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MG Rover

Volume 712: debated on Monday 6 July 2009


My Lords, with your permission, I will now repeat an Answer made by my honourable friend the Minister for Business, Regulatory Reform and Employment Relations in the other place in response to an Urgent Question:

“On 31 May 2005, the then Secretary of State for Trade and Industry appointed Guy Newey QC and Gervase MacGregor, forensic accountant at BDO Stoy Hayward, to examine the issues raised by the Financial Reporting Review Panel and the events leading up to the appointment of administrators on 8 April 2005.

After the collapse of MG Rover, a number of factors concerning the affairs of the company, including issues raised by the Financial Reporting Review Panel, which examined the published accounts of the Rover Group, resulted in the Secretary of State deciding to appoint Companies Act inspectors to carry out a thorough investigation.

The inspectors were appointed under Section 432 of the Companies Act and had wide powers to require documents and the attendance of witnesses, including directors, officers and agents of the company. They investigated the affairs of MGRG, its parent company, Phoenix Venture Holdings, and MGR Capital Ltd between the purchase of MGRG from BMW in May 2000 and the date of it entering administration. The inspectors are independent of the department.

The inspectors carried out a thorough review and delivered their report to the Secretary of State for Business, Innovation and Skills on 11 June 2009. The Secretary of State has studied the report in full and has taken legal advice on the next steps. After considering the report in its entirety, the Secretary of State has asked the Serious Fraud Office to review the report and consider whether there are any grounds for a criminal investigation. Following legal advice, this report will not now be published at this time, in order to ensure that any criminal investigation or prosecution that the SFO may decide to take is not prejudiced. Publication now could also prejudice the possibility of a fair trial.

The discretion of the Secretary of State to publish a Companies Act report where inspectors are appointed under Section 432 is only to publish the whole report. The legislation does not provide for the report to be published in part”.

My Lords, that concludes the Answer.

My Lords, I thank the Minister for repeating the Statement. It is particularly gratifying given that I had tabled a Private Notice Question this morning on the same subject. It should have been clear to everyone involved that such an important announcement could not be swept under the carpet by means of a short Written Statement. I am also disappointed that the First Secretary of State is not in his place to answer questions on the matter. Although my noble friend Lord Hunt has been caught unawares by the Written Statement and was therefore unfortunately unable to return in time, the Secretary of State can have no such excuse; his department has been sitting on the original report for more than a month and had complete control over the release of this information. Furthermore, I see that he had time to be interviewed on Sky TV this afternoon.

Further delays to any understanding of what actually happened in the lead-up to Rover's collapse, although not surprising, remain deeply disappointing, especially for the 6,500 former workers who must now wait a further indeterminate period before they can receive any of the modest sums of compensation due to them.

The Government have played a questionable role in MG Rover and its collapse. There is ongoing uncertainty as to the grounds of accepting the original £10 bid, for example. There was also the scandal of the Government paying out a £6.5 million bridging loan weeks before the last general election, despite written warnings that it would not save the company.

In 1998, the Secretary of State, who is now the First Secretary of State, stated that he considered Rover capable of,

“a commercially successful, viable, profitable future”.—[Official Report, Commons, 21/10/98; col. 1284.]

Seven years later under a Labour Government it went into administration. The lessons to be learnt from that disastrous record are even more important today; once again the question has arisen of government aid to a struggling motor industry. Without proper understanding of these failings the last time around, how can the noble Lord expect us to have any faith in their competence today?

Further questions have arisen over the inquiry that was meant to shed some light on the whole sorry incident. Not only has it taken four years and nearly £16 million for the inquiry to finish, complete with embarrassing reports of more than £100,000 being spent on accommodation and £30,000 on food and drink, but the end result has been promptly hidden away.

Now, more than a month after the report should have been published, we learn that there will be further delay. One cannot help but notice that once again a general election is on the horizon, and once again the Government’s failure to manage the economy and support British industry is a topic of intense interest to the general public. Of course, if there is evidence of criminal activity, the police must get involved. But, unless the Minister is implying that government involvement also warrants a police investigation, burying those parts of the report looks less like an attempt to avoid commenting on an ongoing investigation and more like yet another ploy to avoid public disclosure of the incompetence of the Government until after a general election.

It has apparently taken the Minister’s department a month to read the report and to identify possible grounds for a criminal prosecution. How long does he expect it to take the SFO to decide whether to investigate? If it decides to prosecute, will the Government use that as an excuse to delay the release of any part of the report until a final judgment is reached? What will happen to the compensation payments in that case? If there is a criminal case to answer, the Government should look carefully at the report and publish those parts that do not relate to that case. As he finished, the Minister said that the legislation does not provide for the report to be published in part. Although the Government do not have a duty to publish the whole, they most certainly have the power to publish in part.

There are many questions to be answered that do not relate to criminal activity, but are extremely pertinent to an assessment of the Government’s competence. In 2005, when launching the inquiry, the then Secretary of State for Trade and Industry, Alan Johnson, said:

“People want to know what happened”.

They still want to know what happened—now more than ever—but once again, the Government are trying their hardest to make sure that they do not find out.

My Lords, I join the noble Lord, Lord De Mauley, in thanking the Minister for repeating the Statement made in another place. It is clearly much more sensible to have a Statement on this important issue, rather than having to deal with it in the noble Lord’s Private Notice Question. We are grateful for that.

The noble Lord touched on the substance of his Private Notice Question. What action will the Government be taking to help ex-employees of MG Rover who may be entitled to payments from the trust fund set up to help ex-employees in the event of the firm’s collapse? Payments have been pending publication of the report. This is an important issue for ex-employees. Will the Minister explain the Government’s view on this?

I follow a number of the points made by the noble Lord, Lord De Mauley. Could the Minister answer the questions rather than just accept the general criticism coming from the Conservative Benches? Why has it taken four years for the Government to conclude that the investigation into the collapse of Rover merits a reference to the SFO? It is almost beyond belief that in the past four years there were no discussions between the ministry, Ministers and the people doing the inquiry which would have indicated at an early stage an issue that ought to be referred to the SFO.

That leads to the point made by the noble Lord, Lord De Mauley; there is a suspicion of what is going on here. It is in the Government’s interest for the report to have been delayed for four years and for it then to be kicked into the long grass politically by a reference to the SFO. Unless we can deal with the matter quickly, this will inevitably result in the facts not being known until after the general election. Why does the Minister believe it has taken four years? Can he confirm the remarks of the noble Lord, Lord De Mauley, that the investigation has so far cost £16 million? Is that press report true? If it is not £16 million, what does the Minister believe it has so far cost?

In the context of a suspicion that this is government attempting to delay the whole issue until after the general election because of potential criticism of government action, why have the Government chosen to refer this to the SFO when they had the original report prepared by Pricewaterhouse Coopers, the administrators of Rover, concluding that there was no improper conduct? What weight are the Government now putting on the report by PWC? Why do two separate firms of consultants appear to have reached diametrically opposed conclusions on the need to refer to the SFO?

Finally, touching on a point that has already been made, when matters affect the individual rights of people who could be under potential criminal prosecution, there is clearly a necessity for some material not to get into the public arena. As an aside, I might say that I am significantly sceptical that we will not read about this in the pages of the Telegraph over the next few weeks, but that is not a matter for the Government. Are the Government prepared to meet the understandable concerns of the public, opposition parties and maybe even members of the Minister’s own party to ensure that as much is published as conceivably can be of the evidence and conclusions of this report? To what extent can it be made public without jeopardising the interests of those who may be subject to prosecution?

My Lords, the noble Lord has raised a range of issues. It is intended that when the report is published it will be made available online and free of charge. It is important to state that this was an arm’s-length, independent and thorough investigation and review of a complex and detailed issue. This was not just one company because there were about 33 subsidiaries and related companies. Some £1.3 billion of creditor money was owed and around 6,000 jobs were directly involved, with a further 12,500 indirectly. Not that many independent reviews of this nature have been done. Apart from Lonrho and Guinness, I think that since 1992, seven inspections have been carried out under Section 432 of the Companies Act 1985. They do not have cost and time limits as such, and given the credibility of the people involved in producing this report, it was up to them to continue a dialogue with the government department, which they did. The cost as of 31 May 2009 was £15.9 million. The Serious Fraud Office now has four years’ worth of interviews, witness statements and the report in its totality to evaluate. It has a body of evidence to consider, one hopes, very quickly.

I would also say that this is not a cover-up, but a thorough and independent investigation into what was a very difficult corporate collapse. Given the complexity and the timescale, it is important that we do not prejudice any possible action or next steps by the Serious Fraud Office, so in any statements we make we have to be careful that we do not create problems as regards any further investigations.

I want to make one other comment, which is that given the sensitive nature of the issue, there has been continuous dialogue. While I accept that it has taken a long time, it is important that an investigation of this type is independent, thorough and done properly. That is exactly what has happened in this case.

My Lords, I ought to declare an interest as a former Minister who dealt with company inquiries. Is it not right that a delay is inevitable whenever company inquiries are considered? It is unusual for a delay of three to four years to take place, but not inevitable. Am I not right in thinking that every company inquiry is subject to some delay, perhaps of two or three years? Is it not also considered acceptable for the Government to take some time to consider the report, and that a period of one month should be acceptable? My final question is this: does the Minister agree that it is wholly undesirable to publish this sort of report in part? Is it not inevitable that the Government will be accused of partiality?

My Lords, my noble friend has made a number of interesting comments. We only received this report on 11 June and, given the complexity and seriousness of this issue, the Government’s response has been very speedy. Given also the infrequency of such reviews and inquiries, there will always be lessons to be learnt on timescale and cost, but overall I repeat that we must make sure that we do not prejudice any action that may be forthcoming from the Serious Fraud Office. This has been a thorough investigation and review.

My Lords, I declare an interest as a former West Midlands MP who was involved slightly in the early stages. I hope that the Minister recognises how strong feelings are in the West Midlands. The collapse of the company meant the virtual end of the British-owned motor industry. I understand the point that the Minister makes on the effect that this could have on prosecution, but is there any reason why we should not know the official advice to Ministers in this matter, and on the manner and way they chose to rescue this company? In other words, was it a ministerial decision taken in line with departmental advice, or a decision taken in spite of that advice?

My Lords, first, I disagree with the noble Lord on one issue. The automotive industry remains the key industry for the UK. Whether that involves advance engineering or the automotive industry in general, the collapse and problems around MG Rover were not the end of the industry in the UK—far from it. We remain a huge producer of car engines, and it is a very important industry for us.

The First Secretary of State received the report and took legal counsel on its receipt. It was considered appropriate after that legal advice to present the report in totality to the Serious Fraud Office. I accept that the report now needs to be considered by the SFO before we make any comments on individual parts of it, or how it affects government.