Darling driven to distraction on aid to car makers

LONDON BRIEFING:WITH JUST a week to go before the budget, and when his mind should surely be on higher things, chancellor Alistair Darling has become embroiled in a dispute with business secretary Lord Mandelson over aid to the struggling automotive industry.

Mandelson wants the UK to follow the lead of the dozen or so countries which have already introduced cash incentives to encourage motorists to trade in their old cars for new and more energy-efficient models.

The incentives, which could be worth up to £2,000 (€2,245) for each old banger traded in, would provide much-needed support to the ailing car manufacturing industry, which has seen sales fall off a cliff since the credit crunch began to bite. Thousands of jobs have gone, and plants have been put on short-time working to combat the unprecedented slump in demand.

Such a move would have the added bonus of boosting the government’s “green” credentials and might also generate some rare positive headlines for Darling as he grapples with the UK’s spiralling debts and his own over-optimistic economic forecasts.

But despite the success, such schemes have had elsewhere – car sales in Germany soared by 40 per cent after incentives were launched – Darling remains lukewarm on introducing a scheme here. With many of the most popular models made abroad, the fear at the Treasury is that incentives would simply end up benefiting overseas manufacturers, boosting imports of cars made abroad rather than in the UK. And all this would be at the expense of taxpayers, who are already groaning under the huge cost of bailing out the bust banking sector.

Mandelson has become something of a champion for the automotive industry and has held regular meetings with senior figures from the manufacturing companies. But, as the unseemly scrap over scrappage rumbles on between two of the government’s most senior members, it will fall to prime minister Gordon Brown to have the final say.

The car makers are convinced he will give the go-ahead, a conviction that sent shares in car dealership groups such as Pendragon and Inchcape soaring on the stock market yesterday.

Those celebrations may be a little premature, however. Suggestions from the Treasury include a proposal to cut any incentives to around £1,000, leaving it to the manufacturers to fund the other half. Vehicles manufactured abroad could also be excluded – and as they account for as much as 85 per cent of cars bought in the UK, that would leave the incentive scheme looking rather less than generous.

Goodwin deal to haunt Sutherland

THE SHADOW of disgraced banker Sir Fred Goodwin will hang over the shareholder meeting of BP tomorrow as the chairman of the oil giant, Peter Sutherland, faces criticism for his role in approving Goodwin’s controversial £703,000 a year pension.

Pensions consultant PIRC, which represents pension fund investors with £1,500 billion assets under management, has called on shareholders to oppose the re-election of Sutherland as BP chairman – not for his performance at the oil giant, where he is highly regarded, but in protest at his record as a non-executive director of Royal Bank of Scotland.

As well as sitting on the RBS board, Sutherland was a member of the bank’s remuneration committee, which approved the lucrative salary and pensions deal for Goodwin.

The former RBS chief executive, who has been pilloried as the epitome of banking greed, has refused to give up any of his pension payments despite mounting political pressure. The government is still trying to find a way to cancel at least a portion of the £703,000 a year deal.

PIRC plans to take the opportunity of the BP agm to call Sutherland to account on the Goodwin issue, which they say calls into question his suitability as chairman of one of Britain’s biggest companies.

The pensions consultant is expected to have similar treatments in store for any former RBS directors seeking re-election to the boards of other companies.

There may be some uncomfortable moments for Sutherland at the BP meeting tomorrow, but there is little doubt that his re-election will be voted through by a large majority. Still, it is a downbeat note on which to end his successful stint on the BP board, which he joined in 1997. He had already said he plans to retire from the board and is staying until a successor is found.

Fiona Walsh writes for the Guardiannewspaper in London