Jeremy Warner's Outlook: Everyone has been Shanghaied in the great Chinese takeaway of MG Rover

Equitable's Legal Gravy Reaches Court; Now RBS Seems To Want To Go Shopping In China Too

Pork barrel politics don't come any more blatant than the £6.5m Patricia Hewitt, Secretary of State for Industry, lent to MG Rover over the weekend to keep 6,000 Longbridge workers off the dole. By so doing, Ms Hewitt comes close to negligent use of taxpayers' money, since the chances of recovering anything lent during an administration are close to zero.

Pork barrel politics don't come any more blatant than the £6.5m Patricia Hewitt, Secretary of State for Industry, lent to MG Rover over the weekend to keep 6,000 Longbridge workers off the dole. By so doing, Ms Hewitt comes close to negligent use of taxpayers' money, since the chances of recovering anything lent during an administration are close to zero.

With creditors already queuing round the block, no commercial bank would have lent in such circumstances. The loan is justified on the basis that so long as there is some chance of agreeing a rescue deal with Shanghai Automotive Industries Corporation (SAIC), it's worth trying to keep the Longbridge plant alive.

Yet the sad truth is that with Rover losing £22m to £25m a month, only the unions now believe there is any hope of Rover being salvaged in anything like its present form. News over the weekend that even the mighty Ford won't make any money out of car manufacturing this year, in combination with growing speculation that General Motors will shortly have to go into Chapter 11 to avoid a more serious road crash, show just how tough the present environment really is.

If even the big boys are struggling, what hope for a small mass-market producer like Rover, with its ageing fleet of models? The Government handout is unsecured, so presumably comes quite a long way down the pecking order of claims on the company's assets.

Even if by some miracle, the Chinese are persuaded back to the negotiating table, they would only want to acquire the business free of its liabilities, including the £6.5m. With the company clocking up the thick end of £300m in annual operating losses, it is hard to see why they would do even that.

Indeed, SAIC already seems to have got most of what it wanted out of Rover - the name, the intellectual property and the know-how. There remains only the plant, which at this rate it might be able to pick up for a song from the administrator before shipping it back to Shanghai.

The great Chinese takeaway is almost complete. It is hard to believe SAIC was ever interested in mass-market car production in the UK. Rover seemed to offer a cheap way of buying the know-how to mass produce back home, where the market for out-of-date cars is still potentially vast and low labour costs make them that much more economic to produce. Keeping Longbridge alive was just part of the price the Chinese thought they would have to pay. Now they don't have to do even that.

The Government is picking up the tab instead, though even this lot might find it too brazen to string out the aid long enough to get re-elected. Because this is election time, few politicians even dare criticise, for fear of being called callous and uncaring. It's not an edifying sight.

Equitable's Legal Gravy Reaches Court

A second legal marathon began at the High Court yesterday as Equitable Life kicked off its attempt to hold the society's former auditors, Ernst & Young, and 15 former directors accountable for nearly £4bn in damages. Meanwhile, the liquidators of BCCI are more than a year into their case against the Bank of England for malfeasance, and still there is no end in sight.

Nick Land, chairman of Ernst & Young, describes the Equitable litigation as a waste of time and money. The Bank of England is similarly dismissive of the BCCI claims, which require the litigants to go beyond proving regulatory negligence to show outright dishonesty. Are either of these cases any more than legal gravy trains, or is there some purpose in the madness? The answer, presumably, lies in the degree to which they succeed. Usually such cases are settled out of court before the legal fees get out of hand. A large sum of money is paid over but there's no formal admission of guilt.

In the Bank of England case, that couldn't happen because of the nature of the charge. It might just about have been possible for the Bank to accept negligence, but as a Government regulator, it could not be held liable for any such failure. Legislators have ensured that taxpayers cannot be made to pay for the mistakes of their civil servants. Instead the liquidators have to show deliberate malfeasance. No regulator is ever going to accept such a charge, which if made to stick would undermine any claimed integrity.

Likewise with Equitable Life. Mr Land and his team say they won't accept any degree of liability for a failure they are adamant they couldn't have prevented. To do so would set a precedent and create a charter for litigants. In the BCCI case, liquidators have already recovered more than 70p in the pound on behalf of creditors. Success against the Bank of England would bring them closer to total recovery.

Of all those targeted by the liquidators over the years, the Bank is proving by far the most difficult and resilient, but it also has potentially the deepest pockets - the British taxpayer - so despite the hurdles, it seemed well worth pursuing. Likewise, Equitable Life is targeting Ernst & Young because of all those who might be held accountable for the society's financial difficulties, the auditors have the most money. Former directors, by contrast, couldn't possibly fund the £1.7bn of claims against them. They are there only to support the case against Ernst & Young.

On the face of it, neither case is particularly strong. Equitable's directors believe it's worth the gamble with policyholders' money, yet it's hard to disagree with Mr Land, who is at a loss to see what the auditors might have done about a débâcle whose primary cause was that directors mispriced their products and then took the view that they could wriggle out of the consequent liability. Insolvency is always a depressing affair, but not for everyone it seems. There's always someone making hay out of other people's misery.

Now RBS Seems To Want To Go Shopping In China Too

News that Royal Bank of Scotland Group is among 10 "strategic" partners vying for a 25 per cent stake in Bank of China should set alarm bells ringing. RBS has already bought extensively and expensively in the United States, and although $4bn is almost small change by RBS's standards, the bank needs to spend time integrating existing acquisitions before moving on to others.

At the time of the annual results, Sir Fred Goodwin, the chief executive, said that he would be forgoing any significant further acquisitions for the time being to allow the others to bed in first. He may not consider 25 per cent of Bank of China any more than a calling card, but at a time when investment in the existing business means there is no money for buy-backs or special dividends, Sir Fred ought perhaps to be watching the pennies.

As Rover and others have discovered to their cost, strategic partnerships with the Chinese tend to be a one way street. The idea that the Chinese are about to roll over and allow retail and wholesale banking in China to be dominated by foreign concerns is naive.

For international business, China has become the equivalent of a modern day gold rush. That there is gold to be had is not in doubt. China should soon become the fastest-growing banking market in the world. But that foreigners will be allowed to ship it out, or even prospect in its richest veins, looks a lot more doubtful.

There's no deal here yet, and it costs RBS nothing to have a long hard look at the goods. Yet it needs to tread carefully in a region alive with bear traps. China promises much, takes a great deal, and gives very little back in return.