blow to the community and to the many thousands of people and their families who depended on the jobs they had in that company.
It is a matter of great regret that the people who took over MG Rover when there was an earlier threat of collapse did so without, frankly, proper intentions to build the company and secure its long-term future. Instead, they acted in ways that led to their disqualification as directors or managers of limited companies. Their conduct as directors was found to have fallen well short of the standards of commercial probity and the general conduct befitting the director of a limited company. Frankly, I hope that their part in such a shameful episode that caused so much pain to so many people, and such loss to the community that the hon. Gentleman represents, is a matter of great personal shame to the individuals he has named. I also hope that he agrees that the disqualification penalties that those individuals suffered were appropriate, but he is right to point out that they have not suffered financially in the same way that many of his constituents have. I completely understand why he and many of his constituents feel an abiding sense of injustice at the distribution of the penalties for the failure of MG Rover between those who ran it and those who worked for it so loyally for so long.
The hon. Gentleman referred to the Financial Reporting Council investigation into the action taken by the company’s auditors, which led to a fine that the auditors then appealed. He is right to say that the appeal is ongoing and it is not yet clear what fine will be imposed. He suggested that, when that fine is finally levied, the Financial Reporting Council should consider making the proceeds available in some form to the local community. He will understand that the Financial Reporting Council is an independent body established by the accountancy profession, so it would not be proper for me as a Government Minister to issue any direction or even guidance, but I will say that he made a very strong argument with which many people with a sense of natural justice will have sympathised. I have no doubt that, when the fine has been determined and is about to be levied, the members of the Financial Reporting Council will have heard him and will no doubt want to respond directly with their thoughts on the matter. I can think of no better use for such a fine than the one he suggested.
The hon. Gentleman asked about the Pension Protection Fund. I agree that it was a fortuitous fact for which we should all be grateful that the fund was introduced in advance—just—of the failure of MG Rover, so that many people were at least able to benefit from that level of protection of the lifelong savings that they had worked so hard to put aside. He also asked about the indexation rates. I am afraid I am not an expert on that, but I will encourage officials in the relevant Department to respond to him directly on his concerns about the indexation rates that apply in that scheme.
The hon. Gentleman asked how, had they been in force at the time, the current rules on access to employment tribunals would have affected his constituents following the failure of MG Rover. That is another subject on which a different Department, in this case the Ministry of Justice, leads. Nevertheless, he will know—and it is important that the public know, so that they are not unnecessarily afraid of the circumstances, should they become victims of a company’s failure—that people can apply for an exemption from or reduction of employment tribunal fees. That way, people with limited means are not excluded from seeking redress. About a third of applications for fee remissions by people making a tribunal claim are successful. He made a reasonable point when he said that one consideration in assessing such applications could well be the circumstances that had led people to go to an employment tribunal, such as the failure of a company in the manner he described.
I am grateful to the Minister for the spirit in which he is approaching the debate. I recognise that the matter does not fall under his portfolio, but my point is that although remission can be awarded, the problem is that it is all retrospective. People need confidence when they lose their jobs, not afterwards.
I understand the hon. Gentleman’s point. He referred to the role of trade unions. Perhaps to the surprise of some members of the Labour party, I am generally a supporter of trade unions, because there are occasions—he has outlined one of them—when they have a very important role representing their members and bridging any difficulties that they have in accessing justice. The hon. Gentleman is aware that the Government have announced a review of tribunal fees. I would not want to prejudge that, but he has made a powerful argument about how they might operate in circumstances such as those at MG Rover.
What I am about to say will not necessarily come as much comfort to the particular individuals who lost their jobs at MG Rover, because although many—indeed, most—found other jobs, the pain and loss that they experienced will never be removed from their memories. Nevertheless, it is important that we reflect on the wider success of the automotive industry, including some at the Longbridge site, as well as of the communities that the hon. Gentleman represents and the wider west midlands. It has been a remarkable feat, almost entirely the work of the people he represents. They have managed to pick up the automotive industry from a pretty dismal place and turn it into one of the most successful automotive industries anywhere in the world. Would that it had happened within the form of MG Rover and without the traumatic experience that so many of his constituents had to undergo, but I am sure that he too would like to thank and pay tribute to those who have managed to rebuild British car manufacturing to its current position, and to celebrate the rapid growth in manufacturing employment in his constituency and the broader west midlands region. Long may it continue.
I know that time is tight for the Minister, but in acknowledging the role of the companies and the work force, will he also pay tribute to the constructive long-term work of the unions in bringing about that success?
I am happy to do that. Revivals of this sort are never the work of one party or another; they are almost always the result of effective collaboration between far-sighted investors, hard-working and committed employees, and trade unions that want to achieve success for everyone because that creates jobs and increasing wages. I am therefore happy to pay that tribute. We can all look forward to continued growth, more jobs, more exports and better wages for people working in the automotive sector and its supply chain in the west midlands.