The Work of the Department - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 140-159)


14 JANUARY 2009

  Q140  Miss Kirkbride: We are interested in your ideas, Secretary of State, as to whether or not you think there is a need to do so and, if so, what that might be?

  Lord Mandelson: What are the subsidies you think I should consider which you would like a response on?

  Q141  Miss Kirkbride: We were led to believe by the press that you are considering it, so we are interested in what your ideas are.

  Lord Mandelson: I am glad to have had that encouragement from you for more and extensive intervention in industry and subsidies for important sectors in the economy. As it happens, I happen to share your concern about this sector. I think it is a really important employer, a really important researcher and developer of new technologies, a really important practitioner of advanced manufacturing technique and skills and I want to see the automotive sector remain an essential part of Britain's manufacturing base. I acknowledge, of course, that this sector is experiencing real difficulties. They are facing a serious loss of demand which, in the opinion of some in the industry, will never fully be restored because of changes which are taking place in the levels and pattern of demand for these products. Be that as it may, and I cannot speculate on that, we need to do what we can appropriately take on to enable this sector to get through the economic downtown. I am currently holding discussions with the industry representatives. I saw them before Christmas and I am going to see them again at the end of this month to see whether there is appropriate help or interventions that we can make. Of course, their main issue is the credit crunch, the shortage in the availability and reasonable pricing of credit. The schemes and initiatives which the Government has gone live with today will help companies in this sector, in the very important supply chain for this sector as for others and I hope they will take advantage of it. As I say, if there are other things we can do, then we will consider those in discussions. Before Christmas I asked the European Commission to take a Europe-wide view of what is going on in this sector. They are holding an important meeting this Friday, for which I am travelling to Brussels to represent our country and our sector. In the light of what I hear at that summit from ministerial colleagues amongst other Member States as well as from the industry, I will continue my discussions with my colleagues.

  Q142  Miss Kirkbride: Do you think it is a problem that France and Germany have already gone ahead to help their car sector because obviously that creates an unlevel playing field in terms of if our Government was to choose to do nothing?

  Lord Mandelson: I understand why they have gone ahead. They are both trying to give some help to the finance arms of car companies as well as underwrite the investment in their R&D and new green technologies. I know why this is attractive, why these approaches are attractive to many in Britain and that is why we are keeping them under review.

  Q143  Miss Kirkbride: The fact that others are doing it, therefore, it becomes a problem if we do not, does it or does it not?

  Lord Mandelson: Given Europe's single market, I think it would be better if the same rules, standards, benefits and advantages were applying across the EU.

  Q144  Chairman: This does look to be strangely like state aid issues are being raised here by some of these steps that are being taken in individual markets. Julie is right to highlight France and Germany, but also Italy, Spain, Sweden, Portugal and Romania are all doing or thinking about doing things which look very much like state aids to me.

  Lord Mandelson: Of course, as you know, the state aid rules in the EU have been somewhat relaxed. They have been made more flexible and more rapid in decisions that are taken. I think this is inevitable in the economic circumstances, although I hope it will not remain permanent. One European-wide initiative, of course, which has been taken is in relation to the European Investment Bank.

  Q145  Chairman: Clean transport facility.

  Lord Mandelson: Yes. A major sum of money has been set aside by the bank for investment. It is not acceptable, in my view, either that the EIB discriminates in its investments and its favours between the sizes of company or between EU Member States. I will be looking very carefully at the practices of the EIB to make sure there are fair shares operating across Europe where there is need.

  Q146  Miss Kirkbride: If you were to create some form of scheme in the way you have done schemes to date, would it be important that all car companies in the UK could apply to it or are you really just thinking about Jaguar Land Rover, which is the one that has been mentioned in the press?

  Lord Mandelson: Which one of the schemes today that we have announced, do you mean the loan or the working capital or what?

  Q147  Miss Kirkbride: What I am asking is, for the car manufacturers not the supply people who you have mentioned that you have dealt with today, if you were to come up with some financial support, that kind of scheme, would it apply to all car manufacturers in the UK or are you really looking at Jaguar Land Rover and specific car manufacturers?

  Lord Mandelson: It depends on their need.

  Q148  Chairman: Can I put to you what their need might be, for help in research and development. Jaguar Land Rover account for something like half of all automotive R&D investment in the UK. Making sure the Technology Strategy Board focuses its funds properly on its green automotive projects, for example, would be a way of giving help to the UK industry which would not fall foul of state aid rules and might help JLR very considerably.

  Lord Mandelson: This is one such idea that is under consideration by the Government. Here JLR's performance is very strong. We are talking about something in the region of £480 million spend on R&D by the company investing heavily in low carbon technologies, in hybridisation and light-weighting. This is very important, not just for the company but for the sector as a whole, but also for our manufacturing future in this country. I do not believe it would be right for anyone to stand by and see this sort of investment going to the wind just because of the current economic pressures we are experiencing.

  Q149  Miss Kirkbride: You are more attracted to areas of supporting R&D and perhaps green industries than you are to supporting more directly the manufacturing jobs base?

  Lord Mandelson: I need to look at the impact of any large-scale redundancy or potential business failure on a region's economy, employment base and skill base. I also have to look very carefully at what sort of contribution we think a company which is under threat in that way will make to Britain's future manufacturing strength and economic success. We have a major challenge in this country, a very beneficial challenge, in converting our economy to low carbon production, low carbon technologies, low carbon goods and services. This is going to be a major generator of business growth and job creation for the British economy. We are talking potentially of millions of jobs. In my view, we should not be prepared to see the downturn that we are currently experiencing setting back or even jeopardising our ability to convert to a low carbon economy in the ways that I have described. If it means taking action now, both through a low carbon industrial strategy, which I am working on closely with my colleague, the Energy and Climate Change Secretary, Ed Miliband on which—

  Miss Kirkbride: With whom you are getting on very well, we hear!

  Q150  Chairman: From the Guardian this morning.

  Lord Mandelson: --- plans and measures will be laid before you or in respect of particular areas of research and development which we need to support, you will find the Government paying very close attention, within the financial means and limits we have, to doing what we can to take forward this goal.

  Q151  Chairman: Just to intervene for a second, as you raised this.

  Lord Mandelson: I have not read the Guardian this morning.

  Q152  Chairman: The headline here says, "Miliband and Mandelson battle for top staff to back rival green agendas. `Clash of generations over pro-industry policy bias; credit crunch pits jobs against climate change".

  Lord Mandelson: I do not think I am that much older than Ed Miliband, what do they mean by that!

  Q153  Chairman: I am afraid you are!

  Lord Mandelson: These young Turks!

  Q154  Chairman: You can assure us there is no truth in the Guardian's suggestion that you are at war with the Department of Climate Change, you are working co-operatively with them in every way possible?

  Lord Mandelson: I do not understand what the story is about, we are competing for top jobs?

  Q155  Chairman: You are fighting over the whole agenda and the people who will implement it. Hundreds of civil servants are swishing around between your two Departments as you argue over the turf wars as to who does what in Government.

  Lord Mandelson: Absolute and complete stuff and nonsense. Who wrote the story?

  Q156  Chairman: David Hencke.

  Lord Mandelson: No further comment!

  Q157  Miss Kirkbride: Secretary of State, I was wondering whether TATA'S sponsoring of Formula 1 has helped their case?

  Lord Mandelson: I do not think it is the biggest factor.

  Q158  Mr Hoyle: Obviously you have touched on what part of the West Midlands will benefit Liverpool, Jaguar Land Rover, but we have got more vehicle production than that. I understand you have met with Leyland Trucks, which is very important to the North West, the last major truck builder in the country. Also, we have got van production with Transit and LVA. What can we do to ensure they have got a future? What support we will give to the car industry presumably can be replicated across the van and truck industry as well. Have we thought about the biggest problem we that are facing within the truck industry is people are frightened about replacing their vehicle fleets and I wonder if we can do something with tax breaks to encourage people to replace their fleet or even spending some of that £600 million within Royal Mail because they do buy Leyland Trucks and they buy British built vans and I wonder if we can do something there. The other key is, of course, you talk about playing fields, but when I look at Europe: Italy, Germany, France always manage to buy their own built vehicles. What can we do through procurement to ensure that we buy British built vehicles and that your ministers—I know your claim to fame the last time you were here was you quite rightly ride around in a Jaguar—your great team also rides around in British built vehicles because I think if we are going to flag wave, let us do it with our ministers as well.

  Lord Mandelson: I am still driving the Jaguar.

  Q159  Mr Hoyle: I know, I watch your car go out with great interest!

  Lord Mandelson: And support?

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