MINISTERS are promising MG Rover’s would-be Chinese partner a £100 million “dowry” to prevent the collapse of a proposed rescue deal for the troubled Midlands carmaker.

It is understood that officials have instructed the British Embassy in Beijing this week that the Shanghai Automotive Industry Corporation (SAIC) should be offered sweeteners for signing a partnership agreement with MG Rover.

The last-minute move from the Department of Trade and Industry has sparked accusations that taxpayers’ money is being used to shore up Labour’s vote in key seats.

Patricia Hewitt, the Trade Secretary, and John Prescott, the Deputy Prime Minister, are said to be alarmed that MG Rover’s latest attempts at a partnership — its third since its rescue five years ago — may unravel before the election.

Lord Oakeshott of Seagrove Bay, a Liberal Democrat Treasury spokesman, said: “This is throwing good taxpayers’ money after bad. There are many better uses for £100 million of taxpayers’ money [than] avoiding electoral embarrassment.”

MG Rover employs around 6,500 people in the West Midlands, while 50,000 to 60,000 jobs in support industries depend on the survival of one of Britain’s last remaining mass car manufacturers. The plant produces around 130,000 cars a year and MG Rover has under 3 per cent of the UK market.

Labour is worried about losing seats in Birmingham, where there is a high concentration of Muslim voters hostile to the war in Iraq. The Government is also sensitive to attacks from trade unions that claim that it has done little to prevent the shrinking of Britain’s manufacturing base.

A crisis around MG Rover, which is still an important symbol of British industry, would be a huge embarrassment before an election that is expected in May. Ministers will have noted comments from Tony Woodley, general secretary of the TGWU, which is likely to give up to £1 million to Labour’s campaign, who said that the Chinese deal was the “only show in town”.

SAIC, one of China’s biggest carmakers, has been in talks over collaboration with MG Rover since last summer, but a final agreement has been elusive and hopes have been dampened after SAIC commissioned an audit from an engineering consultancy that cast doubt on the benefits of the deal.

It is believed that talks between the two sides have centred in recent months on MG Rover’s engine capabilities and, in particular, its K-series engine. SAIC, which produces cars in joint ventures with Volkswagen and other Western carmakers, is keen to develop its own car by utilising the British firm’s engine technology expertise.

However, it is thought that Ricardo, a British consultancy that works for all the big car companies, recently concluded that only parts of the Rover’s K-series engine would be useful. This could severely limit the extent of the partnership.

Last year John Towers, MG Rover’s chairman, announced that a full deal was imminent and it was speculated that up to £1.5 billion could be ploughed into the Longbridge carmaker to develop new models.

MG Rover needs a full partner to develop new models because it does not have the resources to replace an increasingly out-of-date range.

Mr Towers’s pronouncements appear to have angered SAIC, which emphasised that the deal was far from complete and that a £1.5 billion injection was out of the question. The company is concerned about a slowdown in the growth of its domestic market and last October bought SsangYong Motor, the South Korean carmaker, for $500 million.

SAIC is regarded as MG Rover’s last hope for a partnership after failures with another Chinese company and Proton of Malaysia. In May 2000 Rover was rescued after a consortium of local businessmen bought it for a nominal £10 from BMW. BMW had first planned to sell it to a venture capital group, which would have slashed the business and kept only the MG brand.

Last year MG Rover predicted that a deal would be signed this month. Now it says that there is no timetable for final agreement but that the talks are still progressing well. MG Rover said that SAIC was happy with the K-series engine and that the Government had not discussed any offer of money.

Government money would take the form of development aid, but it could still fall foul of European regulations and put Peter Mandelson, the European Union Trade Commissioner, in a very awkward position.

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BMW gave the business a £500 million cash injection and wrote off a similar amount of debt

The £500 million working capital is supposed to be repaid after 49 years if MG Rover becomes profitable

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