Thurso, Gidley and Williams quiz Pearson on support for the Motor Industry

• [Jan 27]: ' . . THIS statement provides a number of worthy crumbs of comfort for the automotive industry, but . . it is neither strategic, nor comprehensive, nor the panacea it was trailed to be . . '

John Thurso (Caithness, Sutherland & Easter Ross, Liberal Democrat): I thank the Minister for his usual courtesy in supplying an advance copy of the statement. I also welcome Mr. Clarke to his duties. I rather suspect that I shall enjoy his interventions a little more than the Minister will.

It is worth repeating that at the heart of this recession is the financial crisis, and that restoring confidence in the financial system remains the single most important task if there is to be any improvement in the economy. Does the Minister accept that, given the trends in the economy and unemployment, it is clear that there will be a significant and serious increase in unemployment in the year ahead? In that situation, the Government cannot undertake a series of piecemeal bail-outs. They can, and should, adopt a strategic approach based on clear principles, to ensure that we can take advantage of the recovery when it comes. A fundamental principle within that approach must be long-term value for the taxpayer. Provided it is based on considered strategy and informed by clear principles, it is sensible to look at strategic industries, such as the automotive industry, which includes both cars and commercial vehicles, and to assess how best to preserve their core competence for the future.

The Minister is right to highlight the potential of green technology and the part that the automotive industry can play in it. Indeed, we have an opportunity for a real step change towards achieving those goals, but how will the measures announced in the statement deliver them? The core of the package is the European Investment Bank loans and non-EIB loan guarantees, much of which have been announced already. What is effectively new and what have been the barriers to using what has already been announced? On the detail, how will these proposals be administered, who will undertake the due diligence, what will be the estimate of costs to the industry and the taxpayer, and how will this help the component supply chain?

This statement provides a number of worthy crumbs of comfort for the automotive industry, but as it has been announced today, it is neither strategic, nor comprehensive, nor the panacea it was trailed to be. I thus have grave concerns about whether it will work.

Ian Pearson (Parliamentary Under-Secretary (Economic and Business), Department for Business, Enterprise & Regulatory Reform; Dudley South, Labour): 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.

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.

. . • Sandra Gidley (Romsey, Liberal Democrat): 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 compares 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 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.

. . • Roger Williams (Brecon & Radnorshire, Liberal Democrat): It is difficult to overemphasise what a parlous financial state many car dealerships find themselves in. One in my constituency reports sales of new cars dropping from more than 30 a month to fewer than 10 a month. If those businesses fail, all the other measures will count for nothing. I urge Mervyn Davies to get on and do his work as quickly as possible but also to investigate other ways to support those businesses, such as the relief of business rates. They have to be paid every month regardless of the level of business, which is causing the businesses great distress.

Ian Pearson: I have heard what the hon. Gentleman has said. As I have said, we want Mervyn Davies to be actively engaged and to deal with the matter with the urgency that is required. The hon. Gentleman asked specifically about the dealership network, in which many small businesses operate. He will be aware of the business support scheme operated by Her Majesty's Revenue and Customs for companies with particular difficulties. There are more than half a million people in the dealer network at the moment. Some of them are tied to big companies but some are small and independent, and we must ensure that they are aware of the range of support on offer. I sometimes think that when we come to the House to announce new initiatives, we need to do more to communicate the vast range of initiatives that are already available out there. We are looking to do more in that area as well.