Wokingham Times

We need some commonsense over global warming. The failure of the world’s leaders to agree a target based approach in Copenhagen should come as no surprise. They were unable to do so at Kyoto, where the USA, China and India opted out. Some of the European countries which did sign have so far failed to hit the targets they promised to meet. The 2009 European Environment Report showed just five of the fifteen EU western member states already hitting their Kyoto targets. Countries like Spain, Italy and Canada experienced substantial rises in CO2 output in the early years of the Kyoto plans.

Some of my constituents think a target based approach is the answer. There are several problems with such a policy. There are no global sanctions against countries who sign up and then fail to hit the targets. Some states like China are reluctant to commit themselves to long range targets, as they see their growth and economic development as more important, and difficult to predict accurately. Some states like the European countries that have not hit their targets so far will sign up, but fail to deliver. Most of these targets fall to be delivered by some future government at some date long after the next election, so governments can find it tempting to sign but to defer the action hitting the target would require. Many governments have in the past signed up to targets without having any detailed idea of who has to cut their carbon output. The targets require big changes of behaviour by many in the society, but governments find it difficult or unpalatable to force people to change their lifestyles to that extent.

To me, the three main environmental issues that we need to address here in the UK are flooding, water supply and transport. The truth is the UK will not be able to tell the world how much carbon dioxide to exhale and vent in exhausts from central heating and transport systems. Mr Brown tried very hard to get a deal but was not even part of the crucial meeting of the five countries led by the USA which gave us what agreement was reached at Copenhagen. This is not an issue within UK democratic control. It is also subject to manipulation. A country with a rising population will find it much more difficult to hit targets than one with a declining population. A low income country will find it more difficult than a high income country to limit growth. What is in the control of our government is how we respond to the threat of floods, how we regulate and organise our water supply, and how we configure our transport networks.

People who worry about global warming think there will be two main adverse consequences for the UK. They fear long hot dry summers when we might have insufficient water. They are concerned about warm wet winters when too much surface water leads to floods. They are right to be worried about both a water shortage and potential flooding. We have experienced both in recent years. Too much building on flood plain is causing regular and unacceptable flooding. A big increase in the UK population in recent years has not been matched by extra water capacity. We need to tackle both issues.

I am trying to persuade the government planners – and local ones – that we need to stop building on local flood plain. It is shocking to visit people in their brand new homes just after their first flood, as I have done. We need to intensify the efforts of the Environment Agency to manage the waters of the Loddon, Emm and Thames better. We need more ditches, sluices, holding areas for excess surface water. I am also trying to persuade our water companies to put in more reservoir capacity, so if we are ever blessed with a hot summer we can water out plants and take our showers without fear of running out. If the forecasters are right about the climate you only need reservoir capacity to bridge summer to the wet autumn each year.

Which leaves me with transport. We need to improve our rail and road networks, so traffic can flow more rapidly with more capacity. That cuts congestion and pollution, and makes our lives easier. To me this is all environmental commonsense. We have to accept we do not rule the world There is now ay we can make India and China forgo energy intensive growth. With their 2.5 billion people that will mean a lot more energy use. What we can do is work away at fuel efficiency to cut our bills, at insulation to limit our heat losses, and at better transport systems to cut out waste. It was good to see the efforts Wokingham Borough Council put in to keeping the main roads snow free over the last week. I am taking up why the Highways Agency was unable to do the same on the night of the first snowfall.

Class war and the two Britains

There are two Britains – the public sector and the private sector. Today the Times tries to make out that Councils are about to experience the same bleak prospect for jobs and sackings as private industry and the retail sector, but so far there is no evidence that the public sector faces the same dreadful pressures, or is under any kind of imperative to work more efficiently and effectively.

I do not wish to see sackings in the public sector to match the ghastly situation in the private sector, but I do want to see natural wastage and other means used to manage the public sector to greater efficiency. Parliament continues to set a poor example under this government. We are only just back from three and a half weeks holiday over Christmas and the New Year. On Monday business collapsed just after 8 o clock from a 2.30pm start, and last night Parliament only managed to keep going until just after 6 pm from a 2.30pm start. Officially we were meant to work until 10pm.

We were not allowed to debate the big issues of the day. I wanted to make a speech about how to start to sort out the banking crisis. I wanted to cross examine the Chancellor about the state of the economy. Instead we were told we had to discuss placing a new local business rate or tax on the private sector to pay for more Council spending on Monday, and yesterday the whole day’s debate was given over to a scheme to encourage people on benefit to save by offering them more public money which all parties in the House supported. With such a crashing lack of leadership and with such insensitivity to the plight of the nation, it is no wonder people think poorly of the present Parliament.

I had to listen to the radio and read the papers to hear of the new class war the government wishes to fight. We were not treated to a statement or debate on that important subject. Presumably Labour decided it would not play well if it had to withstand criticism and questions from MPs with a range of differing views on the problem. The government apparently thinks the professions and the military are refusing to appoint people to jobs from modest backgrounds out of some misplaced middle class solidarity. If they turn this into a full blown war against those who have worked hard and who are well educated it will coarsen life in the UK, not strengthen the fabric of our society. As someone who wants to see wealth and opportunity spread more widely I am quite sure attacking what works is not the answer. If the government is too unpleasant to those who do a good job it will just strengthen the exodus of talent from these islands.

I felt so strongly about all this that I sent a letter to Alan Milburn this week urging him to remedy the obvious barriers to success for brighter children from poorer backgrounds that we can see in our state schools and our family policies. As Czar of social mobility he has an important job, but not one which reports to the Commons, allows him to make Ministerial statements or more importantly allows us to cross examine him on what he is saying and doing. His appointment is all part of the post Parliamentary spin world which this government finds is its natural comfort zone, where ideas can be lodged for the news cycle and denied a day later. They live in a virtual world where soundbites and press releases create the good life effortlessly, often without bothering to implement the underlying policy properly.

The sorry progress of the private sector can be seen in announcement after announcement of closures and job losses. Demand has fallen disastrously for many companies. The public sector lives in a different world, where each year budgets go up automatically and Council Tax and Income Tax payers are told they just have to pay up. People who only work in the public sector find it difficult to grasp what it is like to work for an organisation where the annual income can fall, let alone for one where the income may reduce by a quarter or more when a savage downturn like the present one hits. If the best Parliament can do in such circumstances is to discuss putting an extra tax on business and then go home early, no wonder there is a feeling of injustice between the two Britains.

(Recent job losses include Woolworths 27,000
ITV 1000
GKN 1400
Rolls Royce 1500
Wolseley 7300
Marks and Spencer 1200
Nissan 1200
MFI 1200)

“A frightening deterioration in the UK economy”

The British Chambers of Commerce report today that orders, investment and demand for labour all fell heavily in the last quarter of 2008. This will be no surprise to people reading this site. These declines are continuing in the first quarter of 2009. It is the inevitable result of the monetary policy mistakes of a year or so ago, and the weakness of the banking system.

The government is now rolling out a couple of schemes that borrow from ideas put forward by the Opposition – a loan guarantee scheme, and a subsidy scheme for employers taking on new workers. Both schemes can be helpful, but both need careful work on the small print. If you are offering a subsidy for a new hiring you need to make sure you are not encouraging an old firing at the same time. If you are offering a guarantee to banks for offering credit, you need to leave the banks sufficiently on risk if the loan goes wrong so the banks do not lose interest in assessing risk properly.

As the Chambers of Commerce survey should remind us, these two subsidy schemes are not of themselves going to turn round the plunging economy. Companies need orders. They will not be hiring extra people if their order books continue to fall by anything between 5 and 75%. We heard this morning that JCB are currently producing just 25% of the volume they were making a year ago. No wonder they had to sack another 684 people this week. Companies do need overdrafts and short term loans to be able to pay the wages and pay their suppliers, but they cannot go on doing this on borrowed money if the demand is not there to justify the employee numbers and the material and component stocks.

I had a small example of what is wrong yesterday. The keyboard of my House of Commons supplied computer needed repair or replacement. The House authorities IT department told me they wanted it replaced. The new one turned up in a cardboard box marked firmly “Made in China”. This little transaction summed up so many transactions that have got us into our present plight. We no longer have enough repairers or component suppliers in the UK, and have got used to relatively cheap product from China which procurement departments find is cheaper to buy outright. The UK public sector will simply borrow a little bit more to buy the Chinese product.

The keyboard was produced by workers probably earning around one fifth of workers in the UK. Some of them are probably being sacked as we speak, as there is a sharp contraction of global demand for Chinese manufactures. They will enjoy little of the benefits and safety net that workers fortunately enjoy in the UK. These hard working and successful exporters are now experiencing more grief than we are, as they shed jobs more quickly in their manufacturing heartlands and leave people without a western style welfare fall back. The Chinese as a whole continue to save massively, and kindly invest some of their savings in UK and US government bonds enabling those governments to buy their products by lending them the money.

Recently the pound has nosedived. An importer told me the other day that he could go on offering low prices for imports for a bit longer, as he still had some stock bought at better prcies, and had some currency cover in place. However, in a few months time this will have run out. Then the UK economy is open to the full shock of a 25% increase in import prices from the collapse of the pound. The government hopes that this will not just choke off demand for imports, but will kick start home output at better prices to replace the lost imports. The issue is will it?

Normally such a big price movement would change things dramatically. I hope there will be some positive change this time as well. However, we need to factor in the possibility that China(and other low price producers) will actually cut their wages and do whatever it takes to lower their prices again. UK producers will find it difficult to obtain the money, the permits and the facilities to start producing the keyboards and all the other many products we have got used to relying on China to deliver. Prices and currency point to big scale import substitution, but UK companies are badly weakened by low or no profits, poor access to finance, and regulatory complications to expand capacity to drive out the imports.

There are no easy solutions to any of this. We do need a drive to substitute home made product for overseas, and need to get used to mending and improving using local labour rather than automatically reaching for the order form for a complete new overseas product. The currency move will push people in this direction. The danger is our companies are too weakened to respond as vigorously as we would like. In that case we will simply end up buying less and having fewer modern and working items, and will have missed another opportunity to strengthen manufacturing in the UK.

Wokingham News

I am a natural optimist. I like to see the opportunity and the possibilities in life. The background as we travel through the end of the old year and into the new is not auspicious. The news background threatens worse to come on jobs, company failures, house prices and much else. Just to make it all worse, violent war breaks out in the Middle East.

Last year I urged the authorities to try to stave off recession. I explained how “If the authorities cut interest rates and make more cash available to the banks we can avoid too sharp a downturn.”

This year I am forced to write about how they could limit the damage of what is likely to be a severe downturn in the UK.

It took them nine months to recognise the dangers of the high interest rates and tight money they were offering in 2008. All too late in the day they started to shower the banks with cash and bring the interest rates clattering down. These changes will have an impact, but not in the early months of 2009. The authorities seem to have forgotten that it takes a year or more for changes in interest rates and changes to money market liquidity to work through the system. In the meantime there is the remaining problem that the banks themselves are still weak, need to write off more from their assets, and are under regulatory orders to strengthen their balance sheets at the moment of greatest difficulty.

The UK authorities could start to get a grip on their banks, and start to make better decisions about helping nurse them back to health so the wheels of borrowing can move the vehicles of commerce again. We need a government to understand that their regulatory and monetary policies need to reinforce each other, not struggle against each other, a government which finds a way for banks to pass on some of the cash it is now tipping into the system, and then controls the amount of that cash, before we start up another damaging inflationary cycle.

Last year at this time I went hoarse asking them to cut interest rates immediately. This year I say the rates are low enough. The problem now rests elsewhere. Indeed it is savers now who need the better deal, and I would like the government to help them.

They could afford to do so, and to lower taxes on income and jobs, if only they would forgo their foolish cut in VAT. We need now intelligent and affordable tax cuts, rather than clumsy and expensive ones which are not going to lift us out of recession.

I wish you all a happy and prosperous New Year. It’s the year when savers are asked to share the misery of the borrowers, as we continue to sift our way through the debris of the Credit Crunch. I just hope you and yours have jobs that survive and enough cash to see you through.

What was Northern Rock worth?

Shareholders of the Rock are battling it out in the courts. They say their bank was taken from them by the government, without proper compensation for their interests. The government says their bank was in a very bad way, and has to be valued without the support the government was offering it. I leave that to the well paid and well qualified lawyers to fight out. Some will say a central Bank’s duty is to lend money to banks that need it – had they carried on doing that for Northern Rock, shareholders would have retained an asset with decent future value. Others will say the Rock was in deep trouble, and that it had run out of normal commercial options.

What should be clear by now is the government did the taxpayers and future mortgage holders no favours by its nationalisation. As I feared at the time, we have been left with the worst of all possible worlds. We own a heavily loss making bank, which is not allowed to write new business and to grow its activities to try to trade itself into profit again. Taxpayers can look forward to more shrinking of their assets, as staff are sacked and the loan book is run down.

Why on earth did the government do that? Why didn’t they assist a refinancing of the Rock that would have allowed it to carry on trading, and to make a further contribution to the market for new mortgages? Do they yet regret their haste in rushing for the Vince Cable “solution” of nationalisation which is turning out to be a kind of lingering death of the business?

Sunday Telegraph article

Last autumn, the British Government stepped in with massive cash injections for the banks. A few weeks on, and ministers admit this pounds 487 billion package did not even put the main banks into a condition where they can lend normally, let alone save the world.

The country faces a severe economic decline. The Government is trying to print money, slash interest rates, expand public spending and borrowing, inject capital into certain banks, nationalise others, boost demand by an expensive tax cut, prop up certain companies and industries, while lecturing the banks to lend more. So far, none of it is working. The cruel logic of past mistakes is pushing the economy into a vicious downward spiral.

We should remember the origins of our problem. The Monetary Policy Committee kept interest rates too low for too long. The banking regulator allowed banks to balloon their balance sheets and supplement this excessive lending with off-balance-sheet devices that came to haunt them in the bad times. The economy ran faster than could be comfortably handled, leading to a large balance-of-payments deficit as we sucked in what we could not produce at home, and a large private sector borrowing binge. Asset prices escalated giddily on the back of easy money. Homes became unaffordable without taking on a huge mortgage, which would prove too burdensome come higher interest rates or job loss. Once the authorities called time on excessive debt, there was bound to be a downturn. Their decisions to hold rates too high for too long, and then to require banks to hold more capital and cash to support their lending when we were well into the downturn, made the problem considerably worse.

I argued strongly for lower interest rates a year ago to take the edge off the coming decline. I argued against nationalising banks. I would have kept them in business by having the Bank of England act as lender of last resort, providing cash and loans against proper security, and offering stronger deposit guarantees when needed. The aim should be to see them through, with their shareholders and senior executives taking all the hit for past mistakes. Government’s role towards the banks should be that of the intelligent bank manager, not the owner needing profit and access to cheap cash for himself.

The Government, as it says, needs to stabilise asset prices, get the banks to clean up their past mistakes, ensure none of the major banks goes under, and reflate overall demand. However, a number of the measures it has taken are making the problem worse.

Nationalising Northern Rock and the loan book of Bradford and Bingley were bad mistakes. On current policy, and given competition rules, neither of these institutions can now make a contribution to new mortgage lending.

Forcing three banks to take taxpayers’ cash for shares because the authorities wanted them to have more capital was not clever either. The government failed to do any proper due diligence on what it was buying and failed to require write-downs of the loan books before venturing. As a result, taxpayers now have shares in institutions that may announce further big write-offs. The regulators should have discussed with the banks how to strengthen their balance sheets through retained profit and by raising money from markets. The central bank should have stood behind them in the normal way.

In trying to stimulate demand, cutting VAT was about the worst option, and has left us with a costly hole in the national accounts for little benefit. The escalation of the government borrowing requirement, mainly through the mistaken bank nationalisation policies and the VAT reduction, is alarming.

So what should they do now? They should cancel the remaining VAT reduction, and look instead at cheaper tax reductions that put more money into the pockets of individuals and small companies. We need an expansion of cash and deposits in the hands of individuals and companies to get the economy going.

They should aim for early repayment or sale of the taxpayer shares, and ask the banks to accelerate a programme of cost reductions, asset sales, and resumption of profitability. The immediate target should be to get the cash back for the special preference shares the government bought, and to sell the mortgage books and administration of the Rock and Bradford and Bingley on to the commercial sector, where there would be more chance of building these businesses and saving some jobs.

Mr Brown should invite the Financial Services Authority, the Bank of England, the Treasury and the commercial banks to a meeting to hammer out the right mixture of regulation, loans and guarantees so that they can restore normal lending levels more quickly. The Prime Minister has to defend the taxpayer, but he also needs to listen to the people running the banks. The meeting will need to decide to temporarily lower the level of capital banks are required to hold against their lending, to withdraw the proposals on banks keeping more in cash and bonds, and to tweak the packages of short-term loans and guarantees so they are more attractive to the banks.

None of this is guaranteed to lift the recession quickly. The authorities have allowed the downward spiral to become entrenched. The banks face further write-offs from their corporate loan books as trading deteriorates and more companies go under. House prices are still high. People are reluctant to commit to large new loans when there are so many uncertainties about their jobs. Many people and companies are unable to take on more debt, if it becomes available.

The proposals above are designed to hasten the end of the recession, and to cut the risk in current policy. They would reduce the Government’s need to borrow substantially, and would speed up the resumption of more lending by banks. You cannot end a crisis brought on by borrowing too much by the state borrowing even more, or by transferring all the dud loans to the taxpayer. We have to work our way out of borrowing too much and inflating asset values too much. This package would at least put us on the right road to recovery.

Ladders and greasy poles

Alan Milburn has been made the Czar of the greasy pole. It is time more was done to promote social mobility in Britain.

My advice to Alan is simple. Do not think the great Universities or the Armed Services want to recruit preponderantly former public school pupils, or that the answer is imposing targets or other demands on the recruitment services of the professions. I know from experience that an institution like Oxford Univeristy tries very hard to recruit from state schools and from the more deprived parts of the country.

The answer to that problem lies in the achievements and aspirations of the state schools. Alan needs to ensure that the poorer performing state schools have not just money, but esprit de corps, good leadership, and a sense that pupils from all backgrounds can make it if they put in the effort. He also needs to tell them that it does require a lot of hard work to excel at something. People are not given educational advantage by their father’s income alone. They also have to work hard at their better schools if they wish to reach the peaks of academic and professional life.

As someone who made it from a Council house as a young child to a Conservative Cabinet, I was grateful for the ladder of opportunity provided by a free place at a Direct Grant school and a scholarship to Oxford. The 1970s were much more class riven than the noughties. The Oxford place was a solvent of the worst of the clsss barriers. I am glad some of the obvious class divisions have been broken by the changes of the last 30 years, but am conscious that new obstacles have risen that make the journey more difficult for many today. My school did not have all the facilities of an Eton or a Westminster, but it did allow me the freedom to go to other local libraries to find the books I needed to read. Today young people have the amazing world of the web, which is a great leveller.

I am struck by the gap between the average state school and the best of the public schools when I go to speak to 6th formers. There is more intellectual curiosity, academic determination and confidence in the best public schools. It is that which Alan needs to replicate for the brighter pupils in the comprehensives. It is that that has been lost for some of them by the abolition of grammar schools.

My other piece of advcie is to see that educational success is not the only ladder of opportunity. He should turn to consider where entrepreneurs come from. Some of the most successful people I know have achieved a great deal despite or because they had little or no formal education after 16 or 18. They did it by setting up their own business and being successful at that. I suspect that a bigger proportion of the children of entrepreneurs set up in business for themselves than the proportion of the population as a whole. For many in state schools running your own business is not an option, and no-one suggests to them it might be. Schooling is a whirlwind of targets and exam grades, all so often failing to generate that spark of enthusiasm, ignite the passion or release the wild optimism that a good entrepreneur needs.

When you listen to the backgrounds of those who have achieved a great deal in their chosen fields, you often find they followed their chosen area as an interest or a way of life from a very early age. For them, their jobs are not just jobs, a but an integral part of who they are, and what they want to do. The famous antiques presenter on TV usually started collecting and reading about antiques as a boy or girl. The successful sportsman or woman was playing their sport from an early age. The successful academic was usually reading many books in their field well before they went to university. It is those many passions and interests that state schools need to encourage. The best already do, but there is work for Alan to initiaite to get more doing the same.

What do we want? Jobs. When do we want them? Now.

The Prime Minister has to show that his jobs programmes are more than just good spin. He would be helped in this aim if he was more accurate with his history.

He asserts that previous Conservative governments that went through downturns did nothing. He should remember that, on the contrary, the Conservative government of the 1980s tried many things to get more people into work, as it was well aware of the need to do so and was most concerned by the numbers out of work. Instead of bad mouthing the intentions he would be well advised to study what worked and what didn’t from past periods of recession. In the 1980s there were many programmes to promote employment supported by public money, as well as many so called supply side measures to try to get markets working better again to generate the demand for goods, services and employment.

The sad truth is that whilst these measures can help some people and can be palliatives, the only thing that really works is getting the overall economic policy right. Mr Brown talks about helping create 100,000 jobs with public money. Even if he does this, unfortunately the 100,000 will be swamped by the large number of job losses occuring this winter as the rest of the economy continues to deteriorate at an alarming rate.

The message of business to his Jobs summit appears to be that he needs to fix the banks so they can lend again in order to stem the tide of job losses. It is a necessary condition for economic recovery that he helps mend the banks, but it may not prove a sufficient one. Businesses are not just short of loans for working capital. They are also chronically short of orders. Without enough demand for goods and services they will not wish to borrow huge sums of working capital to make things no-one wants to buy or to employ service sector staff with no-one to serve. In that sense the PM was right to try to reflate demand at the same time as offering help to the banks. It was just that the VAT cut was the least likely way of doing this, as experience has proved.

So what should he do at the summit? He should ask the business community what measures they need so they can export more and substitute home goods and services for former imports. The violent devaluation of the pound preents a unique opportunity to correct the balance of payments in a way which generates many more jobs at home. There is demand there for imports that we need to satisfy from home production. Probably business will need changes to regulation and tax structures to make such a favourable response more likely. That would be something useful for the government to do, in addition to trying to sort out its banking mess. The UK is overtaxed and over regulated, which lies behind the shift of a lot of activity abroad. Detailed measures to alleviate this would be helpful.

Do nothing or do the wrong thing – please don’t let that be the question

Let me begin today by reassuring the politically correct monitors that I am not in the “Do nothing” camp when it comes to the economic crisis. Indeed, anyone who has looked at this site for the last eighteen months will know I was in the do something camp – cut interest rates, make more liquidity available, change the way of helping the banks – long before the government.

However, there is one thing worse than doing nothing, and that is doing more wrong things. Some of the action the government has taken has made matters worse. I think in particular of the VAT cut, which was never going to stimullate spending; the nationalisation of two mortgage banks which meant effectively withdrawing them from the new mortgage market and sacking lots of their staff; and buying shares in 3 other banks without revaluing their assets or putting in a plan to make them more successful.

The government needs to review its current range of measures, dropping some, carrying on with some, and introducing some new ones. Today it is too hectic. It expects instant results when problems are deep seated and are going to take some time to work through. It has forgotten that it always takes a long time for lower interest rates to stimulate activity and eventually to raise inflation, just as it took a long time for higher rates to bring everything to a grinding halt and then to curb price rises. The same is true of their move from easy regulation to tougher regulation of the banks.

So what is my short list of policies to drop or reverse?

1. Cancel the VAT reduction
2. Sell Northern Rock and Bradford and the Bingley mortgage business for whatever they can get for them, so they can start to work again.
3. Give the banks more time to raise their capital ratios and agree a faster timetable for repayment of the government Pref shares
4. Announce no more interest rate cuts for the next six months, to give money and savings markets some chance to settle down
5. Announce some tax cuts that put money back into people’s pockets.
6. Announce lower public borrowing figures based on 1,2 and 3 above being considerably larger than 5.
7. Announce that the government is concerned to keep overall public borrowing under some kind of control, adjusted for the cyclical effects.

My worry about present policies is the government is expecting the state to do too much. It wants the state to be lender of last resort, borrower of last resort and spender of last resort – indeed, to be lender of first resort, borrower of first resort and spender of first resort as well. I have no confidence that this is going to work economically. More importantly, how compatible is this with a free society, and with a free enterprise economy? The more the state did in Eastern Europe, the further living standards fell behind the West in the second half of the last century. The government needs to be wary of being dragged in to making too many financial and commercial decisions it is not equipped to make.

(I have written at greater length about the origins of the crisis and the government’s handling of it today in the Sunday Telegraph.)

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.