£1 billion bill for MG collapse

25 July 2006

Tax payers foot almost £300 million
Businesses fork out £600
£6.5 million government loan written off

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The collapse of MG Rover has cost taxpayers nearly £300 million, while businesses will probably have to foot a bill of more than £600 million.

MPs on the Public Accounts Committee (PAC) said the steady decline of the manufacturer between 2000 and 2004 has cost tax payers £270m, including £90m invested to modernise the West Midlands.

The PAC's report into the collapse of MG Rover also said the company's £500 million pension deficit could have to be met by the business-funded Pension Protection Fund, while a further £109 million is still owed to creditors.

The majority of a £6.5m loan given to MG Rover by the Department for Trade and Industry in a bid to keep the manufacturer afloat will also have to be written off. MG Rover shut down a week after the loan was given.

The DTI was also criticised by the committee for being too 'distant' from MG Rover, and that there were 'serious gaps' in its plans to help in the sale of the company if it did collapse.

The committee said the collapse of the company has had a profound effect on the local area and the lives of thousands of families. Of the 6000 workers employed by MG Rover, 2000 are still out of work.

• The DTI's investigation into MG Rover's collapse is expected around the end of this year. It will cover how the company was run by Phoenix Venture Holdings, and how directors of PVH received £40m from MG Rover during its five-year decline.