POLITICS FEEDBACK: Cash bail-out botched
17 February 2009
In BusinessCar's new monthly analysis, we dissect the latest big political stories, from a £2.3bn offering to raking in £67.7m. Tom Webster takes a view
Business secretary Peter Mandelson has finally announced Governmental aid for the car industry. The loans, which Mandelson claimed were "no bail-out", totalled £2.3bn, a figure denounced by Tory shadow business secretary Ken Clarke as "small beer", but welcomed, on the whole, by other areas of the car industry, including the SMMT and the BVRLA among others.
As well as being criticised for only focussing on the building of new cars, the Government wouldn't guarantee that car makers' funding arms would be granted easy access to loans. Mandelson also ducked out of confirming there'd be anything to allow car buyers access to guaranteed cash at a rate in some way linked to the rock-bottom base rate. Instead, he told Mervyn Davies, who'd only been trade minister for two weeks at the time, to "draw up a plan for improving their access to finance". Sadly, the Bank of England reportedly told him where to go. Apparently, technical issues have to be resolved so Davies might end up asking other banks to act as middlemen for the 'special liquidity scheme'. This would allow them to turn liquid assets, such as unsold cars, into cash, which could then be used for customer loans and to run the car businesses themselves.
While it can only be good that the UK car industry has had a cash injection, Mandelson is throwing money at the wrong end of the food-chain. To get fleet and retail buyers spending, more must be done to help potential bargain hunters. Drastic tax cuts on the purchase price of low-emitting cars, and loans at near base-rate, will do more to get cash and confidence flowing again.
The Dartford Crossing has reported it took more than £65.7m in cash in their 2007-08 accounting year. The figure is down from the previous year's £66.5m, but the charge has now been increased from £1 for cars to £1.50.
It would seem that anyone still believing the Dartford Crossing toll would be scrapped once the scheme had paid for itself can now let go of their final shreds of hope.
Instead of slowing down the flow of money coming in off the bridge, the prices have been ramped up. The good news is that night-time crossings are now free, but where's the justification for a cash-cow that increases pollution and congestion - costing UK business countless millions - as thousands of cars per day plod up to the toll booth?
MPs have finally voted in favour of the proposal to build a third runway at Heathrow airport. The vote was taken in response to a Conservative motion opposing the scheme and was passed with a majority of 19.
While money is supposedly tight, there is enough to bulldoze a village and further clog up the skies over London with a third runway.
London already has five international airports, and nearly 10% of Heathrow's annual 67.9m passengers are domestic travellers. Rather than increasing the capacity and ability to fly from one end of the country to the other, the cash could be invested in high-speed rail links, and even on improving a beleaguered road network.