The government now wants you to buy cars

You couldn’t make it up. After a decade of lecturing us about the evils of using personal transport, and the need to go by bus train or cycle, we now have government Ministers wanting to find ways for us to buy more cars. Furthermore, they want us to do this on borrowed money.

I had some sympathy for Peter Mandelson, the newly appointed Business Secretary, coming into the economic mess we have been placed in. (That should wind up a few of my regulars!) In a recent radio interview he was asked about government support for the motor industry. As Industry Secretary he had to appear sympathetic and understanding of their present plight. As a former EU Commissioner, probably freshly briefed by Competition officials in his own department, he had to be very careful not to imply the state would start giving the motor trade anti competitive subsidies.

He picked himself intelligently through these competing pitfalls. He stressed that the motor industry was not seeking subsidy. It was, he said seeking loans on commercial terms to tide it over. He also stressed that its big problem was a sharp reduction in demand, so the best kind of help might prove to be financial assistance to those offering loans to car buyers. He was lucky that the interviewer did not ask him if the industry wanted commercial loans why did it need to talk to the state about it? Nor did they ask him if this meant helping finance companies with state money so they could offer large loans to well paid people to buy large cars.

I am sure the irony was not lost on him. The Labour government spent its first ten years in power trying to make motoring ever more expensive and difficult, with congestion charges, higher parking charges, big increases in VED and increases in petrol tax. Suddenly realisation dawns that UK motor manufacturing is an important part of total UK manufacturing. The dreadful figures for industrial and manufacturing output in the closing months of 2008, taking the annual figure to a fall of over 7%, owes quite a lot to weakness in the motor trades. Makers of prestige high performance cars have been badly hit. Clearly today in government the Business department has more clout than the Environmental one.

I am happier with the government’s latest stance, that cars are an important part of modern life, and successful manufacturing of ever more fuel efficient and environmentally friendly personal transport is part of what we should be doing as a nation. It is not going to be easy from here leading the revival of this sector, as it is one of the least painful personal and company budget decisions to make to defer the replacement of your old car or to forgo the pruchase of an extra one.

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29 Comments

  1. Curly
    Posted January 10, 2009 at 11:31 am | Permalink

    Cue thousands of Greenies on the streets vehemently defending the recession and lauding it’s ability to cease man made CO2 production. Will 2009 be the year when they declare that global warming is finished as the world’s producers throw millions out of work?

    If the government wants us to buy cars, houses, Taiwanese TV sets or anything else to help stimulate the economy, they need to learn to get out of the money markets, reduce their own expenditure, reduce their own debt requirements, and give huge personal and corporate tax cuts.

  2. Acorn
    Posted January 10, 2009 at 11:42 am | Permalink

    Let’s not be too hasty here JR. I have got a Jaguar XF picked out in Radiance paintwork and Champagne leather upholstery. I am ready and willing to help Mandy spend the taxpayers subsidy; I am sure the guys at Fox Jaguar will have the coffee waiting at the showroom door. (Sorry, that was a weak selfish moment).

    I am very confused now. Are we running a “supply side” economy or a “demand side” economy? The following link may upset some Redwoodians. I post it purely in the interest of debate. I have not succumbed to the dark side of the force. Notice it was written in May 2006.

    http://www.commondreams.org/views06/0514-20.htm

  3. Sarah H
    Posted January 10, 2009 at 1:12 pm | Permalink

    And as companies have to make cut backs, or sadly go under, that also affects the car market. My own husband has offered to keep his company car a further year to assist his company.

    ..

    It was nice to read Simon Heffer’s complimentary piece on your good self this morning! I hope The Rt.Hon. David Cameron starts to realise that you would be a great asset to his Shadow Cabinet.

  4. James
    Posted January 10, 2009 at 1:28 pm | Permalink

    Just read Simon Heffer’s online piece.
    In his last paragraph he is in praise of a genious who has been ahead of the economic curve for some time.
    I suggest, if you have time John, you read it.
    You may recognise the subject of Mr Heffer’s praise.

  5. rugfish
    Posted January 10, 2009 at 1:35 pm | Permalink

    I can see Labour’s new argument now.
    It goes something along the lines of :-

    Studies show that the Tories idea that the motor industry was unimportant, wasn’t worth helping, and desering of high taxes simply because it adds unacceptable levels of harm to the environment, were completely wrong and we, your lovely caring Labour Party were right all along. We are therefore announcing, ( despite Tory Policies to the contrary remaining out of tune with the very real damage this is causing to our economy ), ( That’s mine and yours not the nasty Tories folks ), a number of measures to help the impoverished motorists ( who have all been victimised by Thatcher since the Thatcher years took away everything we in the Labour Party have always striven to preserve ), and I’ll be giving details of the changes in the next few weeks as soon as I’ve gauged public reaction….ahem….I mean arrived at full and proper decisions on the matter after further consultation with the respective bodies.

    Sound about right ?

    Any road, the car industry in knackered, no one has any money, can’t get it and if they did they’d keep it, they have no confidence, they’re badly treated, under threat of losing their jobs, taxed to the eyeballs, losing millions on their homes, and generally fed up to the back teeth of striving to be somewhere just to get knocked back again by Labour. Also, I reckon they may have cottoned on to the actual power they have in their own hands to drive our economy off the cliff just to spite Gordon Brown and in particular Peter Mandelson who I haven’t missed that you felt sympathetic toward Mr Redwood. I shall never forgive you for that !

  6. Blue Eyes
    Posted January 10, 2009 at 2:50 pm | Permalink

    Joined up thinking from the “tough, long-term decisions” government. As I wrote last month, I would be happy to buy a car to help support British car-making if it wasn’t so discouraged by the state. I refuse to buy something which the government taxes, taxes and more taxes just for owning. If there was less of a disincentive I would go out and buy a Vauxhall or Toyota right away.

    • rugfish
      Posted January 12, 2009 at 5:55 pm | Permalink

      I feel the same way.
      I refuse to buy a new car now on principle when I know the government wants the taxes from it to pay for their ludicrous giveaway schemes.

      My wife has also cut back and now only buys half the smoked salmon we used to for this very reason. There is too much tax a Jag and too much on cat food she says, so it’s tough for Jags and cats and it’s also tough for Brown !

  7. Stuart Fairney
    Posted January 10, 2009 at 3:31 pm | Permalink

    Presumably it’s only okay to buy it if I:

    ~ don’t drive it into London or Heathrow
    ~ don’t buy a 4 x 4 but
    ~ do buy a landrover
    ~ don’t run it on petrol as that’s not sustainable and produces CO2, but
    ~ do run it on petrol as Gordo needs the tax so badly
    ~ don’t park it in the garage of my new house, as the council haven’t provided enough parking garages or off-road parking, but
    ~ don’t park it on the road either
    ~ don’t drive during times of congestion as that will only make things worse, but
    ~ do alow them to monitor my every movement in it

    A fair summary?

  8. John Campbell
    Posted January 10, 2009 at 3:35 pm | Permalink

    I agree entirely. I’d only add that I’m not at all surprised by the government’s volte face. Their pronouncements are driven by the need to make headlines, and hence they veer with every wind, having no course of their own. And, of course, their understanding of “doing something” is to make favourable headlines. The concept of making a beneficial difference in the lives of the Queen’s subjects is alien to them. Thus the only things this government has achieved are the unintended consequences of fiddling with what, to their surprise, are the levers of power. Spasmodically jerking on the levers of power, to the detriment of all of us (but not, of course, to that of politicians with their fur-lines electrically-heated taxpayer-funded salaries, perks, and pensions) is merely a Pavlovian response to exiting the TV studios after having fully implemented their new policy merely by having been interviewed by some sycophantic and ignorant BBC apparatchik.

  9. Kevin
    Posted January 10, 2009 at 3:38 pm | Permalink

    The labour government are borrowing too much money and this money not even spent wisely its wasted tax payers money and when they borrow more and more and more but people forget its not the governments money its the tax payers money and that money will soon need to be paid back by any future governmments, now not only do that want us to borrow money to try and help save the economy from the mess that labour gotten us into the problem john is most people are now loosing there jobs as a results to labour mis handling of the uk economy and they having problems keeping up with house payments and food etc etc they cant afford to buy cars and how is the 15 percent vat cut helping the uk when most people cant afford to buy because they are unemployed its a crazy world we live in john the sooner labour is out of government the sooner uk plc can start its recovery the worse labour is in the worse things are going to get and the more they gonna keep borrowing

  10. MrDavies
    Posted January 10, 2009 at 4:06 pm | Permalink

    Very ironic, given that the slump of car sales in the UK was triggered by the gov’t’s decision to ramp up Vehicle Excise Duty, in pursuit of the green vote.

    The threat of circa £400 per annum duty on vehicles around 6 years old caused the price of second hand cars to halve, even before the credit crunch, and has left many with negative equity in their cars.

    The fact that the price of diesel is now around 10p per litre more than unleaded, after the government had initially persuaded people to use diesel, does not help either.

    How many will follow the gov’t’s call to buy now? The chances are they will reverse this policy in a year or two and ramp up taxes again.

    The gov’t simply cannot be trusted.

  11. chris southern
    Posted January 10, 2009 at 5:20 pm | Permalink

    it always amazes me that certain politicians can’t see that extra taxation of certain industries eventualy lead to their decline and then panic when said decline becomes very noticable.

    whilst i don’t pity mr mandelson (and can see the irony,) hopefully this will make him see that himself and others realy need to look at what they put in place as to how it will effect the future (or at least others will learn from this any way!)

  12. mikestallard
    Posted January 10, 2009 at 5:33 pm | Permalink

    Sorry for Peter Mandelson! Is this a first?
    Congratulations, by the way, on your little pat on the back from Simon Heffer in today’s Telegraph. Well deserved.
    Anyway, what my wife thinks about our buying a new car after I scratched the side of our five year old Seat:
    First of all she seems genuinely worried about greenery and heating up the global environment. Somehow this ties in with her ideas on not buying another car. She travels on her free bus pass as much as she can now to save the planet.
    Secondly she is afraid for our family money. The loss of hundreds of pounds’ interest has made her want to hang on to what we have at the moment. She is in no mood to “invest” any of it in a new car.
    Thirdly, in the back of her mind, just as you predicted a few months ago when you wrote about deflation, there is lurking the idea that prices may drop even further.
    Fourthly, she knows that, on driving a new car out of the showroom, she loses, on the spot, 30% of its value.
    My wife is very valuable: she is Mrs Average.

  13. brian kelly
    Posted January 10, 2009 at 5:37 pm | Permalink

    This is a general comment. There are very few indeed who consistently give cogent and intelligent analysis of the crisis facing this country as a result of 11 years of political and economic incompetence, ignorance and increasing madness from this govt: you are undoubtedly one of those few.

  14. Chuck Unsworth
    Posted January 10, 2009 at 5:56 pm | Permalink

    The motor industry has survived on people being stupid enough to regard cars as status symbols. Now the chips are down and the public regards them as necessities – or as disposable luxuries. It’ll take a very long time before people start changing their cars every one or two years as they did in the past. Why bother? Modern vehicles all last much longer than older cars. They’re comfortable, pretty practical and mostly fairly reliable. Why change?

    In our household all of our cars last for 100,000 miles before we sell them on. In several cases they’ve lasted for 250,000 miles. Put that into the context of an average yearly mileage of about 12,000 to 15,000 miles for most drivers. So, buy a second hand car with, say, 60,000 miles on the clock, run it for about five or ten years, then do the same again. Depreciation, so what? Never buy brand new.

    In the meantime the prices of both new and second hand cars are on the floor – and will stay there for a few years.

  15. Bob
    Posted January 10, 2009 at 10:25 pm | Permalink

    It’s our grandchildren that will be picking up the tab for Gordon’s largess.

    Ask not what we can do for posterity, but what posterity can do for us, eh Gordon ?

    What a bunch of self serving spivs.

  16. APL
    Posted January 11, 2009 at 1:46 am | Permalink

    JR: “(That should wind up a few of my regulars!)”

    I’ll bite.

    I have no sympathy for Mandelson, he has this in common with Gordon Brown, neither are qualified by election to occupy the post they hold.

    Brown appointed himself. The Labour party being too busy slithering around on its belly to put up even a token candidate.
    Then Brown appointed Peter Mandelson.

    By what right do either of them hold authority in Britain?

    On the topic of the slump in motor vehicle sales, I think Denninger has it spot on. As a result of the distortion in the market brought on by a decades excess cheap credit, we have pulled forward several years demand to the present – (now the past), there will now be a natural drop in demand for the next few years. The government of course think they can ‘stimulate’ the economy.

    All the artificial demand caused by the credit boom led manufacturers to build additional capacity into their production facilities that was not justified by the natural demand in the economy.

  17. Francis Irving
    Posted January 11, 2009 at 1:55 am | Permalink

    Really, it’s pretty simple.

    Electric cars are *massively* more efficient than petrol ones. Even if you still burn coal in power stations to make them. And we have to make them all – the transfer will be good for the car industry.

    It is offensive that we haven’t changed to electric cars yet. Every driver is being ripped off, frankly.

    Don’t believe me? Check out the facts in the free book (or buy a lovely paper copy) at http://www.withouthotair.com/

    • Stuart Fairney
      Posted January 11, 2009 at 10:28 am | Permalink

      If you are right, the cars will be purchased in large numbers, you don’t need to supply evidence. If you are wrong, (in a free market) they won’t. QED

      It’s not up to you to decide if everyone is being ripped off, they can make their own minds up.

      • Francis Irving
        Posted January 12, 2009 at 8:47 pm | Permalink

        The reason that isn’t true, is because it needs an infrastructure change. As an individual, you can’t change to electric cars now – there aren’t the recharge stations, and battery hot swap points.

        Once the infrastructure comes into place, yes, you’re right, people will change to them.

  18. Jimbo
    Posted January 11, 2009 at 2:23 am | Permalink

    Hi John,

    I’m a new visitor to this blog – and I’ll be returning often. What you write here is clear common sense and it makes me hope you have the ear of Mssrs Cameron, Osbourne and Hague!

    As far as the car issue is concerned, I fear the horse has bolted. Everyone is afraid of what the future holds, and unless you are one of the lucky few who still has the odd £100k in loose change on the hip, most of us are seriously reassessing our priorities – and cars, especially luxury ones come way down the list. They just don’t seem relevant to our lives anymore…the days of “keeping up with the Jones’s ” are long gone. Rolling up on the drive with a new Beemer may have impressed the neighbours 12 months ago….today it would seem ever so slightly obscene. Instead the conversation over the garden fence these days is far more likely to be about things we’ve done to save money…and saying that you’ve decided to keep the old jalopy on the road until she gives up the ghost is no longer derided…far from it. It highlights your solidarity with your neighbour and your community in these difficult times. I personally may still have a job, cash in the bank and access to easy credit, but I’m not going to flaunt it in front of my neighbour…and not only that, I like so many others remain every so slightly nervous that it may be my turn for redundancy next.

    So for me fear of the future and the sheer crassness of luxury motors in the current climate means that the likes of Jaguar, Range Rover and Aston Martin are going to have to radically change their business model if they are to survive. Volume producers are not much better off, but the chances are the demand for their vehicles will creep back sooner than the demand for luxury vehicles. Tiding them over until the demand returns is the issue for Government.

    However, I do see this as an incredible opportunity to address the issue of climate change and to save the motor industry at the same time with a Government backed investment plan to force manufacturers to develop hydrogen technology. The recent Top Gear episode featuring the Honda Clarity was a revelation – it is a hydrogen powered car that has the range and performance of a petrol car, that takes the same time to fill up as a petrol car and that looks the same as a petrol car. So why is it only available in California? The answer I believe is the lack of hydrogen making facilities and a distribution network. So why doesn’t the Government invest in a hydrogen network and demand of Jaguar/Vauxhall/Ford etc that they get off their collective behinds and start building cars that use hydrogen? Indeed the Government could provide them with funds to support the necessary R&D. At least there would be a point of focus for all the money the Government is going to throw at the car industry.

    And when Jaguar put its first hydrogen powered saloon in the showroom, I’d be down there like a shot to buy one….and wouldn’t we all? The motor industry needs a radical change of direction if customers are going to start coming back….I reckon hydrogen power could be the trigger to stimulate that demand – it could be one of those “must have” items that sometimes hit the market and we all simply flock to buy.

    The fact that Honda have already achieved a functional hydrogen car, and that California has a hydrogen distribution network of sorts makes me wonder what on earth is holding up the rolling out of this technology across the world? Why aren’t all the car companies talking about their new hydrogen cars? Why aren’t oil companies rapidly developing hydrogen distribution networks?

    A potential partial solution to global warming and the opportunity to rejuvenate the car industry seems to be available…not only that it offers the opportunity to relinquish our dependence on Middle Eastern oil. So why the failure to grasp this new technology and exploit it for all it is worth? Are the oil companies still that powerful?

    • Adam Collyer
      Posted January 11, 2009 at 9:54 pm | Permalink

      The issue is how the hydrogen would be made.

      One way is by cracking hydrocarbons (i.e. oil). Which seems to defeat the object!

      The other way is by electrolysis of water, using electricity. Modern advances in battery technology make that questionable – why invest in a hydrogen distribution network when we already have a perfectly good electricity distribution network? Why not use the electricity directly in the car? Both General Motors and Toyota are developing mass market “plug in hybrids” – i.e. battery powered cars with petrol engines as a back-up if the battery runs down. BMW have recently started tests of a fully electric powered Mini in California. Tesla are already selling a fully electric powered sports car. (0-60 in four seconds and more than 200 miles on a charge.)

      By the way, Honda were NOT the first out with a hydrogen powered car. They were actually beaten by BMW and Ford.

      And also note that Land Rover are also working on a diesel electric hybrid – just google LRX.

      • Jimbo
        Posted January 12, 2009 at 11:07 am | Permalink

        Adam,

        I think you needed to see the Top Gear episode to appreciate what has been achieved here. Of course creating the hydrogen is an issue – and I assume the answer is electrolysis. On a recent episode of “Coast” a guy in Orkney had his own little hyrogen producing plant using a wind turbine.

        The problem with electric cars is the recharge time and the range – any journey over 200 miles and you need a 4 – 6 hour recharge…..not exactly practical.

        Unless someone comes up with a battery that has a 400 mile range, provides consistent petrol matching performance and only takes 5 minutes to recharge I’m afraid battery power remains rather a dead end in terms of a long term alternative to petrol – it only really works in hybrid vehicles, and that doesn’t get you off oil dependency.

        Hydrogen has to be the future, (if the guys on Top Gear say it is, then it must be true!) but at the moment no-one is prepared (other than in California) to take the plunge and invest in a distribution network….this in turn stops the likes of Ford and BMW from bringing their hydrogen powered vehicles to the market – and this was my point – if the government wants to “stimulate” demand for cars then presenting the consumer with an entirely new fueling concept could be the trigger that’s required. Don’t just throw cash at the companies and hope they survive long enough for demand for old petrol cars to return…use the cash to actually make that dramatic evolutionary step to a new fuel technology. It’s at times like this (global financial meltdown) that radical changes can be made to established ways of doing things. This is a golden opportunity to make some big changes that will benefit the human race for decades. Gordon Brown is lumbering our children with a massive debt to pay off – I’m sure they would bear the burden better if we could say it was partly the cost of weaning us off our oil dependency.

  19. Adrian Peirson
    Posted January 11, 2009 at 4:33 am | Permalink

    The Other day you said Gordon was going to Print Money, did you mean Print or Borrow.
    If it’s Print, then that is a step in the right direction.

    Also Building and Manufacturing saleable assets is another step in the right direction.
    Maybe he does read this Blog after all.

    Ok Gordon, all you have to do now is Close down the Private Bank of England, and continue PRUDENTLY printing and issuing our own money, free of charge, without interest.

    Do what Dennis Kucinic in the US is doing and close down the Private Central Bank.

    http://www.prisonplanet.com/kucinich-federal-reserve-no-more-federal-than-federal-express.html

    Keep going Gordon, you’re doing well.

    (sentence left out)

  20. rugfish
    Posted January 11, 2009 at 8:31 am | Permalink

    Since this matter is relevant to the environment, can anyone please explain why we’re freezing like brass monkeys whilst listening to idiots who tell us we’re killing the planet with global warming. Somehow I just can’t seem to get my head around it.

    Secondly, can someone please explain why if we have 400 years worth of coal under our feet, we’re freezing like brass monkeys, oil is running out and gas prices are literally going through the roofs of Britain with VAT on top of double the price we buy it from Russia (?), ( can’t work that out either ), and that our economy is dying and will continue to die if we don’t build more power stations, and when there are at least 2 million on the dole ( which I know is itself a lie ), why we can’t mine coal again ?

    What sense does it actually make not to use the natural resources of our country to feed our own economic survival ?

    • adam
      Posted January 11, 2009 at 2:27 pm | Permalink

      You can make most petroleum products from coal, this would be efficient to do at about $70 a barrel oil, so the world price of Oil is unlikely to stay above $70 for long. This may apply to gas also, i am not educated enough to know.
      I believe we do have one coal mine operating profitably.

      In the long run exponential growth means we need to try and move away from resources where the level of future supply is unknown, even where there are huge resources like coal.

  21. Matt
    Posted January 11, 2009 at 11:23 am | Permalink

    I doubt the government ever wanted to stop us buying cars. They wanted us to buy them and not use them!

    I’m surprised that you are perpetuating the idea that the cost of motoring has risen under the Labour government. My understanding was that in real terms it has stayed constant or fallen.

  22. adam
    Posted January 11, 2009 at 2:30 pm | Permalink

    The car industry is doomed.

  23. Bazman
    Posted January 13, 2009 at 10:53 am | Permalink

    Here’s an idea! Lets build a 24 lane motorway with a cycle route, from South Wales into Central London. That would boost car sales, house prices, housing shortages and the economy in general. The green issues can be bolted on sometime in the future. The idea that cars will ever be more efficient running on electricity is pants. Follow Prince Charles and have your vintage Aston Martin converted to run on recycled wine. Claret can be used for diesel cars.

2 Trackbacks

  • […] Twinkletoes Cable.5. Daryl G has a Moment of Clarity about the need for a bloggers association.6. John Redwood finds it hilarious the government is now urging us to buy cars.7. Richard Willis on the Labour VAT […]

  • By Wow! Four-month shutdown for Honda « Lightwater on January 16, 2009 at 9:40 pm

    […] Am I wrong to do this? Hell, I don’t know. But one thing is for certain, I’m not spending while Gordon’s in Downing Street, just don’t know where he’s leading us. Possibly related posts: (automatically generated)Honda advertises cars with green hybrid billboardsHonda Delays Start-Up Of Argentine Car PlantHydrogen Honda Hits Highway […]

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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