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Car Industry

Volume 485: debated on Thursday 11 December 2008

2. What steps the Government are taking to support the car manufacturing industry; and if he will make a statement. (242332)

We are closely engaged in supporting the UK automotive sector, both at a European level, through pressing the European Investment Bank for an €8 billion automotive support fund and domestically, through our investments in low-carbon research and development and training, and our package of support for small and medium-sized enterprises announced in the pre-Budget report.

The Minister will be aware of speculation in the newspapers that secret talks are taking place between the Government—Ministers and perhaps his officials—and the owners of Land Rover and Jaguar about some kind of financial support. I would be grateful if he would tell the House whether that is the case and whether, given the severe situation in America and in its automotive sector—General Motors is in trouble over there—the Government are also having talks with Vauxhall, which is owned by GM.

I do not want to speculate on talks that the Government may or may not have been having with a range of automotive companies. What I want to say clearly to the House is that the automotive sector is extremely important to the UK. Peter Mandelson and I publicly had a meeting with a wide cross-section of the automotive manufacturers, suppliers and retailers on 27 November. We continue to engage closely with the sector, and I am determined that we shall do everything we sensibly can to help viable businesses during these exceptional times.

Clearly these are difficult times for the motor industry. Some of the major manufacturers are going on extended breaks as a result of falling sales. Does my hon. Friend agree that, although understandable, that can cause major problems down the line in the components sector? Does he also agree that we need to take real action to ensure that our technological base in motor sport, components and other parts of motor manufacturing is maintained, not just for the sake of jobs right now, but to secure our prowess in those areas in the future?

My hon. Friend is an expert in these areas, and I agree that the integrated nature of the automotive supply chain brings real challenges for suppliers when the automotive manufacturers decide to take extended breaks. We are acutely aware of the pressures that the situation is causing a number of supply chain companies. As he is aware, the UK has about 200,000 jobs in the supply chain alone, about 500,000 in retail and about 180,000 in direct automotive production. This is a vast and important sector of the UK economy, and we need to examine what more we can do to support companies that are going through very difficult times at the moment.

I heard what the Minister said, and he cited the statistics that I was going to cite about the manufacturing and retail sectors. But continuing to engage closely is not enough; action is urgently needed. I have just come from a meeting with the Retail Motor Industry Federation, which has suggested a range of practical measures that would help it and manufacturers. Such measures include abandoning the Government’s proposals to remove the right of car retailers to claim back vehicle excise duty in respect of unused car discs and ending the Government’s punitive attack on void rates. The pathetic measures introduced by the Chancellor just will not be enough for car dealers, who will have empty premises next year. A range of things, such as introducing 100 per cent. capital allowances for commercial vehicles, could be done now—urgently—to prevent an imminent disaster, not just for manufacturers, but for retailers.

There is a range of things that the Government are already doing, such as the small business finance scheme, the £1 billion in loan guarantees, the schemes to convert business debt into equity and the transition loan fund, of which the hon. Gentleman will be aware, that exists in the west midlands and other places. I have already written to supply chain companies, through the manufacturers, outlining the package of measures that are already available from the Government. However, we need to see whether we can do anything further, because we recognise as a Government that the UK automotive industry is of critical national importance. The Government are taking action. The action that we took on the recapitalisation of the banks and through the £20 billion fiscal stimulus, which the Opposition have opposed, is about responding. We are trying to kick-start the economy and help companies through difficult times, and I hope that the hon. Gentleman appreciates the actions that we are taking.

My hon. Friend is quite right to say that the car industry is of national importance, but so is the steel industry, which provides it with the basic raw materials. He knows that Corus recently had a meeting with the Prime Minister and other Ministers. Corus is making efforts to keep the work force together, which is a welcome break from the past, because losing a skilled work force makes it difficult when things turn around. Will my hon. Friend assure me that the Government will give Corus whatever assistance is appropriate to see it through this difficult period?

As I have said, we want to do all that we sensibly can to help viable businesses. My right hon. Friend will be aware from reports in the newspapers today of the discussions that Corus has been having with the unions about taking a pay cut, and of the other measures being taken to see people through difficult times. Whether we are talking about the steel, automotive or construction industry, the global credit crunch and the recession that we are all facing are bringing enormous challenges to companies, to people who work in them and to Governments. We need to ensure that we are up to the mark and are taking action to support our companies through these difficult times, and that is exactly what we are going to do.

As has already been said, the car manufacturing industry is a major part of British industry, as well as a substantial employer. Given that President-elect Obama has decided that the US car industry is too large to fail, what assessment has the Department made of the potential for a failure in the car industry to give rise to a systemic failure in UK plc? Would the Government consider a similar decision, and if so, what criteria would they use to make the judgment?

I have already quoted figures that demonstrate the importance of the automotive sector to the UK economy, and I do not need to repeat them. The Government are engaging with the automotive industry on a daily basis about the problems that it faces. We have already taken a range of measures to support companies, particularly some of the small and medium-sized companies in the supply chain, with the schemes that we have made available, which we are widely publicising to the industry.

There is a case for saying that we need to do more and we are actively considering that. I can only repeat that the circumstances in which we find ourselves are circumstances that we have not seen for more than a generation. Sales have fallen off a cliff. The November figures show that UK car sales are down by 37 per cent. The situation is the same in the United States and sales are down by 50 per cent. in Spain. Although they have declined less in France, Germany and Italy, the declines are still significant. When companies’ sales disappear, we need to ensure that we bring back confidence to the market as quickly as possible, which is why the fiscal stimulus is so important and why it is irresponsible of the Conservative party to oppose it.