The Government helped kill Rover by giving suppliers and dealers the impression it was close to collapse, the firm's chairman has claimed.

John Towers, chairman of Rover owners Phoenix Venture Holdings, made the claim in written evidence to a House of Commons inquiry.

He accused the Department of Trade and Industry of telling local officials they expected Rover to go bankrupt, which meant the news leaked out to the firm's business partners.

As a result, suppliers were unwilling to provide parts on credit and dealers lost faith in the business, he said.

The inquiry, chaired by Midland MP Peter Luff (Con Mid Worcestershire) is to sort through a number of angry and contradictory explanations for the death of Rover, which closed its factory in Longbridge, Birmingham, last year.

The final straw for Rover came when suppliers refused to supply parts unless it paid up-front, which it could not do.

Conservative Trade spokesman Alan Duncan has accused the Government of "pursuing an option which has led to the complete destruction of Rover" by helping Phoenix buy the manufacturer from BMW in 2000.

However, former Trade and Industry Secretary Stephen Byers said he made the right decision when he helped "facilitate discussions" between BMW and Phoenix.

Evidence from DTI officials reveals the lengths the Government went to try to save Rover by helping it sign a deal with Shanghai Automotive Industry Corporation (SAIC).

Tony Blair wrote to Chinese Premier Wen Jiabao asking him to back the partnership and John Prescott, the Deputy Prime Minister, raised the deal with him during a visit to China.

Mr Towers' criticisms focused on the decision by Patricia Hewitt, the former Secretary of State for Trade and Industry, to begin planning for Rover's collapse early in 2004. It followed a report concluding that the firm could run out of cash as early as autumn that year.

The DTI tried to keep the plans secret, but Mr Towers suggested they leaked out and damaged Rover's standing.

His evidence to the inquiry was presented as a series of questions he believes should be put to the Government.

He said: "Is it not the case that such planning necessarily required opinions regard-ing the viability of MGRG [MG Rover Group] being discussed with individuals at local agencies who had close ties to MGRG suppliers and dealers?"

He went on: "During the contingency planning, despite well-documented progress in negotiations with SAIC/Nanjing Automobile Corporation, MGRG suffered increasing widespread commercial pressure, and notably on its supplier payment terms and dealer relationships

"Can this paradox not be attributed to the negative impact created by general knowledge of the contingency plans such that they became a self-fulfilling prophecy?"

Alan Duncan, the Shadow Trade and Industry Secretary, laid the blame on Stephen Byers, the former Trade and Industry Secretary, who encouraged BMW to talk to Mr Towers and Phoenix in 2000.

Mr Duncan said: "Setting aside any judgement about the propriety of the ensuing conduct of the 'Phoenix Four', the business model they championed for Rover was doomed from the outset."

He added: "The evidence I wish to submit to your committee proves beyond all doubt that this was inevitable and that it was known at the time. The political judgement behind Mr Byers' approach illustrated supreme incompetence."