Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

I am delighted to have the opportunity to debate this subject. Since applying for the debate, the matter seems to have risen up the political temperature gauge. I was moved to apply for it after intervening on the Chancellor during the three-hour debate on the pre-Budget report, when I asked about support for the British motor industry, and whether we would emulate Europe. His response was that Europe was important, and he then started talking about Scottish whisky. I know that Scottish whisky is important to the Chancellor, but cars cannot run on whisky—[Interruption.]Perhaps they can, but that would be rather a waste. At the time, the subject did not seem to be prominent on the Government's radar. It may have been on the radar of the Department for Business, Enterprise and Regulatory Reform, but it certainly does not seem to have been on the Treasury's radar.

As so often, my initial interest arose because of a constituency concern. Many people think that Romsey is leafy Hampshire, but my constituency includes part of Southampton, which is home to the Ford transit, and proud to be so—or was. The factory is at the edge of my constituency, and a number of my constituents work there. It is fair to say that there were a few problems there and concerns about the future before the credit crunch began to hit home.

I was expecting some local Members to be here, and I had not intended to talk at length about Southampton, but Ford is facing specific problems. A planned redesign of the transit involved a potential refitting of the factory when the company's plant in Kocaeli in Turkey was producing vans at lower cost. That naturally caused the company to rethink what work could be most profitably completed in Southampton. The plans are supposedly not finalised, but all the signs suggest that Southampton will produce only the chassis base, which will mean fewer local jobs for local people. That was going on before the downturn in sales that led to temporary contracts being ended and an increase in the number of down days at the factory.

Today, I want to speak in a more general context. It has become apparent in recent weeks that the problem is not just a little local difficulty. If we continue to sleepwalk towards disaster, vehicle manufacture will be declared the United Kingdom's latest economic catastrophe. As someone with serious concerns about the decline in Britain's manufacturing base generally, I suggest that it is important to retain what is left. So how bad is it?

Photo of Gisela Stuart

Gisela Stuart (Birmingham, Edgbaston, Labour)

The hon. Lady is right in her outline of the problems and the knock-on effects. A company in my constituency is a supply line manufacturer to the car industry, and the problem is not just what happens in Southampton, but what happens down the supply chain. It is a problem for many of us.

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

I thank the hon. Lady for that intervention, and I shall return to that point. Most people think just about cars rolling off the production line, and not about everything behind that, or the consequences.

The figures speak for themselves. In November, new car registrations fell by 36.8 per cent., which is the steepest decline in almost 30 years. In October, car production fell by just over 25 per cent. In times of recession, the commercial vehicle market is always hit first and hardest. The downturn in the commercial vehicle market in November was 41.8 per cent. That is having an impact on manufacturers. At the beginning of December, having given notice to all temporary staff and announced an extended Christmas break, Ford announced an extra 17 down days at Southampton in the first quarter of next year. That will have a significant impact on workers' take-home pay.

The picture is mirrored elsewhere, with a four-week break at Vauxhall's Ellesmere Port factory, and the offer of a nine-month sabbatical on 30 per cent. pay, although it does not expect many people to take up that offer. Two thousand jobs have been lost at Jaguar, and 600 at Aston Martin. The Japanese car manufacturer, Honda, is halting production at its Swindon plant for two months next year. BMW has announced plans to close its Oxford factory, which produces the Mini, for four weeks to reduce output, and Nissan has extended its production cuts. Only yesterday, Toyota told its workers that its factory will shut for a fortnight in the new year. It is difficult to find any good news, but I tried because it is Christmas.

Photo of David Taylor

David Taylor (North West Leicestershire, Labour)

The most recent scale-down by Nissan in Sunderland is having a serious impact on car components firms, and I raised that at column 665 of Hansard last Thursday. Their cash position is often critical, and no immediate support is being made available centrally or locally. Is the hon. Lady aware that the automotive sector is routinely red-flagged by financial institutions and providers? Businesses are being compressed to very low cash reserves, and are in an untenable position. Many are literally on the brink.

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

The hon. Gentleman's intervention is timely, because I was about to say that we are seeing the tip of the iceberg. Components manufacturers are also being badly affected. In The Observer last Sunday, Tony Woodley of Unite said:

"The suppliers of components are a week away from throwing tens of thousands on the dole because they don't see a plan...There's no guidance. They don't know if grant aid is being targeted. There's not one single component company that right now isn't looking to jettison labour.

This is a wake-up call. It's an emergency. Within a month, if"

the Government

"doesn't do anything, between 25,000 and 40,000"

jobs

"will be jettisoned from car retailers and suppliers."

Similarly, the Financial Times claimed on 11 December that more than 1,000 franchise dealerships were threatened with closure. People who sell cars are also having problems.

According to figures released by the Society of Motor Manufacturers and Traders Ltd, the industry currently supports 850,000 jobs. No one working in that industry feels very secure at the moment. So far, the Government have offered only limited support to the car industry, and that merely reiterates the existing channels of lending for businesses. There seems to have been no specialist attention to the problem.

The pre-Budget report measures have not been welcomed in the industry. Car sellers have had to re-price all cars at their own expense, with little return, and will have to repeat the exercise next year when VAT returns to its previous level. Let us compare that with what is happening elsewhere in Europe. As part of the European economic recovery plan agreed at the end of last week, the European Commission has given a commitment to provide €5 billion to the bloc's car industry through the European Investment Bank. As part of the deal, state aid rules have been relaxed so that national bail-out schemes can proceed. That has enabled the French Government to provide credit guarantees to the financing arms of its car makers with a €779 million payment split between Renault and Peugeot. The body set up to underpin new bank debts will hand over a further €221 million to the two car makers before the end of January. President Sarkozy has shown an active interest in the problem and has met manufacturers. No similar high-level interest is being shown in this country.

Last month, the Spanish announced a package of €800 million to the automotive sector as part of a larger two-year stimulus package. In Sweden, an announcement last week promised the equivalent of just over £2 billion in credit guarantees and emergency loans to its ailing car industry, much of which is directed towards the manufacture of more emission-friendly vehicles. In Germany, all new cars are exempt from annual circulation tax for one year until 30 June 2009, and the Government are considering giving General Motors' Opel a €1 billion credit guarantee to ensure cash flow. Even the Romanian Government have announced a one-year exemption from pollution tax to stimulate demand. Portugal has committed €70 million of Government support to financing workers during downtime.

Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

The hon. Lady is making a very thoughtful speech. She was present at the last DBERR oral questions when the Minister, who is now in his place, was asked about European Investment Bank funds and why some of the European countries that she mentions have got funds flowing into their automotive industries. His reply was that Britain does not have a history of drawing down on those funds. In other words, the Government are fiddling; they are not getting the funds into the automotive industry. Should they not get moving and get those funds from Europe into the industry as soon as possible?

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

It is surprising that when there is help to be had from Europe, the Government sometimes do not use all the resources at their disposal, because that could help people to feel more favourably towards an institution that is much maligned.

Photo of John Hemming

John Hemming (Birmingham, Yardley, Liberal Democrat)

I congratulate my hon. Friend on securing the debate. I shall put two points to her. First, money is found to fund the activities of the banks to guarantee credit, but not for the manufacturing sector. Secondly, and similarly, under the Banking Bill, which has just gone through the House, a form of chapter 11 protection from bankruptcy, which avoids the fire sale of an administration, is now being made available for banks, but the likelihood is that chapter 11 is not being considered for a sector that would find it very difficult to come out of administration once in it. Does my hon. Friend think that it is worth examining the lessons that perhaps could be learned from America on that?

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

That is certainly worth considering. I hope that when the Minister sums up the debate, he will make a commitment to assessing how many businesses that go into administration do not come out the other end and whether we can learn lessons from the system used in America. That may be very useful at this time.

Photo of Gisela Stuart

Gisela Stuart (Birmingham, Edgbaston, Labour)

Will the hon. Lady also draw attention to the fact that there are some dangers with national rescues? As I understand it, the French support package is based on an undertaking by the car industry not to take any operations abroad. That could have long-term knock-on effects on some of the people who are currently working in the UK. If we become protectionist, we are just beggaring our neighbour.

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

Yes, but we can flip that round and say this: if every other country is protecting its car industry, where does it leave ours at a time of global downturn if the Government do not provide any back-up?

Photo of Christopher Huhne

Christopher Huhne (Shadow Secretary of State for Home Affairs, Home Affairs; Eastleigh, Liberal Democrat)

An important answer to the point made by Ms Stuart about state aid is that the car industry currently faces a serious problem with the extension of credit to potential purchasers. One does not get a dramatic decline in demand of 37 per cent. over the year—that figure applies to vehicle registrations in this country—without the credit system for purchasers seizing up, which is a different point from an ongoing subsidy with the sort of strings attached that she mentions. I hope that the Minister will take that on board, because the car industry faces exactly the same type of problems in that respect as the financial industry and deserves support to ensure that credit is there.

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

I was about to move on to that, because although I was highlighting what has been done in other European countries and in some non-European countries, a consensus seems to be emerging about what might help the British car industry. Despite the downturn in sales, the market research completed by some of the companies involved—we were told this by Ford when we met—shows that people want to buy vehicles, but the credit lines have dried up and they just cannot get the loans that were once available to do so.

Photo of John Hemming

John Hemming (Birmingham, Yardley, Liberal Democrat)

Does my hon. Friend agree that the drive from central Government to maximise the tier 1 ratios is itself drying up credit? We should bear it in mind that a car loan is more like an unsecured loan than a secured loan. The Government should be considering carefully how their actions are influencing the motor business.

Photo of Sandra Gidley

Sandra Gidley (Shadow Minister, Health; Romsey, Liberal Democrat)

I hope for some reassurance later that the Government have been paying attention to that problem and how their actions are affecting the motor business, because there has been precious little evidence so far. We hear a lot about talks taking place, but as yet we have seen no action.

Let me return to the emerging consensus. The SMMT is asking that the manufacturers' finance companies gain short-term access to the Bank of England's special liquidity schemes, loan guarantees or direct loans. They need quick access to credit in a way that is simple, flexible and transparent and that overcomes barriers to securing loans for struggling companies across the supply chain. This crisis comes at a time when companies are researching new technology that has a greater focus on low-carbon technology. Investment is threatened but has never been more necessary, and any available funding should be directed towards that aspect of the industry.

The SMMT is also calling on the Government to increase capital allowances for fleet buyers, particularly of commercial vehicles, and to remove expensive-car restrictions under capital allowances. That will help the demand for UK higher-end manufacturers and stimulate demand for newer and greener vehicles.

Paul Everitt, the SMMT's chief executive, has indicated that if its request for liquidity aid is successful, it will press for further measures in the new year, such as French-style aid for scrapping old cars and training incentives to keep on vital staff in readiness for any upturn in the market. I am not convinced that we need to go that far today, but it is worth bearing in mind. It has been notable during the current crisis that motor manufacturers are bending over backwards to try to keep their retained staff for as long as possible, but there seems to be a limit to how long that situation can be sustained.

A number of people have asked me why this industry is so important and whether it is right to give it special treatment. First, it is worth stating that the industry is in very good shape. It faces a once-in-a-lifetime global collapse in sales. Usually, there is some part of the world where demand is high and the whole of the car industry is not hit badly at the same time. Secondly, nearly every other country has stood squarely behind its domestic plants. Given that there is probably some excess capacity in the system, if the Government fail to help British jobs, the British motor manufacturing plants become particularly vulnerable when the motor industry is examined on a global scale.

Today, we had an update on the number of people out of work. There are 1.86 million, which is a nine-year high, but all the signs are that it is set to rise yet further. Given the large number of jobs dependent on the motor industry, the Government today have a chance to demonstrate that they are willing to provide the short-term assistance necessary to keep the wheels turning and protect as many jobs as possible.

Several hon. Members:

rose—

Photo of Frank Cook

Frank Cook (Stockton North, Labour)

Order. Hon. Members will be alert to the fact that we must start the first of the three winding-up speeches at 3.30 pm. Five hon. Members have informed me that they wish to speak. I hope that those five and any other hon. Member who seeks to intervene will bear the time constraints in mind when they make their contribution and when they accept and respond to interventions.

2:48 pm
Photo of Jim Cunningham

Jim Cunningham (PPS (Mr Mike O'Brien, Minister of State), Department for Energy and Climate Change; Coventry South, Labour)

I congratulate Sandra Gidley on securing the debate. It is a vital debate nationally, but it is equally important for the west midlands, because as everybody knows, or should know, the west midlands produces about 10 per cent. of the wealth of this country through its manufacturing base. It is vital that we retain that base.

If we consider Coventry in particular, we see that since the 1980s some household names in terms of car manufacture and suppliers have gone out of business. That gives us an idea of the seriousness of the situation. Companies such as Massey Ferguson have left Coventry, which has had a knock-on effect on the west midlands as a whole. Recently—I think it was last year—there was a closure involving Peugeot. In my view, that was badly handled. Two or three years ago, it was the turn of Jaguar's Browns Lane site. Some hon. Members may remember the demonstrations that took place in Paris outside the showrooms. I am sure that the representatives of Jaguar—it was Ford then—remember that. The problem related to a reduction in Coventry, where we probably have only Whitley left, which is a research and development facility. That is vital for new models for the future. It is equally important because it retains certain levels of skills in the west midlands.

The problem with the auto industry has been around for a long time, but the current crisis has accentuated it in a number of ways. Going back about two years, hon. Members will remember that Ford in America paid off about 80,000 employees. Ford had a major problem at the time, and it closed many of its subsidiaries around the world. It is well known in the trade that there is probably one motor car manufacturer too many, but that may be debatable.

Recently, within the last 18 months, Jaguar was taken over by Tata. We read in today's newspapers that Tata is selling some of its assets in India because sales are down by something like 20 per cent. That is an indication that somewhere along the line we need to support the motor car industry. For every direct employee, the industry probably employs two or three indirectly, including those employed by small suppliers in the various trades that help to make a motor car. The hon. Lady has initiated an important debate.

In the west midlands in about 2000, we saw the first stage of what I would call the Rover crisis. Some will remember that the Select Committee on Trade and Industry visited the west midlands and took evidence not only from the Secretary of State but from employees and potential buyers. A rescue package and a taskforce were set up to deal with that situation, but we all know that Rover collapsed about three years ago. The rest is history.

In my view, there has been a gradual erosion of the manufacturing base in the west midlands. In Coventry some 100 years ago, 129 companies were involved in the motor car trade. That shows how much the industry has shrunk. Only Whitley is left in the Coventry area, and it does not produce motor cars; it is, as I said, an R and D establishment. We have had the same situation with Rolls-Royce; 15 years ago, it closed its Parkside facility and moved some of its staff to Anstey, but there were also redundancies.

We must bear it in mind that in the west midlands, manufacturing is still vital both nationally and internationally. People may have different ideas about manufacturing, but we must remember that many of our universities, including Coventry university and to a certain extent the university of Warwick, rely on manufacturing—and particularly so for design, development and research. Manufacturing, as much as anything, is vital to our universities. Some think that universities are not really involved in technology and only involved in academic matters, but manufacturing trade sustains universities throughout the country. Indeed, we have some very good universities in the west midlands, but I do not want to list them today because time is precious.

We must remember also that the car trade in our country is worth about £50 billion in export values. We should remember that we sell cars abroad. That trade makes a major contribution to our economy.

Photo of Andrew Smith

Andrew Smith (Oxford East, Labour)

Does my hon. Friend agree that there are enormous areas of strength in the UK car industry, of which the Mini plant in Oxford is a good example? The first way to help the industry through the crisis is to give help with short-term credit facilities, which is one aspect of the financial crisis. The second is to help motor manufacturers sustain the good progress that they are already making towards producing more environmentally friendly vehicles.

Photo of Jim Cunningham

Jim Cunningham (PPS (Mr Mike O'Brien, Minister of State), Department for Energy and Climate Change; Coventry South, Labour)

My right hon. Friend is right. We have to make a special case for manufacturing in general, but for motor cars in particular, because we are famous throughout the world for producing them.

The Government must reconsider credit facilities, and any assistance that they can give should be made available without us having to make it a party-political debate. The matter should be above party politics. It is a serious situation. If we can bail out the banks, we should start bailing out the motor car trade, at least in the short term. It is equally important to remember that dealers will feel the brunt of the crisis. At the end of the day, they have to sell the motor cars.

All in all, something has to be done by the Government. The situation is urgent. If nothing is done, we could lose more than 100,000 jobs—even as many as 200,000.

Photo of Robert Flello

Robert Flello (PPS (Rt Hon Hazel Blears, Secretary of State), Department for Communities and Local Government; Stoke-on-Trent South, Labour)

Does my hon. Friend share my fear that what is happening to the motor industry mirrors what has happened to the pottery industry in north Staffordshire? As he said about the motor trade a moment ago, where there were hundreds of firms, we now have a small, almost non-existent, handful of companies producing pottery and ceramic ware in north Staffordshire. Indeed, Wedgwood has a big threat hanging over it at the moment. Firms in north Staffordshire moved on to supplying the car chains, and they are now under threat again. Does he share my concern that we may see the beginning of the end if we are not careful?

Photo of Jim Cunningham

Jim Cunningham (PPS (Mr Mike O'Brien, Minister of State), Department for Energy and Climate Change; Coventry South, Labour)

I share my hon. Friend's concern, and I take his point about the pottery trade. Britain was renowned for its pottery. We tend to forget it, but people should take a good look at what has happened to Stoke-on-Trent. The real danger is that we get into the same situation as the mining industry. The pits were devastated—we could debate that subject till the cows come home—but we need to learn lessons from that in order to help motor car manufacturers. Equally, we should remember that Coventry experienced all that when 10,000 jobs a week were being lost there. Can anyone imagine the effect that such losses could have regionally and nationally—and even internationally, because it has international ramifications?

I strongly urge the Government to do something. I have been speaking to my hon. Friend Richard Burden, and we would like the Minister—or, more importantly, the Chancellor—to meet a small delegation to discuss the situation.

2:56 pm
Photo of Richard Burden

Richard Burden (Birmingham, Northfield, Labour)

I congratulate Sandra Gidley on securing the debate. The number of right hon. and hon. Members here today shows the strategic significance of the motor industry to the United Kingdom.

Some statistics have already been alluded to. We are talking about an industry with a turnover of £51 billion and 840,000 jobs, with 180,000 at the manufacturing end and a retail sector supporting thousands more. In the west midlands, turnover is about £13 billion. That includes not only the major manufacturers in the west midlands—Jaguar and Land Rover—but the Fords, the Vauxhalls, the Toyotas, the Nissans, the Hondas, and the BMWs.

Behind those big manufacturers are a range of performance engineering and motor sport industries. There are also niche manufacturers; Aston Martin springs to mind, as do Lotus and Morgan. Britain is home to most Formula 1 teams; it is world-class in motor sport. Behind those is an entire performance engineering industry, with specialist firms such as Prodrive, Mira and Ricardo. We then have the components industry—the supply chain. The big names in the first tier include GKN, Delphi and TRW, and behind them there are second, third and fourth-tier suppliers.

When people talk about the crisis facing the United States motor industry, it is often said that the industry did not keep up with the times—that it did not invest in new products and did not look to the future. That accusation cannot be levelled at the UK automotive industry. If the lead times, technology requirements and the research and development requirements of the UK's automotive industry are akin to other high-tech industries such as aerospace, its vulnerability to sudden downturns in the market and consumer demand will be that much more acute.

We heard that new car registrations were down by 36.8 per cent. in November. We are in real danger of spiralling problems. If major manufacturers go on downtime for a week or two, or even two months—understandably, given the crisis that they face—it will be a rational business response, but what will it mean for component suppliers that have been told for more than a decade that they must be involved in lean production? They are being told to keep their stocks down and work with just-in-time delivery. Their survival could be at stake.

However, it can also work the other way around. If a component manufacturer goes into administration—we recently saw this in the west midlands with Wagon—it can in turn, by not producing, create major problems for big manufacturers. I have the same fear as my hon. Friend Mr. Cunningham, that if we start to lose the critical mass of our automotive industry in the UK, it will not come back; it will not be there to come back when the upturn arrives. I have seen in my own constituency—I am thinking of MG Rover—what it can mean for a local community when a firm goes down. However, through the taskforces, the recovery plan and so on, we responded to that crisis and ensured that it was not as bad as it otherwise could have been—although God knows it was bad enough! When the problem is industry-wide, however, and extends further than just one firm, it is all the more acute.

What responses do we need to consider? I agreed with a lot in the hon. Lady's speech, but she was a little uncharitable in her references to the Government. She described how President Sarkozy met manufacturers and said that nothing equivalent had happened in Britain, but Lord Mandelson met the majority of major manufacturers—[Interruption.] He is not a President, as far as we know, but that dialogue did go on. My hon. Friend the Minister, who admittedly is not a President either, has also been in regular meetings with major manufacturers, and when those meetings are not taking place, his mobile is usually going off.

As far as the components industry is concerned, in the past week or so, a letter went out to major manufacturers and suppliers about the range of support either available now or in the process of negotiation.

Photo of David Taylor

David Taylor (North West Leicestershire, Labour)

My hon. Friend is an acknowledged parliamentary expert on this subject. He was in the Chamber last week for Business, Enterprise and Regulatory Reform questions. The Minister, who is a man of great intellect, energy and commitment in relation to parts suppliers, said:

"I have written to automotive suppliers, through the lead manufacturers, outlining a range and package of measures that are on the table and available now or will be available very shortly."—[Hansard, 11 December 2008; Vol. 485, c. 665.]

Sadly, four days later, in an e-mail to me, a significant parts supplier in my constituency said:

"No information regarding what support is available, or is likely to be available shortly, has ever been circulated to us, either from the Lead Manufacturers or any other source. Might I ask that you brief us on what those support mechanisms may be?"

I turn that question to the Minister, and hope that he can respond today or at a later time.

Photo of Richard Burden

Richard Burden (Birmingham, Northfield, Labour)

If communication has broken down, it is regrettable. However, if hon. Members will forgive me, I shall not get on to Royal Mail. [Hon. Members: "Or TNT."] Indeed.

Good things are happening, but more needs to be done, and quickly. Hon. Members have mentioned the need to inject liquidity into the system and to get credit moving. The SMMT and the Finance and Leasing Association have given some pointers on how that could happen, and extending the Bank of England's special liquidities scheme and the credit guarantee scheme is part of that. We should seriously consider those suggestions as well as scrappage schemes, as is happening in France. Issues around those schemes remain to be addressed, but we must ensure that they are not structured in such a way as simply to suck in imports. There are ways and means of ensuring that that is the case.

Photo of Christopher Huhne

Christopher Huhne (Shadow Secretary of State for Home Affairs, Home Affairs; Eastleigh, Liberal Democrat)

The key point about credit needs to be stressed. If purchasers do not have any money, everything else will fail. It is important that the Government take on board that point more than any other. Everything else is just a sticking plaster. Does the hon. Gentleman agree?

Photo of Richard Burden

Richard Burden (Birmingham, Northfield, Labour)

I do not think that everything else is just a sticking plaster, but I agree that credit is essential to any plan, both to stimulate demand and to ensure that liquidity and credit is available to manufacturers and the components sector. That is also vital. A number of significant manufacturers are saying precisely that, although I shall not name them, because it would not be appropriate.

The Government should consider what can be done on public sector procurement. Part of the economic fiscal stimulus should involve bringing forward major capital projects. In addition, if a public authority is considering changing or updating its vehicle fleet over the next year or so, it should do so now and get those orders going through. The hon. Member for Romsey mentioned skills training for the future, but now is the time to be thinking about that. Downtime is precisely the moment to upskill. Again, a number of manufacturers are seeking assistance and co-operation on that.

In some cases, we need to have a dialogue with certain manufacturers. For example, Honda has announced its intention to pull out of Formula 1 next season. It has a massive hi-tech facility in Brackley, and it would be a tragedy if that was lost to the UK industrial base. Discussions are ongoing to keep it in existence, but that will take time to come to fruition.

Photo of Brian Binley

Brian Binley (Northampton South, Conservative)

Some 50,000 people are reputed to have worked within a radius of 14 miles of Silverstone. We are very frightened by the situation with regard to the withdrawal of Formula 1 racing at Silverstone and by the work of a certain Mr. Ecclestone. Will the hon. Gentleman get the Government to put some pressure on him, because he is having the most damaging impact?

Photo of Richard Burden

Richard Burden (Birmingham, Northfield, Labour)

As with Royal Mail, I shall not venture into a discussion on Bernie Ecclestone, other than to say that the motor sport industry is vital to the UK economy. One of the things holding that industry in place has been the presence of major events such as the British grand prix, whether held at Silverstone or Donington.

Finally, in considering our response to the economic downturn, we must avoid putting up too many boundaries around the motor industry. Motor and vehicle companies exist within communities. In my own area, for example, a number of universities—Birmingham university business school, Warwick manufacturing group, Birmingham City university and Coventry university—are talking about how to ensure that those companies contribute to the regeneration of the local area. The Longbridge site is the biggest redevelopment site in the west midlands, one of the biggest in the country and pretty large on a European scale. China's first major direct subsidiary is there, in the form of the Shanghai Automotive Industrial Corp and Nanjing production facility. Why not link the regeneration of that site—not just the motor manufacturing side, but regeneration in its entirety—much more to that production facility? Furthermore, Honda could be encouraged to play a much bigger role in the future of Swindon, which has an economy that will no doubt be re-profiling in the coming years.

Those are just a few of the many things that we can do. However, the main message from everyone in today's debate is that the UK automotive industry is too important for us to allow it to become fatally damaged in this downturn. Action is needed now to address the situation.

Photo of Frank Cook

Frank Cook (Stockton North, Labour)

Twenty-three minutes are available, and three Members are bidding for it.

3:07 pm
Photo of Andrew Miller

Andrew Miller (Ellesmere Port and Neston, Labour)

I shall be as brief as I can, Mr. Cook. Colleagues will understand if I focus most of my remarks on Vauxhall Motors, which provides vital employment in my constituency. It produces high-quality vehicles, its management has a fantastic relationship with the trade unions, and it has a very real future based on the new Astra coming into production in 2009 as a result of direct intervention by this Government. Sandra Gidley should understand that the Prime Minister, when he was Chancellor, played a vital role in securing that investment from General Motors Europe.

I follow my hon. Friend Richard Burden, who speaks with great authority on the industry, and my right hon. Friend Mr. Smith. In those two speeches, we heard real solutions for the industry. The SMMT has put together an extremely informative briefing for colleagues speaking in this debate, and it has played a pivotal role in some of the discussions over the past few weeks.

Short-term finance is clearly an issue. We cannot get away from that. Inevitably, with a product in the £10,000 to £20,000 bracket, financial arrangements will come into play. The consumer, at any level—be he a fleet buyer at the top or a customer at the bottom—will be looking at liquidity and finance issues. The Government cannot avoid engaging in that dialogue. Some of the issues raised by the SMMT, to which my right hon. Friend referred, are mission critical.

Equally, we need to consider the next generation of vehicles. We will be making a huge mistake if we do not engage with the industry now and ensure that investment comes to the UK for more environmentally friendly vehicles. Such vehicles will not run on internal combustion engines but on other sources, such as bioelectricity or biofuel cells. I thank my hon. Friend the Minister for his response to the letters that I have sent to both him and the Prime Minister. I started to engage with the Government on such issues in September. If we do not bring the matter together in a co-ordinated fashion, we will be doing huge damage to the industry as a whole.

My hon. Friend the Member for Birmingham, Northfield referred to Government procurement. I hope that the Minister will take that point very seriously. I understand that the Department for Work and Pensions is taking a lead in a large-scale Government procurement. If it follows the actions of the Driver and Vehicle Licensing Agency, which put up a Seat as a prize for one of its competitions, it will be doing a huge amount of damage to the industry. I say that with due regard to the distribution industry which distributes and markets products that are made abroad. It is an important part of the economy and we should not underestimate that, but, as a Government, we should support products that are made at home. For example, many police forces use Vauxhall Astras made in Ellesmere Port. We could sell considerably more to other such people, including to Ministers for the Government fleet.

The issue around environmentally friendly vehicles is particularly important. The SMMT has said that companies should be encouraged to invest in new technology and product development using existing research and development programmes, but with greater focus on low-carbon technologies. That will be fundamental to the long-term success of the industry.

Finally, reference has been made to chapter 11 with regard to the three big players in the United States. I do not think that any of those companies will go into chapter 11 in the conventional sense because who would buy any of those products? If we take the General Motors situation, who would buy Hummer as a going concern? I cannot see that as a real issue. We must work with our partners across the pond and ensure that the solution that the White House and Congress come up with protects the interests of European and British workers. After all, for all three companies, it is Europe and Britain that provide something close to a break-even point for them. It is the United States element that is in deep trouble.

I thank my hon. Friend the Minister for contributing to the engagement with the companies. I urge the media to focus on the facts. I am fed up with hearing about secret talks with Vauxhall. As the Minister can confirm, no such secret talks have taken place—they would not be secret if they were in the public domain. Moreover, there are stories about employee sabbaticals to which the hon. Lady referred. As she said, they are something that some people may regard as an interesting option on a personal basis. However, the newspapers have said that such sabbaticals are something that will be imposed on the whole work force. The company is not in that sort of trouble. It has a short-term finance problem, which the Government can help with. The Government can also help with moving towards more environmentally friendly vehicles. It is a strong company within a strong industrial base. I hope that the Minister will leave us with some confidence that the Government will do something to ensure that the industry can see its way through these troubles.

Photo of Frank Cook

Frank Cook (Stockton North, Labour)

Fourteen and a half minutes are available, with three Members bidding.

3:15 pm
Photo of Fraser Kemp

Fraser Kemp (Houghton and Washington East, Labour)

I congratulate Sandra Gidley on securing this important and timely debate. I recognise the time constraints, Mr. Cook, and I will try to keep my remarks very short.

My constituency has the highest concentration of motor manufacturers of any constituency in Britain. That is because of the Nissan car plant, which is a great source of pride for those who work there and supply it and for the wider community. Clearly, this debate is about not any one particular company, but the entire industry, which has been hit very suddenly by the downturn. In the year up to September, Nissan's sales had increased by 16 per cent. on the previous year. Yet, we are faced with a very serious downturn. There are some positive aspects. Over the years, there has been good Government support for many of the models that have been developed there. Inevitably, car manufacturers are now having to take action to deal with the downturn.

Like Unite the Union, I want to praise Nissan for the way in which it has dealt with its staff. Since its arrival in the 1980s, the car industry in my constituency has transformed its operations. Who would have believed 30 years ago that we would be talking about the export of cars to Japan? That is the reality, and cars are exported on a regular basis to Japan.

Earlier on, there were some references to protectionism. I would caution against that. In my constituency, and in many others, we export something like 76 per cent. of what we produce to Europe and the rest of the world.

Our debate today has to be far removed from what goes on in the United States, or from the sorts of debate that we had about state intervention in industry 30 years ago, because we face a wholly different ball game. As my hon. Friend Richard Burden said, the British motor industry has transformed and modernised itself beyond all recognition. In the United States, where this debate is reflected both in the Congress and the Senate, there is a divide between some of the new car plants in the south and some of the older and more traditional plants in the north. We can be pretty proud that we do not have that divide in the United Kingdom. We have an efficient car manufacturing base that is often the envy of many other countries in the world. Members have stressed its importance because of the jobs that it produces and the £50 billion turnover that it generates for UK manufacturing.

The problems that car companies face at the moment are nothing to do with how they operate or with their efficiency. They are to do with the global turmoil that we all face. I welcome the Government's engagement with the industry, and it is right that we examine how we can assist. This is not about a huge bung to the industry. The industry, trade unions, manufacturers and the supply chains are considering sensible measures to assist. The SMMT has one proposal to open up the fiscal situation for car credit, which should be separated from the manufacturing side because it is more of a fiscal stimulus. Many of the finance houses that are involved in the motor industry operate like banks and are multi-billion pound operations. They should be treated similarly to those companies that have benefited from the fiscal easing within the financial sector, so that we can increase liquidity.

Reference has been made to the Train to Gain budget, which I should like to praise, because it is working very well in my area. It means that people are using this down time in production to reskill, so that they are ready when the turnaround comes. Many of my constituents would face Christmas on short-term earnings if there was no Train to Gain budget. The budget makes sense, because it ensures that we can upskill the work force.

Whatever happens with the global crisis, it will end at some point. Inevitably, there will be a reduction in global capacity, but we in the UK must ensure that we come through strong when the global turmoil ends. Hon. Members may disagree on when it will end, but it will end, and losing vehicle manufacturing capacity in the UK, the skills that we have developed, technologies, or the dedicated work force, would be a real tragedy.

Many companies are thinking about how to position themselves to take advantage in domestic and global markets—we must ensure those things. We must ensure that we do not lose the advantage that we have in skills and capacity. That is why I think that many of the practical suggestions need to be seriously considered by the Government, and quickly.

3:21 pm
Photo of David Borrow

David Borrow (South Ribble, Labour)

The town of Leyland, in which there is a long tradition of commercial vehicle manufacturing, in particular of trucks—Leyland Trucks is one of the biggest truck manufacturers in the UK—is in my constituency. When I was elected in 1997, 600 people worked there. When I visited the plant in August, at the start of a night shift, it had record levels of production and a big order book, and the work force was up to 1,600 people. I remember asking the managing director, Jim Sumner, whether there were signs of recession. At that point, there were no signs. Haulage companies were still placing orders and were in the queue for receiving their orders, and everything seemed well.

Within six weeks, it had gone off the cliff. Haulage companies that had planned programmes of regular orders suddenly backed off, either because they could not get finance, or because they were concerned about their cash flows. They were asking, "Can you delay it a few months?" again and again. There has been a reduction in orders of about 40 per cent., and one round of redundancies has gone through and another is due in the next couple of months.

It is not that the company is asking for financial help—it is strong. Eleven years ago, there was a management buy-out after the collapse of the old Leyland Truck and Bus company in the 1980s and early 1990s, and the company is now owned by Paccar, an American company, which is very sound and which has a lot of money behind it. Paccar has invested a lot of money, and it is a very good company. However, if haulage companies cannot afford to go through with their orders, we in Parliament need to look at what can be done to enable them to do so.

Several hon. Members mentioned extending the various financial guarantees to leasing and finance companies, which is key to allowing companies to go ahead with orders. Often, such companies have plenty of work and regular routes by which to deliver goods, and for years have had programmes to replace a percentage of their fleets. However, they are now being told by their finance companies and banks that they cannot have the money that they need. In 18 months' or two years' time, those orders will need to be met. The existing fleet will be falling apart and it will need to be replaced.

The truck industry is always hit by the peaks and troughs of the business cycle; it is affected as much as, if not more than, anybody else. The industry is used to that, and companies build it into their plans, so that if a recession comes, they can cope with a 10 or 15 per cent. reduction in output—that happens. This time, we are talking about a huge drop in orders, even if they will come through in two years.

This year, Leyland is taking 40 per cent. of the UK market—its best ever share. It is a good company, so what can the Government do to enable the orders to come through early—they will come—to allow the production to continue, so that my constituents can continue in work, and so that the company is kept strong? Finance, whether it is through high street banks lending to small companies or leasing, is crucial, and something must happen on that.

A couple of other things have been thrown in the pot in my discussions with the company, which have occurred frequently in the past couple of months. They are not the biggest things that need to be done because finance is the key, but they might make a difference when it comes to allowing and encouraging haulage companies to continue bringing their orders forward. First, we could look at capital allowances for corporation tax and a 12 or 18-month window in which companies would get 100 per cent. tax relief to encourage them to bring orders through early rather than delay them for a couple of years. That could have some effect.

Secondly—again, this is at the margin, but it could make a difference to companies' ability to go through with orders—the changes that the Chancellor made in the VAT and duty regime in the pre-Budget statement has affected the UK haulage industry. For those of us who drive cars, it has made no difference to what we pay for diesel or petrol, but the amount that haulage companies can claim in VAT has gone down, and the amount that they pay in duty has gone up, so their running costs have increased. Those are relatively minor things, but they could make a difference and help orders to come through.

Thirdly, we could look at public procurement. One of the big Government organisations that buys trucks from Leyland is Royal Mail. We should see what can be done to bring orders through early via public procurement, to enable companies such as Leyland Trucks to go ahead. The orders would come in any case, but such a measure would bring them forward. Let us keep people in work and ensure that, when the recession ends and work picks up, we have an industry that is capable of dealing with the inevitably increased work load.

3:28 pm
Photo of Ken Purchase

Ken Purchase (Wolverhampton North East, Labour)

I am sorry that I turned up late, Mr. Cook—I was detained on other House business. I apologise if I mention points that were made earlier.

What lessons can we learn? The No. 1 issue, as far as I see it, is the poverty of understanding and expertise in our boardrooms—it is a massive problem. The words "retained profits" never pass the lips of industrialists in this country; rather, it is always borrow, borrow, borrow, and retained profits are distributed as income to shareholders. Now we have massive over-leverage in a lot of companies, from prime users all the way down the supply chain. That lesson has to be learned.

Proper borrowing is sensible and prudential, but borrowing on the scale that British industry and motor manufacturing undertook in the past 20 years is close to suicidal. We no longer have a competitive currency; we have an import-export, balance of payments problem that will get worse, not better; and, regrettably, our competitiveness agenda has not been fully developed, despite the best efforts of the Government to push it along. We have ignored it in my constituency, which is related to the motor industry in a big way.

Goodyear was facing massive problems. It worked hard and used other agencies to help and advise it—this is an American company, by the way—and improved productivity by almost 30 per cent. It can be done. However, because we are not competitive, we are having worse problems in this recession than many other countries, especially those that put long-term factors in front of short-term gains. In this country, money that should have been retained was distributed as profits for investment.

We have problems with the exchange rate and, although it is helpful overall to have a lower, more realistically valued pound, we are facing reverse premiums in dollar markets, which will cause us even more problems.

I appreciate that you have allowed me to speak for a moment, Mr. Cook, and I can see that you are looking for me to conclude. We need training and more training but, most of all, we need to get those ideas into the boardrooms of the motor and other industries, such as aerospace, in this country. Let us ensure, when we come out of this, competitiveness, and a proper understanding in boardrooms of the need to retain and invest profits rather than overreaching through borrowing.

3:30 pm
Photo of Lorely Burt

Lorely Burt (Shadow Minister, Department for Business, Enterprise and Regulatory Reform; Solihull, Liberal Democrat)

I congratulate my hon. Friend Sandra Gidley. I, too, was in the ballot for this debate, so I am delighted that she was successful in bringing this matter forward.

We are living in times of a double whammy with tumbling demand and scarce credit. There is huge difficulty and I would argue that car manufacturing and construction are among the worst affected industries in this country. Land Rover is based in my constituency so I understand the problems closely. Jaguar Land Rover had record sales last year. Of its vehicles, 63 per cent. are exported, so hopefully the weak pound will at least help in that respect and overseas markets will recover. The UK car market represents 11 per cent. of this country's exports, so it is hugely important.

Jaguar Land Rover provides 15,000 jobs and there are 50,000 indirect jobs. We must think of the families of all those people. The company is doing all it can. We have spoken of the things companies are doing such as scaling back production and cutting shifts. Jaguar Land Rover has released 850 agency staff and allowed people to take sabbaticals. Employees of Jaguar Land Rover are on 80 per cent. of their pay so they are being less generously dealt with than Ford employees. There have been 600 voluntary redundancies already. The company is doing all that it can and there is great camaraderie. However, it needs urgent financial help. Next year will not do because it is vital. I spoke to Land Rover this morning and that is the message that it wants to give the Minister today.

My hon. Friend mentioned what some other countries are doing so I will not dwell on it. The US Senate rejected a $14 billion package of loans because unions refused to accept a pay drop. However, a replacement package is being worked on and an announcement is expected any day. In Europe, France is providing €400 million for the development of electronic and hybrid cars along with a €300 million investment for restructuring. Spain has a €800 million package for the automotive industry, which is part of a €9 billion stimulus package over two years. In Sweden, there is a £2.35 billion increase in research and development investment and state credit guarantees. Other countries are helping their car industries. This country must do the same and we must do it urgently.

I hope that in his speech the Minister will not just reiterate the information in the letter he sent to vehicle manufacturers for their suppliers. The measures in that letter are very welcome, among them the small business finance scheme and the £1 billion guarantee facility for exporters. We want to hear what the Government will do specifically to help vehicle manufacturers. Small manufacturers will fall like a row of dominoes if nothing is done. Such action is urgent and important.

My hon. Friend mentioned stimulating responsible spending on vehicle renewal. Last year, Land Rover spent £800 million on green technologies. This year, the new stop-start Freelander is coming out, which has a reduction in emissions of 18 per cent. Will the Government introduce measures to stimulate responsible spending on vehicle renewal, such as a vehicle scrappage system for older vehicles to encourage take-up of fuel efficient technologies and to renew the vehicle fleet on our roads?

The Society of Motor Manufacturers and Traders urgently wants short-term access to Bank of England special liquidity schemes; loan guarantees or direct loans; a speeding up of the allocation of existing funding; R and D investment, including investment in blue-sky thinking; and an increase in capital allowance for fleet buyers. Another suggestion I put to the Minister is to introduce measures on trade credit insurance, which would be welcome not only to the supplier base, but to companies all over the country. Such measures would protect companies from the risk of default or insolvency among their customers.

We have all been shocked by the demise of Woolworths and MFI and their coming disappearance from the high street. Both had their trade credit insurance cancelled and were not able to find new insurance. That has been a body blow to many companies. Baroness Vadera has intimated that the Government may be prepared to look at a guarantee scheme. If they do not, this industry and many others will suffer needlessly. Such a scheme would not be a huge expense for the Government compared with the investment they have made already.

In conclusion, I reiterate the urgency of this matter. The Government say they are listening and Lord Mandelson has met with motor manufacturers. However, they must do more than listen. They must do something and they must do it urgently. It cannot wait until after Christmas. Please will the Minister indicate what the Government will do now?

3:38 pm
Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

I am grateful to serve under your chairmanship, Mr. Cook. I pay tribute to Sandra Gidley for securing this important debate.

We all agree that this afternoon we are trying to ensure that the automotive industry survives so that when the recession ends and the upturn comes, we are in the best and most competitive state possible. As a word of caution, although this is an extremely important sector that accounts for 11 per cent. of our exports, manufacturing as a whole makes up more than half our exports. We are looking to the Government to see how the manufacturing sector as a whole can survive the recession and move towards the upturn, not only the automotive sector.

As the hon. Lady has said, the automotive sector is extremely important. It provides 200,000 jobs in manufacturing and 600,000 in associated industries such as the garage industry, the parts industry and Formula 1, which has been mentioned. As has been mentioned by Labour Members, for every one job directly in the automotive industry that is affected, about two or three indirect jobs will also be affected. Any downturn in the industry is hugely important.

We are looking to hear from the Government what sort of package they are likely to come up with. In particular, we would like to hear how that will relate to what our friends across the pond are doing for their automotive sector. What they do will affect us. The automotive industries across the world are interrelated. I have seen how competitive Hyundai is in South Korea. I was in China the other day and saw its emerging automotive industry, which is also very competitive. One thing that we must do is produce higher and higher-tech vehicles. As was mentioned by Labour Members, we must maintain our spending on R and D and our university research. It is critical to our future.

I think that everybody here can unite in agreeing that we need to ensure that we keep credit flowing to both the major manufacturers and the second and third-tier supply chain components. If we lose the skills in those supply chain components, it will be difficult to get them back. That is why the Government's role is critical.

Mr. Cunningham made a good speech about how critical the industry is to his constituency, and the 193 firms involved. He also made the point that critical mass is important. We have critical mass in this country at the moment. If we lose it, it will be much more difficult to get the industry back when the upturn comes.

Andrew Miller made the most important point that I have ever heard him make. We must look to the next generation of vehicles. If we are not looking for high-tech vehicles, we will not be competitive globally. Mr. Kemp has a high concentration of Nissan manufacturing in his constituency. It is an important part of the automotive chain. Richard Burden also spoke. The automotive sector is very important to the Birmingham area. My hon. Friend Miss Kirkbride and other Members from Birmingham are also here.

What has gone wrong, what can be done and what will the Government do about it? Unfortunately, so far, the Government have moved in the wrong direction. The pre-Budget report increased vehicle excise duty regulations to reclaim £100 million more in unused car tax discs. The Government take £33 billion in VAT, road fuel tax and fuel duty but give back only £8 billion to the transport sector. The rate of corporation tax for small firms went up from 19 per cent. in 2006 to 20 per cent. in 2007 and 21 per cent. in 2008. That is going in the wrong direction.

Several other changes in tax policy included in the PBR will have a negative effect on manufacturers. For example, individual firms face up to £2,250 in costs to relabel all their stock as a result of a pitiful change in VAT from 17.5 to 15 per cent., which will be reversed in a year's time. I have received numerous representations from firms getting ready for Christmas about the cost and difficulty involved. That money could be much better spent in other directions, as I will explain in a moment.

Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

Yes, but the hon. Gentleman is the only Member to whom I will give way, because of the time.

Photo of Fraser Kemp

Fraser Kemp (Houghton and Washington East, Labour)

Many Members will be concerned to hear that the reduction in VAT is pitiful. When it comes to car manufacturing it represents hundreds and hundreds of pounds. It is not a pitiful amount to people looking to buy a new car. I can understand that it will be pitiful for small items, but not when it is worth hundreds of pounds.

Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

Ask one of the retail component manufacturers that have had to reprice hundreds or thousands of products just before Christmas what they think about the VAT changes. I can tell the hon. Gentleman that they are not very amused by them.

Photo of Julie Kirkbride

Julie Kirkbride (Bromsgrove, Conservative)

My hon. Friend might want to point out that there have been many good deals on new cars, whose prices have been slashed by far more than 2.5 per cent. of late.

Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

I am grateful to my hon. Friend. That is the way to do it. If car retailers can give really good deals, that is the way that we ought to go. Somebody mentioned a scrappage package suggested by the Society of Motor Manufacturers and Traders and the Retail Motor Industry Federation. That is a thoroughly good idea: get rid of the old polluting cars and encourage people to buy new clean technology cars. Incentives for people to do so could be offset by VAT on the new cars. It is a thoroughly good and worthwhile package to consider.

What would the Conservatives do about it? We would introduce a national loan guarantee scheme to underwrite debts and ensure that banks lend to small businesses. [Interruption.] Hon. Members may groan, but everybody in this debate has agreed.

Photo of Christopher Huhne

Christopher Huhne (Shadow Secretary of State for Home Affairs, Home Affairs; Eastleigh, Liberal Democrat)

Will the hon. Gentleman give way?

Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

No. I said that I would give way only once. Everybody in this debate has agreed. We do not need to be political about it; we need to ensure that the banks lend to businesses so that they are there when the upturn comes.

The Conservatives would give tax breaks to businesses that hire workers who have been unemployed for three months or more, which would be revenue-neutral, as it would be funded by lower spending on unemployment benefits. We would cut corporation tax rates, reducing large corporation tax from 28p to 25p and small corporation tax from 22p to 20p. Those measures would help business to get more cash flow now. We would allow businesses to defer VAT for up to a year. We want to get cash flow into small businesses in particular, here and now.

I have one question for the Minister before I finish. The noble Lord Mandelson has been in serious talks with the automotive industry. We need to know what package is likely to emerge from those talks so that we can help safeguard those 800,000 jobs. When it comes, we will evaluate it to see whether we can support it, but we want some real information from the Minister.

3:46 pm
Photo of Ian Pearson

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

It is a pleasure to serve under your chairmanship, Mr. Cook. I congratulate Sandra Gidley on securing this important debate. From the strength of feeling expressed today, nobody can be under any illusion that hon. Members do not value and appreciate the automotive industry in the UK and recognise it to be of strategic importance to the UK economy.

Hon. Members will be aware that I have form. Those who know me are aware that I have been a passionate advocate for the manufacturing industry throughout my parliamentary career, and I can assure hon. Members that that has not changed now that I have become an economics and business Minister at the Department for Business, Enterprise and Regulatory Reform. We as a Government need to consider what more we can sensibly do to help the automotive industry through these difficult times, but we should not forget what action has already been taken by the Government and what help is available or will become available shortly.

Reference was made to the letter that I sent through the automotive manufacturers to supply chain companies, detailing a range of existing support mechanisms. I will say a bit more about that in a few minutes. My hon. Friend David Taylor said that some companies did not get it. If he has the details, we will try to ensure that word gets out to all the companies in the automotive supply chain, because it is important.

It is clear that there is a strong feeling among Labour Members about the importance of the automotive sector. We have heard contributions from my hon. Friends the Members for Coventry, South (Mr. Cunningham), for Birmingham, Northfield (Richard Burden), for Ellesmere Port and Neston (Andrew Miller), for Houghton and Washington, East (Mr. Kemp), for South Ribble (Mr. Borrow) and for Wolverhampton, North-East (Mr. Purchase), as well as interventions by my right hon. Friend Mr. Smith and my hon. Friend the Member for North-West Leicestershire.

I note that my hon. Friends the Members for West Bromwich, West (Mr. Bailey), for Birmingham, Selly Oak (Lynne Jones), for Birmingham, Hall Green (Steve McCabe), for Birmingham, Edgbaston (Ms Stuart) and for Gateshead, East and Washington, West (Mrs. Hodgson) are also here but have not had the opportunity to speak, as this is only a one-and-a-half hour debate. I have no doubt that if they had spoken, they would have expressed the same concerns as other hon. Friends.

It is a bit disappointing, to say the least, that for most of this debate, there has been only one Back-Bench Member from the official Opposition. I hope that that does not reflect the Conservative party's lack of interest in the automotive industry in the United Kingdom. The UK values the automotive industry, and the Labour Government value it. We are doing what we can sensibly to provide it with support.

Photo of Christopher Huhne

Christopher Huhne (Shadow Secretary of State for Home Affairs, Home Affairs; Eastleigh, Liberal Democrat)

I hope that the Minister will include the Liberal Democrats in his encomium to Labour Members. We have motor industries in our constituencies as well —in Romsey, Eastleigh and Solihull—and we are, proportionately, the most highly represented group in this debate.

Photo of Ian Pearson

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

I will not be drawn into mathematics, but I acknowledge the largely constructive way in which the hon. Member for Romsey made her points.

Last year, the United Kingdom produced 1.7 million vehicles, about three quarters of them for export. We produced about 3 million engines and a record 39,000 pieces of construction equipment. This is an industry that employs almost 1 million people in the United Kingdom. It is of immense value to our economy.

Much was made of actions that were being taken by other countries with regard to the automotive industry. In particular, my hon. Friend the Member for Ellesmere Port and Neston talked about the US automotive manufacturers and the discussions that have been taking place in Congress about a package of support for them. I want to assure him and the House that we are continuing to monitor that situation very closely indeed and we will examine the implications that any such package may have for the UK plants of those automotive companies.

My hon. Friend also stressed, very validly indeed, the role of the Prime Minister in securing investment in the new Astra at Ellesmere Port. I could point to many other examples of where the Government have been intervening to provide support, whether it has been selective financial assistance to help companies with new products or new projects; support through the Technology Strategy Board; green carbon research and development expenditure; or Train to Gain and other training packages. A significant amount of support is already being made available through this Government.

Photo of Brian Binley

Brian Binley (Northampton South, Conservative)

I recognise the time constraints, but can I impress on the Minister that businesses, particularly those within the supply chain of the motor manufacturing sector, are crying out for working capital—for cash? It is widening the guarantee scheme with the banks that provides a real answer. I am not bothered how he does that, but will he give us some hope today that he will do that?

Photo of Ian Pearson

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

Let me reply to that point in a moment. First, I want to talk about three areas where the Government are taking action. The first is the action that we are taking to encourage demand in the United Kingdom economy, to create consumer confidence and provide a fiscal stimulus. That is a vital area. We want people to have the confidence to go back to buying cars. In response to the points that my hon. Friend the Member for South Ribble made, we also want them to have the ability to make commercial decisions to buy commercial vehicles. That is why the £20 billion fiscal stimulus is important. It is why the agreement that was reached by European Heads of State for a European-wide fiscal stimulus is another key measure that needs to be introduced.

As hon. Members will be aware, with three quarters of the cars that we manufacture being exported, it is vital that European countries and the US, which are key markets for us, look to provide a fiscal stimulus and take measures to boost the confidence of their consumers, so that those consumers can continue to buy cars in the future. I think that the Conservative party needs a lesson in economics and how aggregate monetary demand works, if its members say that the fiscal stimulus is not an appropriate policy issue; it very much is. As my hon. Friend the Member for Houghton and Washington, East clearly pointed out, the effect of that stimulus on a car can amount to several hundred pounds and can be a significant additional incentive. Of course, as Miss Kirkbride, who has flitted off again, mentioned, discounts that are being made available at the moment by the car manufacturers mean that there are some very good deals for those people who want to buy cars.

Several hon. Members:

rose—

Photo of Ian Pearson

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

I will give way to Mr. Clifton-Brown and that will be the last time I give way, because I want to reply to some of the points that were raised earlier.

Photo of Geoffrey Clifton-Brown

Geoffrey Clifton-Brown (Shadow Minister, International Development; Cotswold, Conservative)

In order to get something positive out of this debate for all those businesses that are struggling on a day-to-day basis and all those people who are likely to lose their jobs, can the Minister give this House any idea this afternoon when some of that European money is likely to flow into the automotive businesses?

Photo of Ian Pearson

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

I will talk in a moment about some of the support mechanisms that are already available or are just about to become available.

The second point that I wanted to make is that this issue is not about just having a fiscal stimulus for the economy; it is also about ensuring that banks continue to lend. Right hon. and hon. Members will be aware of the pressure that the Government have been putting on banks to continue to make lending available, not just to small businesses but to larger businesses as well.

There have been several announcements in the last few weeks. For example, on 23 November NatWest RBS said that it will maintain existing overdraft pricing for small businesses, and it has also pledged to continue to provide committed overdrafts for business. There is an issue about some overdrafts not being committed overdrafts and consequently they could be withdrawn without notice. Lloyds TSB has also been taking action, with its charter for small business. Separately, HSBC is delivering a £1 billion business support fund. I believe that it is only as a result of the significant dialogue that there has been between the Government and the banking system that some of these measures have been announced. I am sure that the whole House will welcome those measures, and we need to continue to ensure that we keep banks in the spotlight, so that they continue to lend at appropriate rates to businesses.

The third area that I want to address is the Government support mechanisms that are available. Hon. Members mentioned Government procurement. We need to look around the Government more widely to see whether there is more that we can do to provide assistance at this point in time.

Packages of measures are available or becoming available, such as the small business finance scheme that was announced in the pre-Budget report. There is £1 billion in extra support to companies. We hope that the scheme will be up and running early in the new year. Similarly, we hope that the export credit insurance to small companies will also be available early in the new year. Obviously, there are legal requirements that must be met to get these schemes up and running in a proper way, but we are doing everything that we can to move as quickly as possible to ensure that that funding also becomes available.

In addition to taking measures on export credit insurance, we are actively working as a Government to see whether there is something sensible that we can do on domestic credit insurance.

A decision has been taken by the European Investment Bank today that £1 billion of new lending will be available immediately to the banks through the European Investment Board, confirming an announcement in the pre-Budget report. Again, the House will welcome that decision. As a Government, we have been pressing very strongly to double the amount of money coming from the European Investment bank for green cars in the next few years. There will be an €8 billion fund and I believe that it will be very important to our industry, to help it with the R and D that it is doing to take carbon out of its new product ranges. We will continue to apply pressure in that area. We are taking other measures to support R and D expenditure through the Technology Strategy Board, and I am sure that those measures will continue to bear fruit.

We continue to have a dialogue with the large automotive manufacturers that came to see Lord Mandelson and myself very recently.

As has been said, we have seen the collapse of big household names such as Woolworths and MFI. Clearly we cannot rule out other companies being at risk, and that is one reason why we need to continue to have a dialogue. However, I want to stress that any Government support that would be provided needs to be regarded as exceptional. These are exceptional times and we are having to contemplate doing exceptional things. Loans from Government should always be seen as very much a last resort. In the first instance, we should be looking to companies and their parent companies to provide the funds that are required for the future. We should also look to companies to restructure. However, in certain instances, we will possibly need to go further. That is why we continue to have dialogue, as appropriate, with companies during these difficult times.