Business

Cable puts brakes on UK car industry

Vince Cable
Image caption Mr Cable welcomed investment in the UK car industry

Business Secretary Vince Cable has told the UK motor industry that the government will rein in financial support for the sector.

"Our starting point is very clear. We've moved on from the era of subsidies," he said. "We just have to be realistic about what's affordable."

But he also insisted that "we're not walking away from the industry".

And he left the door open for investment in research and in carbon reduction measures.

Affordable assistance

Speaking at a conference in London arranged by trade body, the Society of Motor Manufacturers and Traders (SMMT), Mr Cable said he realised that the motor industry is "incredibly important to the UK economy".

"We are now in a different world," he said.

"I don't see the future as one of large scale support for individual companies."

Among the measures that could be on the block was a promise made by the last government to offer a maximum £5,000 subsidy for buyers of electric cars.

The former government had vowed to set aside £250m to the scheme, which had been scheduled to come into effect next year.

"It is still actively under consideration," Mr Cable told journalists in a briefing on the sidelines of the event, though he did not hint at when a decision would be made.

Earlier Mr Cable had spoken of the need to send "price signals" to change the behaviour of the industry and consumers, but when asked to clarify he said this related to differentiated vehicle taxes rather than to subsidies.

Electric motoring

Senior industry officials stressed the need for continuing support for the UK motor industry's efforts to cut emissions from cars and to help transform the UK into a low carbon economy.

Image caption Nissan is to begin production of its new Leaf electric car in the UK in 2013

"The UK is becoming a bit of a hub for electric vehicle and hybrid vehicle production," said Richard Parry Jones, co-chairman of the Automotive Council.

Nissan will produce the all-electric Leaf model here, Toyota this week started making its petrol-electric hybrid Auris here and GM Europe is considering the UK as a location for its Ampera extended range electric vehicle.

Mr Cable agreed that Nissan and Toyota's investment in the UK was warmly welcomed and said "the Ampera project would be great, it would be great for the UK", but he added that GM Europe's chief executive, Nick Reilly, had not asked him for any money.

Earlier this month, GM suggested the Ampera production would go to an Opel or Vauxhall factory in a European country where electric motoring was supported, for instance, in terms of backing for the supplier base and in terms of infrastructure.

Strategic approach

Mr Cable stressed the dangers of countries getting into a situation where they offer better and better terms and conditions to inward investors in order to attract job-creating firms.

"It is completely self-defeating at the end of the day, with governments getting poorer and companies being encouraged to produce too much, resulting in overcapacity," Mr Cable said.

"We can't fight and win a subsidy war."

Senior industry officials insist carmakers and others in the sector never asked for subsidies in the first place and that they are certainly not doing so now.

"We're not saying 'give money for this, give money for that', but we are calling for the government to offer strategic support," said Paul Everitt, chief executive of the SMMT.

Mr Parry Jones agreed: "We've never asked for handouts to failing companies."

Low carbon initiatives

Mr Everitt and Mr Parry Jones both welcomed Mr Cable's suggestion that the government would focus on developing skills and on making the UK more attractive to investment from abroad.

Central to this was the government's efforts to tackle the UK's crippling deficit, Mr Cable insisted.

Moreover, the motor industry is particularly eager to attract major suppliers back to the UK, according to Mr Parry Jones.

Mr Cable insisted that this is happening already, in part because sterling has fallen 25% to 30% against currencies in other major economies in recent months.

And he said the government is working hard to make banks resume lending to suppliers.

"It is one of the major preoccupations of the government," he said.

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