Rover (Adjournment Debate)

Speech by Norman Lamb on Tue 14th Jun 2005

Sir John Butterfill (in the Chair): I call the hon. Member for North Norfolk (Norman Lamb).

Norman Lamb (North Norfolk) (LD): You will not be aware of what has gone on in the debate so far, Sir John, as you have only just taken the Chair, but one issue that must be considered is limiting the length of speeches in these debates, because many people have strong views and it is important that they should have the opportunity to be aired fully.

This has been an important debate and I congratulate the hon. Member for Birmingham, Northfield (Richard Burden) on securing it. He was right to say that there should be no no-go areas in an inquiry, and that the findings must be made public so that we can examine precisely what went wrong. I also accept his view that for those who seek to criticise the Government, there is a danger of speaking with the benefit of hindsight, to dissociate themselves from what went wrong.

I do not know the full truth of what happened, particularly in the period leading up to the acquisition of MG Rover by the Phoenix consortium. We have heard the competing claims of the hon. Members for Birmingham, Northfield and for Bromsgrove (Miss Kirkbride). That is why it is important to have a full inquiry that examines the period and goes right back.

The hon. Member for Birmingham, Hall Green (Steve McCabe) raised legitimate concerns about a period before that which I mentioned. Reference was made to the acquisition by BMW in the first place, and how the Honda association collapsed. Many people saw that as being a valuable association that might well have secured the future of MG Rover.

There has been public debate since the tragic collapse of the company. It is worth making the point that as we argue over who is to blame and what went wrong, we ought to focus on the fact that more than 5,500 people lost their jobs, and on the impact not only on them, but on their families and the local economy, which can be devastating. The point made by the hon. Member for Birmingham, Hall Green about the importance of examining whether the retraining is adequate, and whether the structures to support it are in place, is as important as examining the history.

The focus so far has been on the potential culpability of the Phoenix four, whether there was wrongdoing, and the extent to which they may have profited from MG Rover. The contrast between their situation and that of the work force is stark. The Financial Reporting Council raised issues that properly require further investigation. I have no real idea whether anything sinister was involved, because so far the FRC report remains secret. It is important that at some stage, preferably sooner rather than later, it is brought into the open so that we can see what its initial conclusions are.

A former director, Peter Stevens, has weighed in with accusations of naivety, muddle, mismanagement and waste. While it is right to investigate the role of the Phoenix four, there is a danger of heaping all the blame at their door when in reality the fate of Rover may—I stress the word "may"—have been sealed before they acquired the car maker. I fully accept the point made by my hon. Friend the Member for Birmingham, Yardley (John Hemming) that a deal with the Shanghai Automotive Industry Corporation could still have worked as a long-term association. However, many analysts reached the conclusion that the situation for Rover had looked pretty bleak for some time.

We are faced with a large number of inquiries. On top of the FRC inquiry, we have the current inquiry launched by the Secretary of State and the likelihood of two Select Committee inquiries. The National Audit Office is also thinking about pursuing an inquiry. If all these inquiries are to be of lasting value, everybody must learn lessons. Centrally, the inquiries must also explore the role of Government.

The strongest charge against the Government was made in The Economist, which described Rover as "a classic victim of industrial policy".

It asserted that pinning the blame on the Phoenix four was missing the real target. The blame, according to the article, lay first with the laws of economics, and secondly, "on the Government, whose cowardly intervention five years ago damaged the interests of the workers it said it was trying to protect."

That is the charge against the Government. I do not know the full story. Again, that is why an inquiry is so important.

As for the economics, when the company collapsed, the world's car industry had the capacity to produce some 80 million cars and light vehicles a year, but was only producing 60 million a year. That is massive overcapacity. Most of that spare capacity is in Europe and the United States, where costs are higher and sales growth is slower than elsewhere. One could say that inevitably, a medium-sized company like MG Rover was most vulnerable in that harsh economic environment. However, many analysts have concluded that the fate of MG Rover as a volume car maker was sealed a long time ago.

It is important to examine what happened in 2000. As we have heard, at that time there were two competing suitors, Alchemy and Phoenix. That is a crucial period. I have heard and listened carefully to what the hon. Member for Birmingham, Northfield, who was very much involved at that time, has said. It is important to examine and make public exactly what happened between March, when Alchemy was in pole position, and May, when Rover was sold to the Phoenix group.

The Alchemy option, superficially, was hardly attractive. Only 20 per cent. of jobs would have been saved. But was it the only viable option for the long term? I do not know the answer, but that is a question we need to ask if we are to learn lessons from this sad story. Did the Government intervene, as some allege, swapping sides in the face of public protest? Did they favour a bid that saved jobs in the short term, but had no plan or direction to make the company viable in the long term?

What of the role of John Towers? In March 2000 he was appointed to the taskforce established to consider options for the failing company, as BMW was rapidly losing interest. Towers then became the head of the taskforce, proposing a "project Phoenix". By the beginning of April, Towers had stepped down from the DTI task force to head the Phoenix consortium officially. We all know the outcome. Did the Government interfere or intervene in a way that ultimately damaged any long-term prospect of car making in the west midlands? Those are the reasons why, ultimately, we need a full inquiry.

It is worth finishing with a more positive point. Many commentators have talked about the death of the British car industry. In fact, the car industry is healthy. It just happens not to be British owned. A lot of cars are being made in this country, in plants that are remarkably productive. The future, in many respects, is quite bright. We must balance that against the tragedy of this particular story. We all ought to be learning lessons here. We all ought to look at what happened over the years, at whether any of us reached wrong conclusions, and at what lessons can be learned for the future.