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27 Jan 2009 : Column 171

Ian Pearson: 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.

Andrew Miller (Ellesmere Port and Neston) (Lab): 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?

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Ian Pearson: 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.

Peter Luff (Mid-Worcestershire) (Con): 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—

Mr. Speaker: 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.

Peter Luff rose—

Mr. Speaker: The hon. Gentleman must speak to the statement.

Peter Luff: 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?

Ian Pearson: 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.

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Mr. Fraser Kemp (Houghton and Washington, East) (Lab): 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.

Ian Pearson: 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.

Mr. Edward Garnier (Harborough) (Con): 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?

Ian Pearson: 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.

Richard Burden (Birmingham, Northfield) (Lab): 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
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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.

Ian Pearson: 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.

Adam Price (Carmarthen, East and Dinefwr) (PC): 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?

Ian Pearson: 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.

Dr. Tony Wright (Cannock Chase) (Lab): 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?

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Ian Pearson: 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.

Mr. Michael Jack (Fylde) (Con): What steps is the Minister taking in the automotive industry to ensure that credit risk insurance is readily available?

Ian Pearson: 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.

Mr. David S. Borrow (South Ribble) (Lab): 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.

Ian Pearson: 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.

Mr. Andrew Mackay (Bracknell) (Con): 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?

Ian Pearson: 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,
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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.

Mr. Lindsay Hoyle (Chorley) (Lab): 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.

Ian Pearson: 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.

Sandra Gidley (Romsey) (LD): 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?

Ian Pearson: 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
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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.

Mr. Jim Cunningham (Coventry, South) (Lab): 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?

Ian Pearson: 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.

Mr. Edward Timpson (Crewe and Nantwich) (Con): 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.

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