Session 2009-10
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General Committee Debates
Delegated Legislation Committee Debates

Financial Assistance to Industry



The Committee consisted of the following Members:

Chair: Mr. George Howarth 

Bacon, Mr. Richard (South Norfolk) (Con) 

Crausby, Mr. David (Bolton, North-East) (Lab) 

Engel, Natascha (North-East Derbyshire) (Lab) 

Fallon, Mr. Michael (Sevenoaks) (Con) 

Farrelly, Paul (Newcastle-under-Lyme) (Lab) 

Gerrard, Mr. Neil (Walthamstow) (Lab) 

Hemming, John (Birmingham, Yardley) (LD) 

Heppell, Mr. John (Nottingham, East) (Lab) 

Lepper, David (Brighton, Pavilion) (Lab/Co-op) 

Lucas, Ian (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

Plaskitt, Mr. James (Warwick and Leamington) (Lab) 

Prisk, Mr. Mark (Hertford and Stortford) (Con) 

Seabeck, Alison (Plymouth, Devonport) (Lab) 

Thurso, John (Caithness, Sutherland and Easter Ross) (LD) 

Walter, Mr. Robert (North Dorset) (Con) 

Wright, Jeremy (Rugby and Kenilworth) (Con) 

David Weir, Committee Clerk

† attended the Committee

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Third Delegated Legislation Committee 

Monday 29 March 2010  

[Mr. George Howarth in the Chair] 

Financial Assistance to Industry 

4.30 pm 

Motion made, and Question proposed,  

That the Committee has considered the motion, That this House authorises the Secretary of State to undertake to pay, and to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, sums exceeding £10 million and up to a cumulative total of £380 million in respect of a guarantee which may be provided by the Secretary of State to the European Investment Bank in the event of a European Investment Bank loan to Ford Motor Company Limited.—(Ian Lucas.)  

Mr. Mark Prisk (Hertford and Stortford) (Con):  On a point of order, Mr. Howarth. I am grateful to you and to the Minister for that formal motion. I believe that my point of order is of importance to the whole Committee. Can the Chair confirm whether the Secretary of State is responsible for ensuring that the Committee has the appropriate information? I ask because all Members of the House will have only the motion as the information available to them. I felt that as we were to have a discussion involving £380 million, we needed to have it in an informed way, and that five lines were inadequate for an informed debate. I made several calls to the Department for Business, Innovation and Skills, and only after the third call did I receive a background briefing. I now discover that I appear to be the lucky holder of the briefing, and that the Committee does not have that information. 

I wonder whether you can confirm from the Chair, Mr. Howarth, that the Secretary of State should provide the House with information. The motion is not a matter of great contention between the parties, but I feel that the public would assume that we had more information than five lines, given the amount of money we are discussing. 

The Chair:  The hon. Gentleman anticipated that this is not a matter for the Chair. Astonishing though the powers of the Chair are, they are not sufficient to enable me to insist that the Government or anyone else provide any particular documentation to a Committee. However, no doubt the Minister, having heard what the hon. Gentleman said, will wish to address the matter in his speech to the Committee. 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Ian Lucas):  Thank you, Mr. Howarth. It is a great pleasure to appear before you for the first time. 

I am grateful to the hon. Member for Hertford and Stortford for his point of order, of which he gave me no notice. A request was made of my office, and information was supplied to him. He did not give me any indication

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whatever that the information was inadequate in any way, and, to my knowledge, no other member of the Committee has approached my office requesting information. In the circumstances, I believe that the approach that has been taken in respect of this matter is entirely appropriate. I will, of course, address the matter before the Committee. I am here for it to be scrutinised by members of the Committee. 

Mr. Prisk:  I appreciate the Minister’s generosity in giving way. I want to ensure that the figures are correct—it is important that Members have the information. The motion refers to a cumulative total of £380 million. I am grateful to the civil servants who prepared the briefing on Thursday afternoon, but it refers to £360 million. [ Interruption. ] The Minister says that is correct. Which is the right number? 

Ian Lucas:  I shall specifically address that point later in my remarks. I am pleased to say that the staff the hon. Gentleman has commended have already considered it and fully briefed me on it. If he will allow me to proceed, I should be grateful to him. 

Mr. Prisk  indicated assent.  

Ian Lucas:  The hon. Gentleman is most generous. 

Under the provisions of section 8 of the Industrial Development Act 1982, the Government are required to seek parliamentary approval for financial assistance when the sums in respect of any one project exceed £10 million. On 18 March, the Secretary of State for Business, Innovation and Skills announced the Government’s willingness, in principle, to support Ford Motor Company Ltd’s application to the European Investment Bank for a £450 million loan through a loan guarantee under the automotive assistance programme. That programme, supporting projects worth up to £2.3 billion, was designed to help the sector and to ensure that the downturn does not curtail the essential investment in innovation and change that will help to support the industry in becoming a world leader in the development, manufacture and use of low-carbon vehicles—an agenda that the United Kingdom Government are resolved to advance. 

The proposed loan and loan guarantee, if agreed, will support six projects in the UK, with a total value of £1.5 billion. Ford’s plans will safeguard about 2,800 skilled jobs in the UK at its research and development centre at Dunton in Essex, as well as its manufacturing plants in Dagenham, Southampton and Bridgend. The projects to be supported cover research and development for Ford’s commercial vehicles, such as the Transit and Connect vans, and the development of low-carbon emission diesel and petrol engines. That includes investment in production facilities for new lower-carbon engines in Bridgend, which was also supported by the Welsh Assembly Government last year. 

Lord Mandelson and I are confident that Ford presents a good case for support under the automotive assistance programme. As Lord Mandelson said: 

“Ford has an important role to play in the UK’s aim to be one of the leading manufacturers of low carbon vehicles.” 

Ford makes a significant strategic contribution to the UK automotive sector and the wider economy, providing

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29 per cent. of the sector’s research and development. Currently, 25 per cent. of all Ford engines worldwide and more than 50 per cent. of all Ford diesel engines are made in the UK. 

Ford has welcomed the Government’s offer of support. The chairman of Ford of Britain, Joe Greenwell, said: 

“Ford welcomes this positive support from the Government. It greatly assists in delivering Ford’s commitment to invest over £1.5 billion in new, affordable, volume-produced low CO2 technologies.” 

By providing the guarantee, the Government are securing substantive ongoing investment in the UK by Ford, ensuring that the UK remains a centre of excellence in engine and commercial vehicle technology. Without the guarantee, the European Investment Bank would not provide the loan, which would create a credible risk that some of the projects would be lost to the UK. 

As part of our appraisal process, we sought the views of the Industrial Development Advisory Board, which is independent of Government and provides advice on large investment projects, based on its wide commercial and industrial expertise. In this case, the board’s advice supported extending the loan guarantee to Ford on the terms proposed. The motion seeks a resolution from the House enabling us to provide that support. 

The automotive sector is of key importance to the UK. It supports research and development, technological innovation, skills and a supply chain that is a mainstay of the wider manufacturing sector. The automotive sector directly employs 180,000 people, accounting for nearly 6 per cent. of employment in UK manufacturing. Another 200,000 people are employed supplying essential parts and services to the sector, with a further 550,000 jobs in the retail and service sectors. 

Support for the sector, including the automotive assistance programme and the Government’s scrappage scheme, was launched in response to evidence that the recession was hitting the car industry harder and faster than other manufacturing sectors. Output and employment was falling at twice the UK manufacturing average rate. The industry also faced tough new emissions targets from 2012, meaning that investment in low-carbon technology was urgently needed. 

In our “New Industry, New Jobs” strategy, we outlined the Government’s future approach to the challenges of market failures and market barriers. Strategic intervention from Government will help to remove barriers to success, and targeted support can drive innovation and access to markets in existing and new technologies. 

I will address specifically the point that the hon. Member for Hertford and Stortford raised concerning the discrepancy between the £3.8 billion and the £3.6 billion. 

Mr. Prisk:  That was £380 million and £360 million. 

Ian Lucas:  It was £380 million and £360 million; I beg the hon. Gentleman’s pardon. The Government have agreed to guarantee 80 per cent. of the proposed £450 million European Investment Bank loan, which is £360 million. The difference between the two figures relates to a 5 per cent. cap on costs required by the European Investment Bank as a condition of the guarantee. 

With that point, I commend the motion to the Committee. 

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4.40 pm 

Mr. Prisk:  I am grateful to the Minister for specifically addressing the points raised. The motion relates to an important matter of investment that both sides of the House strongly endorse and wish to see, so I want to make sure that we get the facts right. My fear was that the motion itself could have been wrong, which obviously would have been worrying in terms of the legalities of the process, so it is encouraging that the Minister has assured me that is not the case. 

The announcement in November 2008 of the automotive assistance package, which underpins the motion, was followed by the launch of the package in January 2009. One of the concerns raised throughout the process, on which I have persistently badgered, and no doubt annoyed, the Minister, is the question of why it has taken so long for money to be received by major manufacturers in this country, because the package was launched in January 2009 and it is now March 2010. In France and Germany, for example, manufacturers have been receiving EIB loans of that character for more than a year. Many people are asking why under the current Government businesses in Britain are the last to receive the help. 

In that context, and without testing your chairmanship too far, Mr. Howarth, as my question relates to that automotive package, could the Minister indicate how many similar loans have been agreed by the Government? It would be helpful for us to understand the context of the motion. 

As I said, we very much welcome the investment by Ford, which undoubtedly has one of the world’s leading centres for engineering research and development. It is fair to say that it is part of an encouraging trend in investment, particularly in relation to how engines are changing in the industry. We have seen that and other such investment, and we support the Government’s proposal for their new automotive council, which is an eminently sensible suggestion. We want to be constructive and support it. We welcome the investment by the industry and think that it is right to focus, along with the Government, on low-carbon vehicle technology. It is absolutely right that this country should seek to develop expertise on highly productive, low-carbon vehicle technology, so in that context the motion is to be welcomed. As I am keen on detail, would the Minster indicate whether the technologies that Ford will apply will go beyond diesel and can he give us an idea of the nature of the low-carbon programme investments taking place? 

The Minister kindly explained the difference between the £360 million and the £380 million. Are there any other key conditions that the House, and therefore those we represent, need to be aware of, such as the circumstances in which the loan guarantee might be called? In what circumstances do the Government envisage that it might occur? 

4.43 pm 

John Hemming (Birmingham, Yardley) (LD):  I am pleased to serve under your chairmanship once again, Mr. Howarth. I was a city councillor for many years and at one stage sat on the council’s economic development committee, which did similar things to those we are discussing, although with much smaller sums of money. I share the concern expressed by the hon. Member for

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Hertford and Stortford about the lack of information. When city councils do such things they produce reports with considerable detail. Some of the detail might have to be confidential, as happens with a council’s blue agenda, and as can happen here. I have some concern about that. Over time that procedural issue may need to be reviewed, so that Committees get a report rather than just a motion. 

However, we will support the motion. In my constituency I have had struggles finding help for businesses trying to expand in the automotive sector, even with all that has gone on in terms of funding. It has been quite a struggle and the regional development agency has not been particularly helpful, so I welcome the proposal. It would be nice to have something that is fairer to the smaller companies, which also need assistance at times. 

I think those points are sufficiently clear. The automotive sector is very important to the country as a whole and we welcome the motion. 

4.44 pm 

Ian Lucas:  I shall respond to the points raised. The hon. Member for Hertford and Stortford said that France and Germany had provided finance earlier than the UK Government. Of course, France and Germany agreed with the UK Government that it was necessary to provide a financial stimulus to the economy and to invest in and support the sector. 

The hon. Gentleman will correct me if I am wrong, but I understand that his party opposed that financial stimulus. That raises the question of whether the scheme would be in existence under the Opposition. Would we have been in a position to fund the automotive assistance programme or the car scrappage scheme had we followed their policies, which would have deflated the economy

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and taken money out of it? Would that have been an appropriate approach? It is rather churlish of the Opposition to criticise the Government for delaying—they suggest—the application of the automotive assistance programme. 

A number of schemes have been taken forward. Offers were made to companies such as Tata Motors European Technical Centre and Jaguar Land Rover, both of which found appropriate private finance and decided not to proceed with the automotive assistance programme. We have heard about Ford today and I can confirm that financial arrangements have been put in place to proceed with General Motors, whose excellent Vauxhall plant I visited this morning. Through this move and the investment secured for the car scrappage scheme, the automotive industry as a whole has been supported by the Government. I am glad about that. 

The Automotive Council, which the Government established, is not just a proposal—I have chaired two meetings of it. It is up and running, and the UK automotive sector is leading the world. We are driving forward this extremely important agenda. 

I cannot reveal the terms under which the guarantee is callable upon—if I may put it in that way. They are commercial terms and are subject to confidential discussions and commercial arrangements between the Government, the Ford Motor Company and the European Investment Bank. 

I take the point made by the Liberal Democrat spokesman that the proposal necessarily poses scrutiny challenges. However, I believe that it is a strong and important proposal that will support an important sector in the UK economy. It is on that basis that I believe all parties will support it this afternoon. 

Question put and agreed to.  

4.48 pm 

Committee rose.  


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Prepared 10:41 on 30th March 2010