£40m to stop catastrophe

Patricia Hewitt today announced £40 million in aid for firms supplying MG Rover, as Labour rushed to limit the political damage caused by the collapse of the car maker.

The Trade and Industry Secretary also promised the Government would do "everything it could" to try to continue car manufacturing at the Longbridge plant in Birmingham.

A taskforce is being set up to help the 6,100 Rover staff facing redundancy but another 20,000 people work for components firms reliant on Rover.

With the crisis threatening to derail Labour's election campaign, Ms Hewitt visited Birmingham for talks with unions, staff and managers. MG Rover, Britain's last independent volume carmarker, is understood to have called in accountants PricewaterhouseCoopers.

There was confusion over the exact status of the car firm and Longbridge. Ms Hewitt last night said the firm had been put into administration, but this was denied by Rover bosses who said they had merely asked accountants for advice.

The firm had sought a rescue

deal from China's State-owned Shanghai Automotive Industry Corporation. The British Government said it had been ready to issue a £100 million bridging loan to Rover, but this was dependent on a deal with the Chinese, and the talks failed.

In a sign of Labour's desperation, Mr Blair phoned China's president on Wednesday in a last-minute bid to swing the deal. Today Ms Hewitt said: "Just as we did everything we could to make a deal possible, we will now do everything we can to secure the future of at least some car manufacturing at Longbridge." She said the £40million support package was aimed at helping ensure the future of the components industry that supplied Rover.

The minister also said that when she said Rover had been put into administration, she had been accurately reporting a conversation with Rover chief John Towers.

The meltdown at Longbridge means Mr Blair now faces having to defend his Government's economic record against the backdrop of thousands of job losses in a key election battleground. His party is said to be rueing the decision to hold its manifesto launch in the Midlands next week.

Longbridge is surrounded by marginal Birmingham seats such as Yardley, Edgbaston and Hall Green. But the fallout will extend to constituencies including Dudley South, Wolverhampton-South West, Redditchand Stourbridge.

The Conservatives seized on the crisis. Tory co-chairman Liam Fox said: "It is interesting that while Tony Blair and Gordon Brown were congratulating themselves on their handling of the economy, another 6,000 people were losing their jobs in manufacturing."

But Tony Woodley, general secretary of the Transport and General union, said ministers could not have done more to try to rescue Rover. He was backed by CBI director-general Digby Jones, who said: "There was no deal the Government could facilitate."

Tony Murphy, boss of the Amicus union, added: "Yet again I'm having to write an obituary for a stalwart of British manufacturing. The whole of the West Midlands is becoming a ghost town."