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Automotive Industry

Volume 487: debated on Tuesday 27 January 2009

With permission, Mr. Speaker, I shall repeat a statement made by my noble Friend the Secretary of State for Business, Enterprise and Regulatory Reform. I begin by extending a warm welcome to the right hon. and learned Member for Rushcliffe (Mr. Clarke), who has returned to the Opposition Front Bench.

I want to make a statement on the Government’s plans to help the British automotive industry to weather the downturn in the global economy. The automotive industry—with its nearly 1 million employees, from manufacturing to retailing, and its £10 billion in added value to the economy—is in the front line of the downturn, with its output falling faster and further than any other sector’s since the summer.

We need to counter that to prevent an irreversible loss of capacity, skills and technology. The health of the automotive industry is vital to the strength of manufacturing in Britain and is at the heart of many of our regional economies. The industry and its supply chain will benefit from the measures that the Government have already taken to boost the economy. Those include the VAT cut, which saves consumers hundreds of pounds when buying a vehicle, and Government guarantees that secure £21 billion in new and existing credit lines and lending for businesses, many of them in the automotive industry supply chain. However, I recognise that we need to do more. Today’s measures will give a specific boost to the industry, providing real help and laying the foundations of its reinvention for a low-carbon future.

The industry is not a lame duck, and this is no bail-out. The industry has been transformed over the past decade. Productivity has risen, catching up and overtaking that of both France and Sweden. In Britain today, we have some of the world’s most productive car plants. For the future, Britain needs an economy with less financial engineering and more real engineering. The car industry can and should be a vibrant part of that future. The steps that we are taking today will help companies to speed their way to becoming greener, more innovative and more productive. This is the route to securing jobs for the long term as we build a more balanced economy for Britain’s future.

The world’s car industry is at a turning point. In Britain, we need to be at the leading edge of the development of low-carbon vehicles and green manufacturing. This offers a major business opportunity for us. However, this greening of industry needs investment in plant, research and development. Today I can announce that to back that investment, we will provide loan guarantees to Britain’s automotive manufacturers and large suppliers. First, we will offer guarantees to unlock loans of up to £1.3 billion from the European Investment Bank. Secondly, we will offer guarantees to support up to a further £1 billion of lending, or loans where appropriate, to cover worthwhile investments that are not eligible for EIB support or that will bring special value to Britain. Applications will be assessed by us on a case-by-case basis. There is no blank cheque on offer; there are no operating subsidies. We are committed to ensuring that anything backed by the scheme offers value for taxpayers’ money, enables us to green Britain’s economic recovery, delivers significant innovation in processes or technologies for the long term, and supports jobs and skills in Britain.

To support these aims, the Government will build on their programmes that are currently supporting the automotive industry. To further strengthen the sector’s skills, we are increasing funding for the training of all employees. We have developed a package to tailor the Government’s Train to Gain programme to meet the automotive industry’s specific needs. If there is the demand from the industry, my right hon. Friend the Secretary of State for Innovation, Universities and Skills will boost the funding to support new training to £100 million from its present £65 million. This offers real help to people, including workers in small and medium-sized enterprises in the automotive supply chain. The £50 million economic challenge investment fund that is being announced separately today by the Higher Education Funding Council also creates new opportunities for automotive employers looking to tap into academic expertise in improving business performance.

Earlier this month, my right hon. Friend the Transport Secretary announced the provision of £250 million to support consumers switching to ultra-low-carbon cars, but we want the car industry in Britain to meet that demand for low-carbon cars. So alongside our loan guarantees for the greening of the industry, the next element of today’s announcement is that I am inviting the regional development agencies to work with the Technology Strategy Board to bring forward a further step change—[Interruption]—in our programmes for research and development into cleaner engines, lighter cars, plug-in hybrids and components for electric vehicles. [Interruption.]

Order. Hon. Members must listen to the Minister. He is putting a statement before the House, which is something that Back Benchers often call for—so please listen.

Thank you, Mr. Speaker.

This investment will build on the £110 million of support for research and development that was announced last September.

We are looking at steps to improve car company financing arms’ access to additional funding. The finance arms play an important role in providing the credit that keeps the industry functioning. The Secretary of State has asked the new Trade and Investment Minister, Mervyn Davies, to draw up a plan for improving their access to finance—a task to which he will bring considerable experience and expertise.

Taken together, today’s announcements will provide our leading automotive companies, their workers and suppliers with a significant boost. It will also ensure that the downturn does not derail the investment in innovation and change that is needed to make Britain a world leader in the development and manufacture of low-carbon vehicles. This is both an economic objective and an environmental imperative.

The automotive industry knows that it must change to succeed in this new world. It has to be cleaner and greener. The Government know that this is an important national objective—a key to building a competitive and balanced economy. Within the resources agreed in the pre-Budget report and the provision made then for such contingencies, we are determined to counter the credit crunch, counter the recession, create a level playing field for the industry and build Britain’s low-carbon industrial future. As a Government, we will take whatever action it is possible and appropriate for us to take. I commend this statement to the House.

May I begin by thanking the Minister for welcoming me to my new position? I think I have debated matters upstairs in Committee with him twice in the past six months, so I am used to his courtesy and competence, and I look forward to our exchanges.

I am grateful to the Minister for his courtesy in repeating to this House the statement made a few moments ago by the Secretary of State in the upper House. I actually think it is a constitutional outrage that it is being done in that way, and that it is a very poor way of accounting to the House of Commons, but at least we have been given the details of the package, such as it is.

May I say that I am slightly disappointed? I thought that the Secretary of State, whom I am shadowing, would produce some new ideas and some dynamite. He has been trailing a massive programme of support for the automotive industry, but unfortunately the Minister has had the task of producing pretty small beer. Is it not the case that the Secretary of State is not producing a bail-out because the Treasury has finally won an argument inside the Government and explained to him that it cannot afford the kind of support for the industry that, it seemed to me, his Department was trailing over the weekend?

Does the Minister realise that this package is part of the Government being behind the curve and too late, and not responding to events that are deteriorating by the week before they produce any package at all? Does he recall that back on 16 October, he stated that the Government “stands ready to assist” the car industry? By November, we were advocating a loan guarantee scheme for the finance arms of car companies. [Interruption.] So was the hon. Member for Ellesmere Port and Neston (Andrew Miller).

The key problem was obviously that demand had fallen off a cliff, no one was buying a car, and the people who wanted a car and could afford the hire purchase could not get the credit arrangements to buy it. It is part of the credit crisis, the credit crunch, in this country that should be the main object of our intentions at the moment. The Secretary of State said that the Government were already working on that, but here we are months later, and during that time sales of cars in this country have dropped by half while the Government dithered. And what do they produce on this key subject of how to help those consumers who can afford it to get credit, so that they can buy a car? We are delighted to discover that the Government say, “We are looking at steps to improve car company financing arms’ access to additional funding.” The new Trade and Investment Minister, Mervyn Davies, is to set up a task force to consider that. Will the Minister ask the new Minister to do something to improve the Government’s competence, their ability to keep up with events and their ability to produce programmes that work? May I advise the new Minister not to involve the Prime Minister in any preparations? We have all lost faith in his competence in the delivery of anything.

To the rest of the statement I think the car industry will have listened in vain. The Minister made a great deal, in his few sentences, of the money from the European Investment Bank, which I think was first announced back in September last year, and which is already being expended by other European countries.

The other matter in the statement is the loan guarantees for green technology and so on. Again, they are well intentioned, but the Government are not giving details. We will have to explore whether they produce detailed answers on how they are going to allocate them. They say that they will have to be satisfied and mention all the provisos that are in place, but again, experience shows that these packages are usually not in place for weeks and weeks after the Government have announced them. They are well intentioned, but they are not well financed—they are loan guarantees. At the end of the statement, somebody has insisted on including “this is all within the resources announced in the pre-Budget report.” The Treasury—or somebody—has noticed what we have been saying: that the wave of panic-stricken announcements has pledged the taxpayers’ credit for tens of billions of pounds. Someone has said to the Department for Business, Enterprise and Regulatory Reform, “We can’t afford anything but modest loan guarantees, with all these provisos about how to give them out.”

This is a vital industry, of particular importance to the industrial midlands, but important throughout the country. I suspect that one of the problems with the loan guarantee scheme is that, in the past 12 years of the Government’s activities, there has been such a decline in our manufacturing base that 80 per cent. of any sales money now goes to cars that are made abroad and imported. In the past 12 years, our trade deficit in motors has more than doubled, so packages for the car industry are relevant.

I understand that a car summit will take place tomorrow. Given that a Commons Minister must be there, perhaps this Minister may even be allowed be attend. I urge him, when he gets there and faces Tata and other multinational giants, which have strong balance sheets, to ask them what they will bring to the party and to try to clarify what on earth the Government can do that is targeted properly at the automotive industry now. As he rightly says, the industry is suffering worse than almost any other at a time of catastrophic decline, which the Government are plainly unable to answer or measure up to with proposals and schemes.

I think I am going to enjoy debating with the right hon. and learned Gentleman downstairs as much as I enjoyed debating with him upstairs. Once we get beyond his synthetic anger about our having a Secretary of State in the House of Lords—the right hon. and learned Gentleman was in the Cabinet when Secretaries of State sat in the House of Lords—perhaps we can make some progress.

I also hope that we can make progress on debating the real issues. I do not want to play party political point-scoring games about who first thought of a working capital guarantee scheme to help with company credit. It has been known for a long time that that was a problem for the industry.

The right hon. and learned Gentleman quoted me, but he should also quote the pre-Budget report, and the announcements about setting up the working capital scheme and the enterprise finance guarantee. Both measures give significant support to industry as a whole, not only the automotive industry, and respond to some of the key issues that companies have presented to us, day in, day out. They want access to credit. The enterprise finance guarantee provides loans now for small companies with a turnover of under £25 million. They can go to their local banks and discuss the position with them. From 1 March, we hope that the working capital scheme will be available, too, providing credit that is needed for new and existing credit lines.

Perhaps the right hon. and learned Gentleman misread the statement, but we said that we had tasked Mervyn Davies to work to find a solution; we did not say that we had set up a taskforce. [Interruption.] The right hon. and learned Gentleman asks me from a sedentary position whether I can explain the distinction. There is a great difference between asking somebody to do something and setting up a taskforce. We have asked Mervyn to do the job. If the right hon. and learned Gentleman paid a bit more attention to detail when reading the statement, we would all be the better for it.

What we are announcing today is support that will guarantee the loans that the EIB is going to be issuing—very shortly, we hope—to some of our major car manufacturing companies. Under EIB rules, there has to be a guarantee for funding above £200 million, and we are saying today that we will make that guarantee available. We have also stated clearly that we are making available guarantees for up to £1 billion more in lending to companies with a turnover of above £25 million in the automotive supply chain. I believe that that will be widely welcomed by companies in the automotive sector.

We did not hear any constructive suggestions from the right hon. and learned Gentleman. I know that he is new to speaking from the Opposition Front Bench, but in addition to opposing what we say, he needs to come up with some of the characteristic policy interventions that I think have been the hallmark of his political life. We heard nothing positive from him today, however. We believe it right that there should be a fiscal stimulus, including a VAT cut. The package of measures that we are announcing today is possible only because we are putting a fiscal stimulus into the UK economy. I thought that the right hon. and learned Gentleman believed in that; now, I suppose that he does not.

I hope that he and I will be able to have constructive debates on these matters in the future; I am sure that there is the potential to do so. Meanwhile, I would have thought that he would wish, on reflection, to welcome the support that we are putting in place for the automotive industry.

May I reassure my hon. Friend that there will be a warm welcome on this side of the House for his statement today, particularly from those Members who have interests in cars, vans and trucks in their constituencies? May I press him a little further, to ensure that there will also be a positive welcome from the industry for what he said about the £16 billion EIB funding that will be available over four years for the greening of the industry, as he put it? Am I right in saying that that Government guarantee will be made available to those companies that do not enjoy a single-A rating—I think that that applies to the whole of the British motor and truck industry at the moment—and that we will be able to go further than the £200 million, access to which would otherwise be restricted, with a full Government guarantee? That could be a major influence in getting the funding that we need.

My hon. Friend is a long-standing expert on these matters, and he is absolutely right. Under the EIB’s rules, loan applications in excess of £200 million have to be guaranteed if companies do not have the requisite credit rating. A number of companies in our automotive industry fall into that category at the moment, but they need this guarantee, and our proposals will help to unlock up to £1.3 billion of funding from the EIB. That will be welcomed by the industry. The Government have pushed for green research and development to be supported further through the EIB, and we continue to do so. Again, we believe it right to take positive action, and to have an active industrial policy to support our companies through difficult times. That is what we are doing today.

I thank the Minister for his usual courtesy in supplying an advance copy of the statement. I also welcome the right hon. and learned Member for Rushcliffe (Mr. Clarke) to his duties. I rather suspect that I shall enjoy his interventions a little more than the Minister will.

It is worth repeating that at the heart of this recession is the financial crisis, and that restoring confidence in the financial system remains the single most important task if there is to be any improvement in the economy. Does the Minister accept that, given the trends in the economy and unemployment, it is clear that there will be a significant and serious increase in unemployment in the year ahead? In that situation, the Government cannot undertake a series of piecemeal bail-outs. They can, and should, adopt a strategic approach based on clear principles, to ensure that we can take advantage of the recovery when it comes. A fundamental principle within that approach must be long-term value for the taxpayer. Provided it is based on considered strategy and informed by clear principles, it is sensible to look at strategic industries, such as the automotive industry, which includes both cars and commercial vehicles, and to assess how best to preserve their core competence for the future.

The Minister is right to highlight the potential of green technology and the part that the automotive industry can play in it. Indeed, we have an opportunity for a real step change towards achieving those goals, but how will the measures announced in the statement deliver them? The core of the package is the European Investment Bank loans and non-EIB loan guarantees, much of which have been announced already. What is effectively new and what have been the barriers to using what has already been announced? On the detail, how will these proposals be administered, who will undertake the due diligence, what will be the estimate of costs to the industry and the taxpayer, and how will this help the component supply chain?

This statement provides a number of worthy crumbs of comfort for the automotive industry, but as it has been announced today, it is neither strategic, nor comprehensive, nor the panacea it was trailed to be. I thus have grave concerns about whether it will work.

The hon. Gentleman is right to say that the first priority is to stabilise the financial system. That is exactly what the Government did when we recapitalised the banks and made our announcements last Monday. I do not think anyone could seriously disagree with the proposition that a major banking crisis would have a devastating effect on all our economies. It is also right to have an activist industrial policy that is set within a clear framework. First, we ensure the stability of the financial system; then we ensure that the economy gets the stimulus it needs during these difficult times; then we get credit flowing in the economy, set out a clear policy framework for taking action rather than doing nothing, while at the same time rebalancing the public finances over the medium term. That is exactly what we are doing. We need to look into where there is a case for Government intervention to ensure that we put in place the right sort of bridges to the future that will get us through the difficult economic times we face at the moment.

The hon. Member for Caithness, Sutherland and Easter Ross (John Thurso) asked what was new in all this. The fact that we are guaranteeing the EIB loans so that they apply above the £200 million level is new, and it is important that we are doing this. As I say, it unlocks round about £1.3 billion of lending through the EIB. Also new is the fact that we are supporting up to £1 billion of loans through the guarantees that we are providing. That will support a number of companies in the automotive supply chain. As for mechanisms, we look into these on a case-by-case basis. It will be for companies with a turnover of more than £25 million; below that level, they can go through the enterprise finance guarantee scheme. We will also be looking at companies that are investing in green R and D, plant and capital equipment. We believe that those are the right sort of policy responses.

Again, I characterise our position, which is taking measured and appropriate policy responses—[Interruption.] Unlike the hon. Member for Caithness, Sutherland and Easter Ross and his party, Conservative Members do not seem to want to do anything—or if they say they do, they do not want to will the means to do so, because they are against the fiscal stimulus that is so needed in our economy today.

I welcome the work being done jointly by Ministers in the Department for Innovation, Universities and Skills, the Department for Transport and the Department for Business, Enterprise and Regulatory Reform. It is the collective impact of their efforts around the car industry that we should examine. The greening work and the work of the European Investment Bank is all-important, but as the right hon. and learned Member for Rushcliffe (Mr. Clarke) said, the issues around finance arms have been pressed for some time. I remember first pressing the Minister on this some time ago.

After tomorrow’s meeting of the Society of Motor Manufacturers and Traders, there will undoubtedly have to be rapid movement to put that mechanism in place. Will my hon. Friend ensure that he and the new Minister, Mervyn Davies, meet key Labour Members with direct interests in this process, to ensure that it is turned into a reality as soon as possible?

I am always happy to meet my hon. Friend. There is a significant and complex issue to be grappled with, but we want to see progress. I think that Mervyn Davies will be an excellent man to take lead responsibility for ensuring that we can make that progress, and I hope we can do it quickly. Even if we do ensure that credit is available to the car financing arms, however, there is a question to be asked—whether people still want new cars, sales of which fell dramatically in November and December.

We need to restore overall public confidence if people are to want to buy cars in the future, even if they are to buy them through cheap finance deals. That is why the wider measures we are taking to boost the economy are so important. Restoring public confidence is one of our vital tasks, and I should be happy to discuss that with my hon. Friend, as well as the specific issues relating to car financing arms.

This should have been an important statement, and it should have been made to the House by a member of the Cabinet, not a Parliamentary Under-Secretary of State, no matter how decent and able he is as an individual. I say that this should have been an important statement—

Order. I will not allow this. It is within the rules of the House for the Minister concerned to come to the House. It is up to the hon. Member for Mid-Worcestershire (Peter Luff), who is Chairman of the Business and Enterprise Committee and whom I have called, to question the statement. The question of who delivers the statement is the business of the House: it is for the House to decide, and the rules of the House are quite clear. This is within the rules.

While I am on my feet, let me also say that I want brief questions.

My Committee has made its views clear, and I shall let our report speak for itself. However, this should have been an important statement, and it is not. It falls well short of the industry’s expectations.

There are many issues on which I should like to press the Minister, but I want to press him on one issue in particular, the one raised by the hon. Member for Ellesmere Port and Neston (Andrew Miller). When will the car company financing arms’ access to additional funding be improved? The Minister was told three months ago that the matter was urgent, but nothing has happened. When will action be taken?

I have just made a wider point about the need for confidence in the economy, the measures that we have taken in terms of the fiscal stimulus, and the measures that we will continue to take to help us to get through this difficult economic time. Those are the key measures that are required. We need people to have confidence in their prospects, so that they want to buy cars in the future. Of course we will continue to hold discussions with the car financing arms, because we recognise that a real issue is involved. Mervyn Davies and I will be happy to meet them, and to try to make progress as a matter of urgency.

The car industry and its work force at Nissan in my constituency and throughout the United Kingdom have had to face the consequences of a dramatic downturn. I want to ask two questions. First, while I realise that the Minister cannot name a time, may I urge him to ensure with the utmost speed that Mervyn Davies presents specific proposals on car financing? Secondly, will the Minister commit himself to working with his European counterparts to ensure that there is co-ordinated action to try to help the car industry? Given that 76 per cent. of the cars produced in my constituency are exported to Europe and the rest of the world, European and wider, global co-ordination is essential to help the industry.

My hon. Friend is a long-standing campaigner on these issues, and he has been pressing me and other Ministers both on car financing and on wider support for the industry. He has heard what I have said about wanting to make progress with the car financing arms, but he is right to refer to the vital need for European co-operation. We have a car industry that is integrated not just in the United Kingdom but in Europe, and, some would argue, globally as well. Engines made here are exported and put into cars manufactured in Germany, France and other countries; equally, components from the UK are outsourced to Europe. We must continue to engage in dialogue with our European partners, and take concerted action at EU level to support our industry during this difficult time.

Can the Minister explain briefly the practical differences between the over-£25 million turnover and under-£25 million turnover schemes? Many companies in my constituency make components for the automotive industry but do not do so exclusively. Are they eligible? Will the schemes also cover those who contribute towards military vehicles and those who make trailers?

When the banks and Government are looking at these things in the normal way, we would not expect a company’s turnover to be 100 per cent. with the automotive industry. It is the case nowadays that many companies in the automotive supply chain will supply the automotive sector but might also supply aerospace, defence and other industrial sectors. We need to take a pragmatic approach to that. On turnover levels, the enterprise finance guarantee is for companies with a turnover of up to £25 million. We will guarantee loans by up to 75 per cent., up to a value of £1 million. The scheme that we are announcing today will operate on a case-by-case basis, but it will be principally for companies with a turnover of above £25 million. We will be looking, probably, to have a minimum level of £5 million for loans and possibly a maximum of £50 million, because above that, one can apply to the European Investment Bank. We have a staircase of finance to help different companies at different stages of their development, which we believe is appropriate.

I pay tribute to the efforts that my hon. Friend personally has made on this issue. Coming from the west midlands as he does, he knows that the automotive industry, and companies such as Jaguar Land Rover in particular, are part of the glue that binds together our regional economy and on which the skill base and so many jobs depend. I welcome the lines of credit and loan guarantees that he has announced today, particularly for low-carbon technology, but if they are going to work, I emphasise the importance of their going into effect quickly, particularly if they are going to link to institutions such as the European Investment bank.

My hon. Friend is a longstanding champion of the automotive industry and I thank him for his kind words. I do not think that one can be born in the black country without having a passion for manufacturing and engineering. We tend to be born with engineering oil under our fingernails and have swarf for a pillow. He is absolutely right to point to the central importance of the manufacturing sector to the UK economy and I thank him for his welcome for the credit lines in the working credit scheme and for the measures that we announced today, which are providing real help for businesses. That is the vital thing now—to help businesses through the next 12 months by providing real and practical help and to make sure that we can all signpost businesses in our constituencies that have difficulties so that where it is sensible to provide help, that help is available.

Surely the purpose of Government intervention in the car industry at this time has to be to defend jobs through increasing sales. Laudable as they may be, I fail to see how any of the measures announced today will lead to a single additional car being sold. Why are the Government not considering, for example, the generous time-limited incentives through rebates and so on—possibly linked with a car scrappage scheme—that are being introduced in Germany in order to get money flowing again through the supply chain by getting people to bring forward their car purchases and getting them into car showrooms?

I agree with the hon. Gentleman that it is important to increase demand. We all want to see greater demand in the economy, which is why boosting demand through a fiscal stimulus is the right thing to do. He mentioned scrappage schemes, and he will be aware that the German scrappage scheme is pretty contentious. It has not been introduced and there is some debate about whether the Lander want to approve some of it. In my view scrappage schemes look expensive and would be best done at a European level, rather than in individual member states. In many ways, at their best they probably underpin the second-hand market rather than encourage people to buy new cars. It is not as simple as a lot of people think when they are discussing these issues.

Does my hon. Friend see any role at all for a Government wage subsidy scheme for the automotive industry? ThyssenKrupp in my constituency in good times employs 1,000 people, making car bodies for a range of manufacturers. It says to me that its plants in Germany are currently helped by an 80 per cent. wage subsidy from the Government there, so both companies and Government share the cost of the recession but they also keep a skilled work force together ready for the good times. Is there a role for such a scheme here?

What the Government have done so far is look at what measures we can provide to help companies with training during the downturn, and at what we can do to help unblock credit lines where there are problems with them. We have to evaluate what is the sensible thing to do when spending taxpayers’ money. We will look at some of these issues, but we must consider very carefully whether the policy mentioned is the most appropriate action compared with other policies available to us at present.

What steps is the Minister taking in the automotive industry to ensure that credit risk insurance is readily available?

When we made our statements on the working credit scheme and the enterprise finance guarantee, we said we were still working on the issue of trade credit insurance. I recognise that it is an important policy area. Companies in some sectors are saying to us that they are having credit lines withdrawn and that that is affecting their business model. The Secretary of State has said he hopes to be able to make a further announcement on that issue shortly, but I cannot give any definitive time scale.

Can my hon. Friend confirm that the proposals he has announced today also apply to the commercial vehicles industry, and in particular to Leyland Trucks in my constituency? I urge him to work as hard as possible to get the financing arms in place, as that is crucial to bringing through more orders in the truck industry. I also ask him to work with colleagues in the Treasury and the commercial vehicles sector to look at ways in which we can encourage haulage companies to bring orders through early, and to be in a position at the Budget to make announcements on the tax system that will allow that to happen.

My hon. Friend makes a very good point. The automotive sector does, of course, encompass the commercial vehicles sector. As he will be aware, just as we have seen a dramatic drop in new car sales, we have also seen a dramatic drop in sales of new vans and lorries. That is an equally significant problem, and I can confirm to my hon. Friend that it is our intention that companies such as the one he mentioned should be eligible for the loans to which I have referred.

May I gently put it to the Minister that it was not synthetic anger that he heard from this side of the House, but deep, deep concern that this Government have dithered while car sales have dived, and that they have done nothing for three months? Does he not realise that the only way we will increase car sales in the longer term is by reducing production in the short term, which will improve residual values and allow people to afford to buy a new car?

The simple fact is that car sales have dropped almost all over the world: they are down significantly in the United States; they are down in Spain; they are down slightly less in France; and they are down in Germany. This is an economic problem that we are facing right across Europe. It is a problem that, as we have all said, originated in the United States, and certainly in its automotive sector there are major problems with new vehicle sales.

What we have to do as a Government is try to assess what are the most effective and appropriate measures that we can take. The measures that we have taken to support industry in general, such as the working credit scheme, the enterprise finance guarantee and the fiscal stimulus, are all sensible and appropriate steps for the Government to take. We have gone a step further today, specifically in respect of the automotive industry. I believe that, again, it is right to do so, because that industry is encountering some dramatic problems. We should not pretend that this is just a UK problem—it is a European and a global one.

Following on from the point made by my hon. Friend the Member for South Ribble (Mr. Borrow), I point out that the Minister failed to mention the van and truck industry and the shadow Secretary of State failed to mention the crisis in that industry. There is a way to assist the van, truck and car industry: if tax breaks could be put in, it would help fleet purchases. Without that, there is no incentive for the trucks, cars and vans to be bought in the volume that we need to see going through the production line. Will the Minister examine that issue? The other way forward is through procurement by the Government. I would have thought that Ministers on the Front Bench should consider what car they are riding around in and make sure it is British-built and we can give support though the Warwick agreement, so that we have a truck, car and van industry that we can be proud of and that will last this country into the next century.

We are happy to look at all constructive suggestions about what more we can do to help the van and truck industry during these difficult times. My hon. Friend mentions procurement, which I sometimes think we ask to do everything. We want to see green procurement, and we want procurement to achieve a number of other objectives too. He is right to say that we need to be thinking about what cars, vans and other equipment the Government want to purchase in future. On the market for low-carbon vehicles for the future, I strongly believe that it is strategically important for the UK to make some medium to long-term decisions about its purchasing intentions, in addition to investing in research and development and new technology, so that we can have a home-grown, low-carbon green industry. That is what we are working towards.

The Minister will be aware that the commercial vehicle market is being hit harder than the car market, and that Ford in Southampton has had a particular problem. It assures me that although people want to buy vehicles—that contrasts with the Minister’s indecision on this—the finance is crucial. When will Mervyn Davies finish his report? How many jobs does the Minister expect to be lost in the meantime?

That was a rather churlish response from the hon. Lady. She referred to Ford in Southampton, and I must tell her that a number of discussions on the situation have taken place between Ford and the Government. We are well aware that the industry, be it in terms of vans, trucks or cars, is going through a terribly difficult time at the moment. Members of the House need to recognise that there are some things that the Government can sensibly do and others that would not be an appropriate use of taxpayers’ money. The response that we have announced today, which builds on the other measures that we have taken, provides a significant boost to the automotive sector at this difficult time, and I would like to think that hon. Members would welcome it.

May I suggest to the Minister that when the Government meet the car manufacturers tomorrow he should bear in mind that Jaguar Land Rover is at the forefront of developments on environmentally friendly cars? I visited the plant yesterday, and I was very impressed. Will he also bear in mind that thousands of jobs in Coventry and in the west midlands are at stake, and that a lot will rest on the outcome of tomorrow’s meeting? May I stress once again to him that lots of people in Coventry fear for their jobs if Jaguar Land Rover goes, and that goes for the suppliers too?

Jaguar Land Rover is an important car company for the United Kingdom. It has a significant research and development programme running into many hundreds of millions of pounds. As my hon. Friend will be aware, because he takes a close interest in these matters, it has applied to the European Investment Bank for significant funding for green R and D in the future. Jaguar Land Rover is taking exactly the right sort of steps that we would want to see on reducing carbon. Its products are at the high-range end of the market, but its new vehicles are, increasingly, far more green than their predecessors. In the first half of 2008, the company was making significant profits, and I have no reason to believe that it will not do so in the future. We need to look at what support we can provide through the measures that I have announced today to help Jaguar Land Rover access the EIB funding that is available. Of course, we will continue to have regular dialogue with the company, too.

There has been a severe slump in car sales at Bentley Motors, the largest employer in my constituency, and it is only thanks to the company acting responsibly that it has avoided making compulsory redundancies. However, it is on the cusp of having to make some very difficult choices. Discussions that I have had with representatives from Bentley have made it clear that, despite representations to the Government, they are still struggling to access finance and credit. Like other hon. Members, I urge the Minister to ensure that the company has access to finance and credit now, rather than in the months to come, before more jobs are put at risk.

Bentley is a great brand, but I know that the company is having difficulties, because as with other companies in the automotive industry, people are not buying its cars. That is one of the reasons why it has had to make some of the decisions that it has made recently to cease production for a period. There are challenges facing Bentley, just as there are challenges facing all our major car manufacturers in the UK at the moment. All that the Government can do is look at what sort of sensible measures we can put in place to help the industry, and the working credit scheme will help many companies in the supply chain, especially as the cessation of production by some companies creates enormous problems for a lean, integrated, just-in-time supply chain. We will continue to work with the industry on tackling the problems that it faces and providing solutions where it is sensible to do so.

My hon. Friend will be aware of the importance of the industry in my west midlands constituency, which has many design and component companies. They have told me that two things are essential at this stage. The first is support for credit lines, and the second is encouragement to adopt green technology, so I think that they will welcome the statement as right on the button in terms of what they have told me is necessary. However, I have noticed that the money will be accessed via application, and the companies have also told me that the application process is sometimes very complicated, tortuous and involved. Can my hon. Friend ensure that the application process is as simple and as streamlined as possible?

My hon. Friend is right to stress the importance of the automotive industry to his constituency, and I am well aware of it. He is also right to say that what companies want is access to support as quickly as possible, and we are endeavouring to achieve that. We need to look at the issue on a case-by-case basis and there are certain due diligence steps that we will need to take because taxpayers’ money is involved; the whole House would expect us to be responsible with it. Having said that, we need to move as speedily as we can in all these areas, including access to the working capital scheme, on which we are working actively with the banks at the moment.

Access to credit and loans is not working in the way that the Government would like. In my constituency, I have a small specialist company that distributes bearings and supports the bearing industry. It cannot access any funding under the current schemes and I doubt that it will be big enough to access funding under the scheme proposed by the Government. However, that company is a key component of the aerospace and automotive industries. Will the Minister meet my constituent who runs this company—he would happily take on three or four extra people if he could access funds—to discuss the problems facing small and medium businesses?

In the first instance, if the hon. Lady e-mails me with the details I can get some officials to look at that matter right away. We will see how we go from there, but if it is appropriate to have a meeting I will be more than happy to do so.

General support schemes for industry can do a range of things, but they do not green industry by one jot. Will the Minister reconsider the German scrappage scheme? My understanding is that the €2,500 subsidy is offered specifically to those who are the owners of older high-carbon vehicles when they trade in those vehicles in exchange for new low-carbon vehicles. Will he consider using demand to make the same green shifts in the UK and to tie improved access to finance to precisely the same green demand agenda?

As I said, I do not think the German scrappage scheme is necessarily quite as straightforward as it might seem from reading about it in the newspapers. It is a lot more complicated. We continue to monitor the situation with the German scheme and the French scheme, too, which I understand is not without its problems. I remain to be convinced that the schemes are an effective use of public money. I will always keep my mind open and we need to consider the evidence on such schemes, but my judgment is that there are better ways to support industry and to achieve our environmental objectives at this point in time than going ahead with the scrappage scheme. We will continue to review these matters.

I have listened to the statement twice and I am none the wiser as to how many new cars the money will help to sell. Would the Minister like to tell us?

I have been at pains to stress that the measures we are announcing, which will provide guarantees that will support £2.3 billion-worth of lending to the automotive sector, will help to ensure that we give the companies that are supported a bridge to the future to enable them to get through the difficult times that we are in and to support the development of cleaner, greener cars. That is what we can do. The sensible thing to do is to help companies through the short term to ensure that they are best placed for the future when the economic upturn comes.

I particularly welcome the training and greening initiatives that my hon. Friend has outlined, which appear to be in stark contrast to the do nothing or “lay workers off” policies of the Opposition. The provisions will be of particular use to IBC Vans in my constituency, a company that is very highly productive but where workers are facing a 30-hour week from February. May I press the Minister further on the issue of tax incentives for businesses to purchase fleet vehicles, as I think that they would benefit small and medium-sized enterprises, IBC Vans and white van man?

My hon. Friend is absolutely right to point out the importance of the green and training components of the packages that we are announcing. I want to support white van man, too. I want to ensure that white van man has the confidence in his business to say that he wants to buy a new white van because he can see the business opportunities in the future. Restoring that confidence is vital. There is an important point to be made about the fleet market, and we are open to discussions about whether more can be done in that policy space. As I said, my hon. Friend is right to point to the green and training aspects of the package, which will both be welcomed.

It is difficult to overemphasise what a parlous financial state many car dealerships find themselves in. One in my constituency reports sales of new cars dropping from more than 30 a month to fewer than 10 a month. If those businesses fail, all the other measures will count for nothing. I urge Mervyn Davies to get on and do his work as quickly as possible but also to investigate other ways to support those businesses, such as relief from business rates. They have to be paid every month regardless of the level of business, which is causing the businesses great distress.

I have heard what the hon. Gentleman has said. As I have said, we want Mervyn Davies to be actively engaged and to deal with the matter with the urgency that is required. The hon. Gentleman asked specifically about the dealership network, in which many small businesses operate. He will be aware of the business support scheme operated by Her Majesty’s Revenue and Customs for companies with particular difficulties. There are more than half a million people in the dealer network at the moment. Some of them are tied to big companies but some are small and independent, and we must ensure that they are aware of the range of support on offer. I sometimes think that when we come to the House to announce new initiatives, we need to do more to communicate the vast range of initiatives that are already available out there. We are looking to do more in that area as well.

I welcome the measures taken by the Government, but I want to stress that their success or otherwise will depend ultimately on how much of the money is distributed. What measures are being taken to ensure that small companies that wish to access the loans know how to do so and where to go? Will the Minister ensure that the institutions disbursing the loans know what is a reasonable basis for their disbursement? Finally, what role does he see the regional development agencies playing in bringing consistency to the process?

My hon. Friend makes a very good point. The RDAs, with Business Link as their agent, have a primary responsibility in promoting a wide range of Government services through the Business Link brand. He will be aware of the Solutions for Business programme, which provides a range of different Government support in addition to the measures such as the enterprise finance guarantee scheme that I have mentioned already today. We must make sure that we have the most effective communication channels out there. Companies are facing challenges, but sources of funding are available that are either backed or directly funded by the Government. We will see whether there is more that we can do to make sure that MPs have the information that they need, because I am acutely conscious that lots of MPs are being approached all the time by companies that are having difficulties. They need to signpost those companies in the right direction.