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Fixing the Jag

  • Robert Peston
  • 18 Dec 08, 02:05 PM

It's pretty clear that taxpayers are about to provide financial support to Jaguar Land Rover.

That seemed to me to be the subtext of the mildly opaque statements on this given to me today by Peter Mandelson, the business secretary, in an interview.

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The car manufacturers' problem is a looming crunch on debt that needs to be refinanced.

It has told Mandelson that it can't secure the finance from the private sector in the normal way. So it's asked the government - or us as taxpayers - to fill the gap.

jaguar carsMy strong sense is that Mandelson has no doubt that Jaguar Land Rover - which employs 15,000 here - should be saved.

A good chunk of its business - though not all of it - was viable before the economy started to contract fast and car sales dropped like a stone.

And Jaguar Land Rover is responsible for a disproportionate amount of precious UK-based research and development in the automotive sector.

The main outstanding question over whether it should be propped up by us is whether its owner, Tata of India, really does lack the ability to obtain the finance elsewhere.

Tata is a huge group, with a dizzying mixture of interests all over the world. It is under financial pressure, but it remains a formidable business force.

It would plainly be wrong for taxpayers to lend to Jaguar Land Rover or to underwrite lending to the group if there were other sources of finance available, but these were somehow seen by Tata as too pricey.

British taxpayers must be the lenders of last resort - not a cheap source of funds in a world where the cost of capital has risen.

It's all very well for Peter Mandelson to insist that he would only save businesses that are of strategic importance to our economy and would be sound in a world where credit was flowing freely.

Jaguar Land Rover would tick those boxes.

But he also needs to be mindful - in advertising to the world that he dare not let too much of our relatively small manufacturing sector disappear in a recession that seems particularly horrible - that he doesn't become the lender of first resort to canny mutinationals.

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