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MG Rover

I am grateful for the opportunity to raise with the Minister the results of the investigation into the affairs of Phoenix Venture Holdings Group, MG Rover Group and 33 other companies. I am pleased to be joined by my hon. Friend the Member for Birmingham, Hall Green (Steve McCabe), who has taken a close interest in the issue, and I know that many other hon. Members with constituencies in Birmingham or the west midlands who cannot be here today are concerned about the issue. The investigation was commissioned in 2005 by the then Secretary of State for Trade and Industry, my right hon. Friend the Member for Kingston upon Hull, West and Hessle (Alan Johnson), soon after the collapse of MG Rover Group at Longbridge in my constituency. The investigation was headed by Gervaise MacGregor and Guy Newey QC. It had been set up under section 432(c) of the Companies Act 1985 and had a wide range of powers and a high degree of independence, both of which were important for its credibility. The inquiry certainly had to look at some highly complex issues, but I am not alone in questioning why it took more than four years to report and cost around £16 million. I ask my hon. Friend the Minister to consider how we can ensure that future comparable inquiries will be neither excessively costly, nor so long drawn out, without compromising their independence or thoroughness. Some have suggested that much of what is in the inspectors' report had already been said or alleged before. There is something in that, but it does not alter the fact that the their findings are significant. The report's 830 pages meticulously catalogue how the companies associated with MG Rover were structured and then restructured and how money was moved around between 2000 and 2005. The report is damning of the actions of the directors of Phoenix Venture Holdings, the so-called Phoenix four, during that time. That they paid themselves a lot of money during their stewardship of MG Rover was well know a long time before the report. I was one of those who asked questions about some of those things years ago, and my criticism at that time of the Phoenix four's largesse towards themselves is on the record. However, what is devastating about this report for the Phoenix four is not what it reveals about the amounts they paid themselves, or that they saw considerable personal gain as a desirable or justifiable consequence of building a successful company, but that personal gain—some would say greed—was their central objective from the start of the Phoenix takeover of Longbridge. That objective took precedence over the interests of MG Rover as a car maker and the interests of the employees, from whose efforts the Phoenix four benefited. I do not have time to go through all the report's findings, or even most of them, but I will offer a flavour of some of the things it contains. It provides evidence that from the word go at least some members of the Phoenix consortium were seeking to make around £75 million for themselves, not from engineering cars, but from engineering company finances. They did not reach that target, but they got a long way towards it. The report shows how losses were locked into the car-making business with profits going elsewhere. Despite what was claimed at the time, many of those profits were not recycled back to support the car manufacturing business. The Phoenix four made sure that their own stakeholdings in the business brought them significant personal remuneration and the power to make decisions. The shares they distributed to their employees, however, brought neither income, nor influence over company decisions. The Phoenix directors still awarded themselves millions for their own sacrifice in making those employee shares available. Phoenix invented a range of money-spinning schemes, which some people might call scams. The names were sometimes bizarre, like Project Patto or Project Lisa, and sometimes the names spoke volumes in themselves, such as with Project Aircraft. Not all of those schemes saw the light of day, but all seemed designed principally for personal or corporate gain. Phoenix Venture Holdings' advisers, such as Deloitte and, to some extent, Eversheds, helped to design some of those schemes, and the millions they got in fees for their trouble raises important ethical questions. Perhaps even bigger ethical issues are raised by the report's revelation that one Phoenix director, Peter Beale, chose to install a programme called "Evidence Eliminator" on his computer the day after the investigation was announce in 2005. I would like to say a little more about one project, Project Platinum, which established MGR Capital, the vehicle through which the former BMW loan book for Rover was acquired during the Phoenix years. Acquiring that loan book was the right thing to do for MG Rover as a car company, but there are and always have been real questions about why MGR Capital was set up outside the Phoenix group of companies. The result, of course, was that when the money finally came in it would be shared between members of the Phoenix consortium and their partners at Halifax Bank of Scotland, rather than ploughed back into investment in MG Rover. I and others questioned the Phoenix directors about MGR Capital as long ago as 2003. It was also one of the subjects on which the inspectors suggest that I, and Parliament itself, received misleading replies and information from one or more of the directors. Therefore, I welcome the decision of the Business, Innovation and Skills Committee to invite the Phoenix directors back to Parliament to explain these things. The Phoenix four should accept that invitation. It is not good enough for them simply to rubbish the inspectors' report through their PR firm without answering the report's central charges. If the Phoenix four have answers, we all deserve to hear them, and we deserve to hear them in public and on the record. I was never one who joined in the backstairs briefings against Phoenix Venture Holdings even before it signed the deal with BMW to take over Longbridge. Indeed, I criticised some of those responsible for those briefings because they never seemed worried that their words might not only highlight genuine concerns about the conduct of a bunch of directors, but destabilise the future of MG Rover itself, threatening the livelihoods of the thousands of MG Rover workers, from those on the shop floor to senior managers, who were genuinely trying to make a go of the company, a company that was so important to manufacturing in the west midlands as a whole. Let us not forget that in the circumstances we faced in Longbridge when BMW pulled out in 2000 it was not wrong to ask BMW to consider alternatives alongside the deal it was proposing to do with Alchemy Partners. It was certainly not wrong to back the only alternative in town when negotiations between BMW and Alchemy broke down on 28 April 2000 and Longbridge faced the real prospect of closure, with the likely loss of over 20,000 jobs in the west midlands and beyond. Perhaps the Phoenix four are all resigned to going down in history as greedy, but I am sure that they would also want to be remembered for genuinely trying to build a future for car-making at Longbridge and, when that failed, finally doing the right thing by all those who worked for them. They do not have much credibility left, but for what remains of that credibility, and because it is the right thing to do, I ask the Phoenix directors to agree to the following. First, there should be no more delays in putting money into the trust fund they set up for their former employees. They say that there are still all kinds of procedural impediments causing delays nearly five years on from the closure. That may be the case, but I say bluntly that that is their problem. They made sure that there were no impediments when they paid themselves millions each to insulate themselves from the consequences of company failure. They now have a responsibility to their employees which they should honour without delay. The second thing concerns MGR Capital. It is unclear where the wind-up of MGR Capital is up to, but there are reports that there could be proceeds of between £16 million and £22 million. My understanding of the structure of the company is that the money could be shared by HBOS and members of the Phoenix consortium. I say no to that. Let the proceeds from MGR Capital be at least one positive legacy of the Phoenix years. I say to the Phoenix consortium that it should put part of its share of MGR Capital's profits towards the trust fund for its former employees and the rest of it into a community development trust so that local people can have a direct say in, and direct benefit from, redevelopment of the Longbridge site and the surrounding area. And HBOS, the Phoenix consortium's partner in MGR Capital, should show that the banking sector itself is recognising some social responsibility by investing its profits from MGR Capital in the venture, too. Those things are unfinished business. They are things that could still happen, and I ask my hon. Friend the Minister to do what he can to make them happen.