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17 Dec 2008 : Column 99WH—continued

In exerting continued control over Gaza’s borders, airspace and territorial waters, Israel retains the obligation to co-operate in the passage and distribution of relief supplies. We are pressing Israel to allow more supplies in and support the UN in purchasing supplies. Over the last six months, the ceasefire has brought relative calm for the people of Gaza and southern Israel. I believe strongly that it is in both sides’ interests to recommit to that ceasefire as it comes to its conclusion. But if we are
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to go beyond alleviating the immediate situation to make Gaza an integral part of peacemaking efforts, Hamas has to engage with President Abbas in the national dialogue negotiations and it must move towards non-violence and the Quartet principles, as I argued earlier. Through its behaviour—firing rockets at Israel, replacing teachers who do not kowtow, attacking rival political parties, smuggling arms, holding Gilad Shalit in captivity, and more—Hamas shows it is not a partner in peace or a constructive force in building a Palestinian state.

Let me deal directly with the comments that my hon. Friend has made about the claimed need for a chapter VII resolution at the UN Security Council. The problem with that—my hon. Friend and I discussed this in the main Chamber a few weeks ago during Foreign Office questions—is that a resolution under chapter VII of the UN charter implies that all movement is necessary on one side: in this case, from Israel. However, I believe strongly that we need to see co-operation from all parties, including Israel freezing all settlement activity and easing restrictions on life in Gaza and Hamas engaging with President Abbas in the national dialogue negotiations and moving towards non-violence and the Quartet principles. There will not be progress without movement and compromise on both sides. I do not think that a chapter VII resolution recognises that. There are chapter VI resolutions calling for actions from and responsibilities on both parties and that is the way forward.

I will be visiting Israel and the occupied Palestinian territories next week and I will seek to develop my first-hand experience of the challenges faced by Israelis and by the Palestinians. The message I will take with me is that we are determined to redouble our efforts to drive the peace process forward in 2009 and to look to all those, in the region and beyond, to join us. I genuinely believe that this is a crucially important issue to people in Israel and the occupied territories and, frankly, it is crucial to people across the world.

We have an opportunity, with the election of Barack Obama in the United States; he comes in with greater expectations placed on him than any democratically elected politician that I can recall in recent decades. We have to ensure that he has an opportunity to use the power and influence of the United States. We will be working alongside him, as an individual nation and through the European Union, to put pressure on all sides to make the necessary compromises to achieve that lasting peace in the middle east, which is long overdue.

I congratulate my hon. Friend once again on securing this debate. Let us hope that, as we move into 2009, we can begin genuinely to take the peace process forward.

11.29 am

Sitting suspended.

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Motor Industry

2.30 pm

Sandra Gidley (Romsey) (LD): I am delighted to have the opportunity to debate this subject. Since applying for the debate, the matter seems to have risen up the political temperature gauge. I was moved to apply for it after intervening on the Chancellor during the three-hour debate on the pre-Budget report, when I asked about support for the British motor industry, and whether we would emulate Europe. His response was that Europe was important, and he then started talking about Scottish whisky. I know that Scottish whisky is important to the Chancellor, but cars cannot run on whisky—[Interruption.]Perhaps they can, but that would be rather a waste. At the time, the subject did not seem to be prominent on the Government’s radar. It may have been on the radar of the Department for Business, Enterprise and Regulatory Reform, but it certainly does not seem to have been on the Treasury’s radar.

As so often, my initial interest arose because of a constituency concern. Many people think that Romsey is leafy Hampshire, but my constituency includes part of Southampton, which is home to the Ford transit, and proud to be so—or was. The factory is at the edge of my constituency, and a number of my constituents work there. It is fair to say that there were a few problems there and concerns about the future before the credit crunch began to hit home.

I was expecting some local Members to be here, and I had not intended to talk at length about Southampton, but Ford is facing specific problems. A planned redesign of the transit involved a potential refitting of the factory when the company’s plant in Kocaeli in Turkey was producing vans at lower cost. That naturally caused the company to rethink what work could be most profitably completed in Southampton. The plans are supposedly not finalised, but all the signs suggest that Southampton will produce only the chassis base, which will mean fewer local jobs for local people. That was going on before the downturn in sales that led to temporary contracts being ended and an increase in the number of down days at the factory.

Today, I want to speak in a more general context. It has become apparent in recent weeks that the problem is not just a little local difficulty. If we continue to sleepwalk towards disaster, vehicle manufacture will be declared the United Kingdom’s latest economic catastrophe. As someone with serious concerns about the decline in Britain’s manufacturing base generally, I suggest that it is important to retain what is left. So how bad is it?

Ms Gisela Stuart (Birmingham, Edgbaston) (Lab): The hon. Lady is right in her outline of the problems and the knock-on effects. A company in my constituency is a supply line manufacturer to the car industry, and the problem is not just what happens in Southampton, but what happens down the supply chain. It is a problem for many of us.

Sandra Gidley: I thank the hon. Lady for that intervention, and I shall return to that point. Most people think just about cars rolling off the production line, and not about everything behind that, or the consequences.

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The figures speak for themselves. In November, new car registrations fell by 36.8 per cent., which is the steepest decline in almost 30 years. In October, car production fell by just over 25 per cent. In times of recession, the commercial vehicle market is always hit first and hardest. The downturn in the commercial vehicle market in November was 41.8 per cent. That is having an impact on manufacturers. At the beginning of December, having given notice to all temporary staff and announced an extended Christmas break, Ford announced an extra 17 down days at Southampton in the first quarter of next year. That will have a significant impact on workers’ take-home pay.

The picture is mirrored elsewhere, with a four-week break at Vauxhall’s Ellesmere Port factory, and the offer of a nine-month sabbatical on 30 per cent. pay, although it does not expect many people to take up that offer. Two thousand jobs have been lost at Jaguar, and 600 at Aston Martin. The Japanese car manufacturer, Honda, is halting production at its Swindon plant for two months next year. BMW has announced plans to close its Oxford factory, which produces the Mini, for four weeks to reduce output, and Nissan has extended its production cuts. Only yesterday, Toyota told its workers that its factory will shut for a fortnight in the new year. It is difficult to find any good news, but I tried because it is Christmas.

David Taylor (North-West Leicestershire) (Lab/Co-op): The most recent scale-down by Nissan in Sunderland is having a serious impact on car components firms, and I raised that at column 665 of Hansard last Thursday. Their cash position is often critical, and no immediate support is being made available centrally or locally. Is the hon. Lady aware that the automotive sector is routinely red-flagged by financial institutions and providers? Businesses are being compressed to very low cash reserves, and are in an untenable position. Many are literally on the brink.

Sandra Gidley: The hon. Gentleman’s intervention is timely, because I was about to say that we are seeing the tip of the iceberg. Components manufacturers are also being badly affected. In The Observer last Sunday, Tony Woodley of Unite said:

the Government


Similarly, the Financial Times claimed on 11 December that more than 1,000 franchise dealerships were threatened with closure. People who sell cars are also having problems.

According to figures released by the Society of Motor Manufacturers and Traders Ltd, the industry currently supports 850,000 jobs. No one working in that industry feels very secure at the moment. So far, the Government have offered only limited support to the car industry, and that merely reiterates the existing channels of lending for businesses. There seems to have been no specialist attention to the problem.

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The pre-Budget report measures have not been welcomed in the industry. Car sellers have had to re-price all cars at their own expense, with little return, and will have to repeat the exercise next year when VAT returns to its previous level. Let us compare that with what is happening elsewhere in Europe. As part of the European economic recovery plan agreed at the end of last week, the European Commission has given a commitment to provide €5 billion to the bloc’s car industry through the European Investment Bank. As part of the deal, state aid rules have been relaxed so that national bail-out schemes can proceed. That has enabled the French Government to provide credit guarantees to the financing arms of its car makers with a €779 million payment split between Renault and Peugeot. The body set up to underpin new bank debts will hand over a further €221 million to the two car makers before the end of January. President Sarkozy has shown an active interest in the problem and has met manufacturers. No similar high-level interest is being shown in this country.

Last month, the Spanish announced a package of €800 million to the automotive sector as part of a larger two-year stimulus package. In Sweden, an announcement last week promised the equivalent of just over £2 billion in credit guarantees and emergency loans to its ailing car industry, much of which is directed towards the manufacture of more emission-friendly vehicles. In Germany, all new cars are exempt from annual circulation tax for one year until 30 June 2009, and the Government are considering giving General Motors’ Opel a €1 billion credit guarantee to ensure cash flow. Even the Romanian Government have announced a one-year exemption from pollution tax to stimulate demand. Portugal has committed €70 million of Government support to financing workers during downtime.

Mr. Geoffrey Clifton-Brown (Cotswold) (Con): The hon. Lady is making a very thoughtful speech. She was present at the last DBERR oral questions when the Minister, who is now in his place, was asked about European Investment Bank funds and why some of the European countries that she mentions have got funds flowing into their automotive industries. His reply was that Britain does not have a history of drawing down on those funds. In other words, the Government are fiddling; they are not getting the funds into the automotive industry. Should they not get moving and get those funds from Europe into the industry as soon as possible?

Sandra Gidley: It is surprising that when there is help to be had from Europe, the Government sometimes do not use all the resources at their disposal, because that could help people to feel more favourably towards an institution that is much maligned.

John Hemming (Birmingham, Yardley) (LD): I congratulate my hon. Friend on securing the debate. I shall put two points to her. First, money is found to fund the activities of the banks to guarantee credit, but not for the manufacturing sector. Secondly, and similarly, under the Banking Bill, which has just gone through the House, a form of chapter 11 protection from bankruptcy, which avoids the fire sale of an administration, is now being made available for banks, but the likelihood is that chapter 11 is not being considered for a sector that
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would find it very difficult to come out of administration once in it. Does my hon. Friend think that it is worth examining the lessons that perhaps could be learned from America on that?

Sandra Gidley: That is certainly worth considering. I hope that when the Minister sums up the debate, he will make a commitment to assessing how many businesses that go into administration do not come out the other end and whether we can learn lessons from the system used in America. That may be very useful at this time.

Ms Gisela Stuart: Will the hon. Lady also draw attention to the fact that there are some dangers with national rescues? As I understand it, the French support package is based on an undertaking by the car industry not to take any operations abroad. That could have long-term knock-on effects on some of the people who are currently working in the UK. If we become protectionist, we are just beggaring our neighbour.

Sandra Gidley: Yes, but we can flip that round and say this: if every other country is protecting its car industry, where does it leave ours at a time of global downturn if the Government do not provide any back-up?

Chris Huhne (Eastleigh) (LD): An important answer to the point made by the hon. Member for Birmingham, Edgbaston (Ms Stuart) about state aid is that the car industry currently faces a serious problem with the extension of credit to potential purchasers. One does not get a dramatic decline in demand of 37 per cent. over the year—that figure applies to vehicle registrations in this country—without the credit system for purchasers seizing up, which is a different point from an ongoing subsidy with the sort of strings attached that she mentions. I hope that the Minister will take that on board, because the car industry faces exactly the same type of problems in that respect as the financial industry and deserves support to ensure that credit is there.

Sandra Gidley: I was about to move on to that, because although I was highlighting what has been done in other European countries and in some non-European countries, a consensus seems to be emerging about what might help the British car industry. Despite the downturn in sales, the market research completed by some of the companies involved—we were told this by Ford when we met—shows that people want to buy vehicles, but the credit lines have dried up and they just cannot get the loans that were once available to do so.

John Hemming: Does my hon. Friend agree that the drive from central Government to maximise the tier 1 ratios is itself drying up credit? We should bear it in mind that a car loan is more like an unsecured loan than a secured loan. The Government should be considering carefully how their actions are influencing the motor business.

Sandra Gidley: I hope for some reassurance later that the Government have been paying attention to that problem and how their actions are affecting the motor business, because there has been precious little evidence so far. We hear a lot about talks taking place, but as yet we have seen no action.

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Let me return to the emerging consensus. The SMMT is asking that the manufacturers’ finance companies gain short-term access to the Bank of England’s special liquidity schemes, loan guarantees or direct loans. They need quick access to credit in a way that is simple, flexible and transparent and that overcomes barriers to securing loans for struggling companies across the supply chain. This crisis comes at a time when companies are researching new technology that has a greater focus on low-carbon technology. Investment is threatened but has never been more necessary, and any available funding should be directed towards that aspect of the industry.

The SMMT is also calling on the Government to increase capital allowances for fleet buyers, particularly of commercial vehicles, and to remove expensive-car restrictions under capital allowances. That will help the demand for UK higher-end manufacturers and stimulate demand for newer and greener vehicles.

Paul Everitt, the SMMT’s chief executive, has indicated that if its request for liquidity aid is successful, it will press for further measures in the new year, such as French-style aid for scrapping old cars and training incentives to keep on vital staff in readiness for any upturn in the market. I am not convinced that we need to go that far today, but it is worth bearing in mind. It has been notable during the current crisis that motor manufacturers are bending over backwards to try to keep their retained staff for as long as possible, but there seems to be a limit to how long that situation can be sustained.

A number of people have asked me why this industry is so important and whether it is right to give it special treatment. First, it is worth stating that the industry is in very good shape. It faces a once-in-a-lifetime global collapse in sales. Usually, there is some part of the world where demand is high and the whole of the car industry is not hit badly at the same time. Secondly, nearly every other country has stood squarely behind its domestic plants. Given that there is probably some excess capacity in the system, if the Government fail to help British jobs, the British motor manufacturing plants become particularly vulnerable when the motor industry is examined on a global scale.

Today, we had an update on the number of people out of work. There are 1.86 million, which is a nine-year high, but all the signs are that it is set to rise yet further. Given the large number of jobs dependent on the motor industry, the Government today have a chance to demonstrate that they are willing to provide the short-term assistance necessary to keep the wheels turning and protect as many jobs as possible.

Several hon. Members rose

Frank Cook (in the Chair): Order. Hon. Members will be alert to the fact that we must start the first of the three winding-up speeches at 3.30 pm. Five hon. Members have informed me that they wish to speak. I hope that those five and any other hon. Member who seeks to intervene will bear the time constraints in mind when they make their contribution and when they accept and respond to interventions.

2.48 pm

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