The Rover scandal
When Tony Blair made Stephen Byers Secretary of State for Trade and Industry, it is now clear that he was entrusting that office to the most incompetent, the most cynical and the most financially illiterate Cabinet minister of the last 20 years. This spring the last British-owned volume car manufacturer has been brought to its knees in humiliating circumstances. Five thousand employees of MG Rover are shortly to come on the job market. They will probably be joined by a further 20,000 workers also in the Midlands automotive trades, whose firms are owed hundreds of millions by the expiring company. If they fail soon to find new employment, let us hope that they join forces, on a no-win no-fee basis, with the 55,000 defrauded Railtrack shareholders still pursuing Mr Byers in the High Court for misfeasance of public office, and the destruction of £1.5 billion of value in the company in which they had invested. In each case the lives of workers and shareholders have been blighted by the Labour government: not just by a minister who relentlessly put spin before business sense, but also by the frank incomprehension and dislike of capitalism that is endemic in Labour.
In the case of Railtrack, Mr Byers decided to ‘take back the track’ — to renationalise the railways — not because that was in the interest of railway passengers or the taxpayer. Commuters will remember that performance declined catastrophically after his intervention, while subsidy levels soared. Mr Byers destroyed Railtrack because he was anxious for acclaim on the Labour backbenches, and thought it would play well with those who disapproved of railway privatisation. The more closely one examines his motives in 2000, when he played his part in the sale of Rover, the clearer it is that he was actuated by the same kind of disastrous, short-term political considerations. Like Railtrack, MG Rover has gone into administration because of Labour interference.
At the critical moment, Trade Secretary Byers made no secret of his dislike for Alchemy, the venture capitalist which had agreed to buy Rover from BMW, or for its business plan which would slim down the company and concentrate on making MG sports cars, the only viable brand. Alchemy would have guaran teed £50,000 for every man and woman made redundant, instead of the paltry £3,400 the administrator can now afford; it would have guaranteed their pensions and saved 2,000 jobs. Had it succeeded, it might even be hiring now.
It has never been exposed exactly how the Phoenix consortium emerged from the smoke five years ago, or how the government leaned on BMW to reject Alchemy and to sell Rover to the consortium for a nominal £10; but Labour’s bungling fingerprints are everywhere. We do know Mr Byers visited Munich at the time and that Tony Blair spoke to the BMW chairman at least once. Hansard also records that in May 2000 Mr Byers praised John Towers’s ‘personal strengths’ in the House of Commons, and boasted how the government had ‘brought John Towers and BMW together’.
What is clear is that as soon as Mr Towers and his friends Nick Stephenson, Peter Beale and John Edwards gained control of Rover, they set about dismembering the group, stripping it of its assets and enriching themselves. They sold the freehold of Longbridge to St Modwen Properties for £74 million; the components business for £100 million; the rights to the engines to Shanghai Automotive Industrial Corporation of China; and hived off the profitable customer finance division into a new company owned by them and HBOS, the high street bank. At the same time, they set up a £16.5 million pension fund for themselves and their families and arranged for salaries and a loan note payable to them worth about another £15 million.
If only the Phoenix Four’s automotive engineering was as skilful as their financial engineering, Rover might still be going. What is most amazing is that when BMW sold them the company, it also gave them about 3,000 unsold cars and a soft loan of £427 million (since written off) on which no interest was payable. The published accounts from the web of interconnected entities which make up the Phoenix empire show that the BMW loan was injected into a company called Techtronic, which then apparently earned interest on it by lending the money on to other Rover companies. Was that what the money was for? Byers brokered this deal with only one consideration in mind: that on the face of it Phoenix would save more jobs. He never had the wit to look beneath the surface.
It is becoming ever more obvious that Labour has frittered away the benefits of Tory reforms. Is it any wonder that inflation is up to a seven-year high when 850,000 jobs have been created by the state, to go with the million lost in manufacturing? When voters come to make their minds up, any wavering Tories or teetering Lib Dems should remember a stunning fact. With the arguable exception of Lord Sainsbury (who certainly pays his way), there is not a single member of the Labour front bench who has any experience of business or industry. They have shown a rank indifference to the interests of taxpayers, shareholders and workers alike, and it is time they — Blair and Byers together paid the price.
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