Blair ignored Brown on Rover offer

Tony Blair today faced claims that he went against advice from key advisers over plans to offer Rover a £100 million rescue package.

The Prime Minister is said to have brushed off warnings from the Chancellor and Trade and Industry Secretary that the loan was not a good use of taxpayers' money.

A report in today's Financial Times claims he was also warned that the deal could be illegal under laws governing state aid.

Ministers are under intense pressure to save the stricken car giant as the general election looms. Up to 6,000 workers risk losing their jobs if the Longbridge plant in Birmingham closes.

Gordon Brown and Patricia Hewittt are said to have told the Prime Minister that a £100 million loan for Rover would not qualify as a "prudent and proper" use of taxpayers' money.

During government discussions about the possibility of bailing the company out, it is claimed the Prime Minister was warned that a loan might be illegal. Under EU and UK laws, state aid cannot be used to prop up a company which has no hope of being revived in the long term. Government cash can only be given if there is a genuine prospect of the business being rescued.

Today's report claims Mr Blair cast aside these fears to insist the government should step in. The Prime Minister is said to have intervened after a private meeting at Number 10 with Tony Woodley, head of the T&G union.

The plan to offer the company ?100 million to tide it over was eventually abandoned when it became clear that the Chinese company interested in buying the plant was pulling out. Shanghai Automotive Industry Corporation (SAIC) has made it clear it is no longer interested in the business.

Downing Street told the Financial Times that the ?100 million would only have been available if a deal between Rover and SAIC had still been on the cards.

The claims come amid new questions over Rover's accounts. MPs are demanding an inquiry into how a ?427 million interest-free loan was used. The cash was paid to Rover's owner Phoenix Ventures when it bought the company from BMW for ?10 in 2000. It is technically repayable in 2019, but it is understood BMW now accepts it is unlikely to get the money back.

Reports today claim that Phoenix accounts show that the money has not been used. If true, it will infuriate Rover workers and their families. Such a sum would be enough to fill the black hole in the company's pension fund and could fund appropriate redundancy payments for staff.

Analysis of Rover's published accounts by independent analysts is said to show serious discrepancies in the figures.