3 The Automotive Assistance Programme
34. On 27 January 2009 the Secretary of State announced
a £2.3 billion package of loan guarantees to Britain's automotive
manufacturers and large suppliers, primarily to support investment
in low carbon plant and research and development. The scheme is
designed primarily to use government guarantees to unlock up to
£1.3 billion of loans from the European Investment Bank (EIB)
and a further £1 billion in loans from other lenders. In
exceptional circumstances, government loans may be provided under
the AAP.[46]
35. We considered the AAP in our Report on the Automotive
Industry in the UK which was published in July 2009. At that time,
no funds had been disbursed through the scheme and we concluded
that:
"we are profoundly disappointed that to
date not one single penny has been advanced through the scheme.
We hope that this will change rapidly".[47]
We also concluded that there was too great a gap
between eligibility for the Enterprise Finance Guarantee Scheme
and eligibility for the Automotive Assistance Programme and recommended
that "the loan guarantee threshold for the Automotive Assistance
Programme should be lowered urgently to £1 million".[48]
36. The threshold for the Programme has now been
lowered to £1 million, in line with our recommendation. We
welcome the fact that the Department has now lowered the limit
of the Automotive Assistance Scheme from £5 million to £1
million, in line with the Committee's recommendation.
37. However, little progress has been made in releasing
funds through this scheme. The Government has yet to provide
a single loan guarantee, although Mr Fraser confirmed that an
offer of a loan of £10 million had been made to Tata Motors
European (TMETC) for the production of electric vehicles.[49]
However, recent press reports indicate that Tata have since rejected
that loan.[50] Another
offer of a loan guarantee was made to Jaguar Land Rover (JLR)
but the company had decided not to accept the Government's offer.
[51]
38. In July we were told that the Government was
in negotiations with 18 companies. This has now risen to 20:
We have engaged with about 20 companies in negotiation
on this scheme and there is a pipeline which could actually amount,
if they were all to come off, to a total of projects guaranteed
by the scheme of £2 billion. So there is no shortage of
negotiation. Obviously we cannot fund all those, but they will
not all come off, so although we have not got the money out of
the door at the moment, there is activity around the scheme.[52]
39. When asked why the process was taking so long,
Mr Fraser argued that the Department was not "dragging its
heels", it was just that there were complicated issues to
address before negotiations could be concluded:
This is not just giving people money on a short-term
basis. The conditions of the funding are linked to the future
viability of companies and particularly related to their investments
in low carbon-related technologies.[53]
Furthermore, he added that:
These are long negotiations and of course we
do not want to just put taxpayers' money behind any old sort of
agreement or scheme. It has to be very carefully thought through
but there is a lot of negotiation in the pipework with a number
of different companies. [54]
Despite the lack of progress, Mr Fraser remained
of the opinion that the Automotive Assistance Programme was not
failing.[55]
40. While we are aware of the apparent success
of the scrappage scheme, and while we appreciate the fact that
negotiations to agree loans and loan guarantees with car companies
can be complex and time-consuming, the absence of a single loan
or loan guarantee from a scheme which was heralded as "a
further £2.3 billion package of loan guarantees" is
disappointing. The Government needs to expedite its negotiations,
and prove to us and the automotive industry that the Automotive
Assistance Programme can provide tangible benefits to the industry.
46 Business and Enterprise Committee, Ninth Report of
Session 2008-09, The Automotive Industry in the UK, HC
550, Ev 64 Back
47
HC (2008-09) 550, para 31 Back
48
HC (2008-09) 550, para 20 Back
49
Q 80 Back
50
www.business.timesonline.co.uk/tol/business/industry_sectors/engineering/article6936238.ece
Back
51
Q 87 Back
52
Q 87 Back
53
Q 93 Back
54
Q 99 Back
55
Q 101 Back
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