Hewitt under fire over Rover loan

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The Independent Online

The Department of Trade and Industry came under fire from a government watchdog yesterday for its handling of the MG Rover fiasco - in particular for making a £6.5m loan that kept the doomed company afloat for just one more week.

A report into the Rover affair by the National Audit Office offered little comfort for Patricia Hewitt, who was the secretary of state for trade and industry when Rover collapsed.

The DTI lent Rover the money in April while administrators embarked on a last-ditch attempt to find a buyer for the business. The NAO said it was obvious by then the chances of a life-saving deal for Rover were "remote", suggesting the DTI wasted taxpayers' money. According to the report, £5.2m of the loan will never be paid off.

Many Conservative MPsregarded the deal as an attempt to bribe voters in marginal constituencies before the General Election last year.

The Tory Trade spokesman, Alan Duncan, said: "Much of the pain is entirely of the Government's making. This [loan] did nothing to give any real help. It was no more than a bung to buy the Government a few weeks to get them through the General Election. The person in the firing line on this is Patricia Hewitt, and I'm afraid her past is catching up with her."

The DTI defended the loan yesterday, saying it gave administrators more time to prepare redundancy payments to staff.

The NAO also attacked the DTI for failing to prepare a contingency plan when it first became clear that Rover was in trouble.

The NAO estimates that about £146m will eventually be spent on the support package to aid the West Midlands economy that was so affected by Rover's demise.

MG Rover went into administration on 8 April 2005, when a buyout from the Chinese group SAIC collapsed, resulting in 6,000 job losses.

The company pension fund has a shortfall of £500m, a deficit that is likely to lead to a "large call" on the business-financed Pension Protection Fund.