£2.3bn loans scheme for car makers fails to pay out
A £2.3 billion loans scheme to support struggling carmakers has failed to help a single employer, a Commons inquiry has warned.
The influential Business and Enterprise Select Committee slammed the Government over its management of the Automotive Assistance Programme, which was launched with great fanfare in January.
Lord Mandelson, the Business Secretary, said up to £2.3 billion in loans or credit guarantees would be made available to vehicle manufacturers, after they warned it had become impossible to obtain loans because of the banking crisis.
But officials admitted in July that no money had been provided. And asked how many loans or loan guarantees had been issued, Ian Gregory, the civil servant overseeing the programme told a Commons inquiry: “It’s a round number - it’s none.”
And a new report reveals that even now, no firms have received funding.
The Business and Enterprise Committee said it was “deeply concerned” that not a single loan or loan guarantee has been made under the programme.
Chairman Peter Luff (Con Mid Worcestershire) said: “When it was announced in January it represented a genuine opportunity to help the automotive industry. But it is now December and not a single loan or loan guarantee has been made.
“The scheme seems to have been a wasted opportunity to support this important manufacturing sector during the recession. It is up to the Government to prove us wrong, but they must ensure that funds are released to companies very quickly.
“It is late in the day for this to happen, so the Government must act soon.”
The Government insisted that talks were still taking place with businesses which might benefit from the scheme.
A spokesperson for the Department of Business, Innovation and Skills said: “It is important to understand that the Automotive Assistance Programme is about long-term investment projects, rather than short-term rescue. We have to work at the pace demanded by the companies and also have to consider the best interests of the taxpayer.
“Following direct contact with more than 90 companies we are now working on detailed plans with some ten companies as part of the Automotive Assistance Programme on projects worth around £2 billion.
“As always, when taxpayers’ money is at stake we must ensure that we are offering the right support to the right companies. And as we have seen with Jaguar Land Rover, some companies are able to secure funding from other sources, which is good news for both the industry and the taxpayer.”
Midlands-based carmaker Jaguar Land Rover has been involved in tortuous negotiations with ministers over the scheme, and there appeared to be a breakthrough earlier this year when the Government announced it had agreed guarantees allowing JLR to borrow £340 million from the European bank.
But the deal fell through, amid claims that Ministers had imposed tough conditions which Jaguar’s Indian owners Tata could not accept, such as the right to choose JLR’s chairman and have a seat on the board.
JLR has announced it is planning to close one of its plants, which are in Birmingham, Solihull and Merseyside. It has said this will not mean any net job losses.
High-profile casualties of the recession have included Birmingham vanmaker LDV, which closed with the loss of 800 jobs.
The report also welcomes the creation of the new Department for Business, Innovation and Skills, which was formed by merging the old business and enterprise department and the department for innovation, universities and skills.