PATRICIA HEWITT, the Trade and Industry Secretary, who was once the most vocal ministerial critic of generous pay for failure in the boardroom, yesterday launched an extraordinary defence of the substantial remuneration taken by MG Rover directors.

While MG Rover is not expected to break even until 2006, four years later than the group’s target, two directors at the carmaker pocketed salaries of £530,000 between them last year, with Kevin Howe, chief executive, having the potential to double his salary with bonuses.

The four directors who bought MG Rover in May 2000 for £10 share a £13 million trust fund for their pensions with Mr Howe, who joined after the deal. The four initial directors also each took £2.5 million from a loan note they awarded to themselves.

Those four initial directors are expected to net at least another £1 million each when they wind up MGR Capital, a vehicle-leasing business they bought from BMW.

Ms Hewitt’s remarks at the Birmingham Motor Show are likely to anger trade unions and community leaders and raise concerns that the DTI is not keeping abreast of developments at MG Rover.

Four years ago the DTI was criticised for being unaware that BMW was about to dump the carmaker. Yesterday Ms Hewitt insisted that executive pay at Rover was a matter for investors and it was their responsibility to hold the company to account. But there are no investors in Rover, which is a private company, except for the four directors who took over the business. The workforce has nominal shares but no voting power.

Ms Hewitt said: “Company directors who take big risks and achieve big success deserve big rewards. There were big risks involved in the starting up of Rover again when it looked as though it was the end of the road for the company.”

Her comments come ahead of a report by the Trade and Industry Select Committee, which is likely to be critical of MG Rover’s boardroom pay and its structure because all corporate governance is in the hands of the four directors.

Sources close to the minister emphasised that the DTI was monitoring MG Rover but it was anxious not to rock the boat while the company conducted joint venture talks with potential partners.

John Towers, a former Rover chief executive, Nick Stephenson, a former Rover engineer, John Edwards, a dealership owner, and Peter Beale, Mr Edwards’s finance director, each put in £60,000 as surety for the business along with a nominal £10 payment to BMW for Rover. In return they received the assets of the company which occupies a sprawling site in Birmingham, a large inventory of cars and a £500 million loan from BMW along with the writing-off of about £500 million in debts by the German carmaker.

HOW THEY FARED IN 2002

• 2002 loss for Phoenix Venture Holdings (MG Rover parent company

  ‘Where I have issue is with rewards for failure. Directors receiving extraordinary payoffs for delivering falling profits, dwindling investment, redundant workers and out-of-date skills . . . this is just plain wrong’ Patricia Hewitt, April 2003

• £12.95m paid into pension trust of 5 directors, including John Towers plus £10m in handouts

  ‘Company directors who take big risks and achieve big success deserve big rewards. There were big risks involved in the starting up of Rover again when it looked as though it was the end of the road for the company’ Patricia Hewitt, yesterday