Blair pledges £150m to aid Rover as Chinese pull out of rescue deal

Tony Blair has pledged a £150m aid package for Longbridge in an attempt to limit the fallout from the announcement of 5,000 job losses at MG Rover.

Tony Blair has pledged a £150m aid package for Longbridge in an attempt to limit the fallout from the announcement of 5,000 job losses at MG Rover.

Flanked by the Chancellor of the Exchequer, Gordon Brown, yesterday, the Prime Minister promised money for statutory redundancy pay, the retraining of Rover workers and help for supply companies affected by its collapse.

The two men had earlier diverted to Longbridge from their planned election schedules after confirmation that the last-ditch attempts to save MG Rover through a link-up with China's biggest car maker had failed.

Administrators sent in from the accountants PricewaterhouseCoopers a week ago said they now had no option but to make wholesale redundancies and begin the break-up of what is left of MG Rover.

The collapse of the company after 100 years of car making at the Longbridge plant in Birmingham could not have come at a worst time for Mr Blair as he puts Labour's management of the economy at the centre of its re-election campaign. The West Midlands is also home to a number of marginal Labour constituencies.

MG Rover had been kept on life support for the past week after the Trade and Industry Secretary, Patricia Hewitt, agreed to provide £6.5m to pay its wage bill while attempts to revive talks with Shanghai Automotive Industry Corporation continued.

But earlier yesterday morning, the Chinese company informed Ms Hewitt that it was neither interested in buying MG Rover and its Powertrain engine division from the administrators nor willing to establish a joint venture.

This left the administrators with no room for manoeuvre to seek fresh emergency funding from Ms Hewitt and no option but to lay off most of the workforce at the Longbridge plant.

The administrators will keep on just 1,000 of the 6,000 employees at Longbridge, 400 of whom work in the engine plant, to help complete the production of cars on the assembly line and "mothball" the plant.

However, even those jobs also look vulnerable once the remaining cars have been built.

The £150m of government aid includes the £41.6m of support for Rover suppliers that Ms Hewitt announced a week ago.

In addition there will be £40m to cover redundancy payments, which works out at £8,000 per worker. However, thousands of MG Rover employees also have loans outstanding on company cars that in many cases could wipe out their redundancy pay.

Ms Hewitt also said that up to £50m would be provided for re-training workers, of which £25m is new money, while a further £24m would be used to establish a loan fund to help businesses threatened by the company's collapse.

In addition, the local job creation agency, Advantage West Midlands, is redeveloping part of the Longbridge site as a science-and-technology park on land that it previously bought for £42m from MG Rover's parent company, Phoenix Venture Holdings. The agency is also making a grant of £19.3m to the international automotive research centre at Warwick University.

Mr Blair described the collapse of MG Rover as a "terrible blow" to the West Midlands but the Tory leader, Michael Howard, pinned some of the blame on the Prime Minister, saying: "I would have liked to see the Government get involved earlier. They left it very late."

Tony Woodley, the leader of the Transport and General Workers Union, who had fought to rescue the joint venture with SAIC, described the closure of Longbridge as "the darkest day ever in the history of the British car industry".

However, the four directors of PVH, who have been criticised for taking £40m out of MG Rover as it slid towards collapse, said they remained hopeful that car making at Longbridge was not at an end.

Stephen Byers, the former trade and industry secretary who brokered BMW's sale of Longbridge to Phoenix five years ago, said he had no regrets about the original deal. "When people look back at the circumstances which applied, I hope they would agree that was the right decision," he told Channel 4 News.

Ian Powell, one of the joint administrators, said they had received 70 approaches about MG Rover but none would have resulted in its sale as a going concern. He said some parts of the group might be salvaged, such as the MG TF sports car division, which employs 300 workers and had attracted "keen interest".

On the decline of a car giant

'This is a desperate time for the workers at Longbridge and their families'

Tony Blair

'I would have liked to see the Government get involved earlier. They left it very late'

Michael Howard leader, Conservative Party

Despite a concerted view to the contrary, we remain hopeful that car making at Longbridge is not at an end'

Phoenix Statement

'I certainly hope that John Towers, who did try and do everything possible to pull off a deal with Shanghai, will now offer, he and his fellow directors, to put the money that they made out of MG Rover into a trust fund or pension funds or whatever is appropriate for the workforce and their families'

Patricia Hewitt Secretary of state for trade and industry

'This will undoubtedly be investigated. We will look into this'

Gordon Brown, Chancellor of the exchequer

'I feel devastated about the fact that we have been stopped at this final hurdle. I don't feel guilty about the process we have been through. Wind back the clock five years and I would have done the same'

John Towers, Director of Phoenix Venture Holdings (PVH)