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Car Industry

Volume 485: debated on Thursday 11 December 2008

5. What recent representations he has received on the effect of the current economic climate on the car manufacturing and components industries; and if he will make a statement. (242335)

We have wide-ranging contact at all levels with the automotive industry. The Secretary of State for Business, Enterprise and Regulatory Reform and I met automotive manufacturers, suppliers and retailers on 27 November and we continue to have close dialogue.

Factories such as Nissan in Sunderland, Honda in Swindon and Toyota in south Derbyshire have components supplied by extensive networks of much smaller firms, which, lacking significant cash reserves, suffer disproportionately as car production is scaled back. Does the Minister agree that a possible erosion of jobs in parts suppliers by up to 25 per cent. will reduce the anchorage of car plants in the UK, with remaining firms sourcing much more from abroad? Further to the question asked by my hon. Friend the Member for Birmingham, Northfield (Richard Burden), what steps is the Minister taking to ensure British component firms have the necessary access to credit to enable them to trade through the deepening recession?

My hon. Friend is absolutely right to point to the importance of the supply chain and UK automotive manufacturers sustaining it in the future. Clearly, some of the major difficulties that the automotive industry faces have an impact on the supply chain. We saw Wagon Automotive going into administration in the UK only very recently. Any job losses are regrettable.

As a Government, we need to ensure that we continue to provide measures—the finance that is available—to the sector. As I explained, I have written to automotive suppliers, through the lead manufacturers, outlining a range and package of measures that are on the table and available now or will be available very shortly. Again, we need to see whether there is more that we can do to help some of the companies that are viable but are facing unprecedented shocks to their businesses as a result of the problems that we are seeing internationally.

Will the Minister confirm that it is not just about the manufacturers, or even the component manufacturers, but about the national network of dealerships, which employ dozens, if not hundreds, of people in each of our constituencies? As we know, they are struggling and have had a very bad year. Will he help them by the clarifying precisely which cars will have their vehicle excise duty increased over the next year or two, because people out there are still completely confused by this and it is acting as another deterrent to cars being sold? Will the Government enter into a campaign to demonstrate precisely which cars will have their VED reduced or increased, and clarify the situation for the people at large?

The hon. Gentleman is right to point to the importance of the retail end of the industry and the car dealership networks that exist in the UK. They employ significant numbers of people. While they might not be as geographically concentrated as some of the big automotive plants, the cumulative effect is that something like 500,000 people work in that retail sector. What we said about VED in our pre-Budget report was clear, but I will talk to some of my colleagues and officials in the Treasury to see whether there is more that we might need to do to ensure that that information is widely available. The industry as a whole has welcomed the announcement that we made on VED. We need to ensure that we actively promote it.

My hon. Friend will be aware that many small companies in my constituency are second, third and fourth-tier suppliers to the car industry. If they go under, it will not only be a tragedy for the employees of those companies, but it could undermine our future industrial capacity to meet the upturn when it takes place. Will he undertake to listen to their submissions and work on policies, but above all will he examine the potential role that Government procurement could have in the motor industry to sustain demand at this time when it is most needed?

My hon. Friend has made some key points. Obviously the development of lean production techniques and “just in time” manufacturing has led to a hugely interrelated supply chain. If one part of it suddenly breaks down, major problems can be caused to the process of making cars, so it is right for automotive companies themselves to take a close interest in the financial performance of their supply base. A number of companies have given their suppliers credit to ensure more prompt payment and to help the supply chain through difficult times.

I am not sure that a major Government programme of purchasing new cars would be effective. What we want is for people to start buying cars again because they feel confident about the future, and there are some pretty good car deals around at the moment.

The Government have already introduced a substantial bail-out package for the banks, and there have been calls for them to do the same for the automotive sector. Will the Minister tell us precisely what the policy is on the use of further taxpayers’ funds for future rescue packages, to enable the half million employees in the sector to whom the Minister referred to know exactly what they can and cannot expect from their Government?

We were absolutely right to make the decision to recapitalise the banks. Even the Conservatives have welcomed that decision, although they have cavilled at measures such as our credit guarantee scheme. The scheme is effective, and by the end of the year some £100 billion worth of guarantees will have been issued.

As I have said, it is important for us, as a Government, to see what we can do to help viable businesses through difficult times. We are engaged in a contingency planning exercise and we are considering a number of possibilities, which is the right thing for us to do. We will continue to consider what further sensible measures we can take to support the automotive industry during the current incredibly difficult period.