Government and the Fate of MG Rover
Writing about web page http://www.bis.gov.uk/mgrover-report
The demise of MG-Rover in 2005 has many lessons. Most of them, no doubt, are in the official report, just published.
But the most important political lesson may well be this one.
In 2000, the government tried too hard to keep MG Rover in business. It did not try hard enough to do the right thing.
The right thing would have been to let MG Rover go to the wall.
If a business asset is good only for stripping, it is predictable that the best-looking promises to keep it in business will come from asset strippers.
If MG Rover had gone to the wall in 2000, nearly everyone would be better off today.
- The taxpayer would have saved the £16m cost of the Phoenix inquiry and report.
- BMW would have saved the "dowry" of loans and grants to the Phoenix Four totalling £475m.
- MG Rover's creditors would have saved nearly £1.3 billion of bad debts.
- The MG Rover workers and their community would have saved five years of false hopes and delayed recognition of their true situation.
If the government had done the right thing in 2000, in fact, everyone would be better off today -- except the Phoenix Four.
Mark Harrison
13 Sep 2009 19:48
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Tags: Economics Politics
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