Mandelson unveils car industry rescue plan
By Alex Stevenson and Ian Dunt
The government has unveiled its package of assistance for Britain’s struggling car industry, including guarantees for investment loans.
Business secretary Peter Mandelson told the Lords he was not proposing a “bailout” and insisted the car industry was not a “lame duck” in his statement to parliament’s upper house.
But he insisted it would have to adapt to future market demands by concentrating on cleaner engines, lighter cars and other ‘green’ vehicles.
“This industry is not a lame duck and this is not a bail out,” Lord Mandelson said.
“Taken together, today’s announcement 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 needed to make Britain a world leader in the development and manufacture of low carbon vehicles,” he continued.
“This is both an economic objective and an environmental imperative.”
The government had set aside funds for this form of substantive intervention in its Pre-Budget Report, Downing Street said earlier today.
The prime minister’s spokesman said the moves were designed to help “fundamentally sound companies get through a difficult period”.
Loan guarantees covering £1.3 billion of funds from the European Investment Bank will be introduced, while a further £1 billion of lending will be made available to cover “worthwhile investments” not covered by the EIB.
Lord Mandelson warned there would be “no blank cheque on offer”, however, and insisted the Department for Business, Enterprise and Regulatory Reform (BERR) would only back loans which offer value for taxpayers’ money, help keep Britain’s economic recovery green and deliver significant long-term technological innovation.
Extra funding for workplace training, a renewed drive towards low-carbon cars and additional financing assistance for car companies were also announced.
Liberal Democrat business spokesman John Thurso said: “These plans have a number of worthy crumbs of comfort for the car industry, but are neither strategic, principled nor comprehensive.
“The core of this announcement is a repackaging of European investment bank loans and loan guarantees. I do not think the car industry will be particularly happy with that.”
The car industry has been suffering worse than most since the financial crisis began.
The price of commodities required to make vehicles, such as metal, has soared while demand is at an all-time low, not least due to a lack of credit.
Lord Mandelson will discuss the package in his pre-arranged meeting with representatives from the car industry tomorrow.
He wanted to make today’s announcements before then to ensure parliament is told first, No 10 explained. The government faced criticism over the weekend from the Lords communications committee for not placing enough importance on informing parliament first.
This afternoon’s Commons statement gave newly-appointed shadow business secretary Ken Clarke his first opportunity to make an impact in parliament since returning to frontbench politics last week.
In his response to the government plans, he said the government was doing too little, too late.
