Scrapping reality

Wheels of fortune?

I'm happy with the old one I'm happy with the old one
Ten good reasons to like Alistair Darling anyone? Five then? Two? OK, there's one good reason and it's that Darling is saying no to Lord Peter Mandelson's car scrapping scheme. Following slavishly in the footsteps of his old EU chums the Germans, who do this, Mandy is keen to see such a scheme included in the upcoming budget. The Times has its version of these events HERE

The story is credited to both Suzy Jagger, Politics and Business Correspondent, and Francis Elliott, Deputy Political Editor. This is reasonable as the basic policy behind it is neither wholly politics nor business. It is a mishmash of 'me-too', following our EU partners and hence political in nature, while also giving, or trying to give, the nod to business. This lack of clarity is very Nulabour and more than just another internal spat; this one between Darling and Mandy, the Treasury and the Department for Business, Enterprise and Regulatory Reform. Cynics will immediately spot that Mandy's fiefdom has the longer title. So it, one assumes, (he assumes?) appears sassier, more vital, urgent and modern; while Darling has just one word to describe his day job, how dull and boring, staid, conservative even. (Also while putting this post together a surreal typo appeared, fiefdome, funny how we never forget!)

Further analysis of the titles will reveal that Mandy's has the word Reform. So that's it then, game to Mandy? After all in the good old days of Mandy and Tony Blair, reform was the very purpose of life, but time has moved on.
A driving ambition A driving ambition
Back in the Mandy and Blair days the political mood was very different, so was the financial situation; today reform includes re-thinking what was formally taken for granted. Then Blair's Chancellor was none other than Gordon Brown, he may have been steadily and stealthily taxing the nation but he was spending too. For Darling the game is very different, the money, the tax, is simply not coming in, dare he spend as Brown used to? The Times says -

“Mr Darling and some Treasury officials have expressed deep anxieties about the cost and terms of the programme”, I'll bet they have.

All we are told, and with monotonous frequency, is that this scheme works well in Germany and, according to the Times-

“has been hailed as a huge success”, by whom?

And then, so what? The idea that this scheme is bound to bring benefit to the UK is not sound. Germany has an indigenous motor industry on a large scale, the UK does not.

All sensible people agree we are 'over banked' and some banks will, must, close. However, Nulabour were spooked by the bank crisis rushed in and rescued Northern Rock. This opened the flood gates and so followed a rescue scheme for failing banks, for which the tax payer is responsible for many years to come. Does the tax payer now face footing the bill for another expensive rescue scheme?

gotta new motor gotta new motor
Another quote from the Times -

“Officials (from the Treasury) are understood to be concerned that the scheme will prove expensive to implement and that drivers will spend most of the money on imported vehicles”.

We can all agree there is too much production capacity in the motor industry worldwide. The UK motor industry has been running down for years. When the old home of MG Rover, the Longbridge works in Birmingham, closed in 2005 Nulabour made little more than ritualistic puffing noises, it was not 'saved'. Following the closure there was very little effect on the voting patterns of the locals either, Nulabour retained the Longbridge seat at parliament. So what is different now?

Yet another quote from the Times, dated April 2005, the headline is -

"5,000 jobs to go as MG Rover closed".

But in the story reported on April 2009 we are told -

“It is estimated that the British car industry supports about 800,000 jobs, including car factory workers, mechanics and salesmen”.

This is odd as in the 2005 Times article the larger number, the whole of the UK motor trade, was not mentioned, so why now? Regardless of their age cars will need the attention of mechanics and spare parts distributors. It's not logical to quote the larger number now, in 2009, but ignore it in 2005. In fact it could be said that the scrapping scheme will have a negligible affect on maintaining UK employment. This because the car production jobs are fewer now than ever before, while the other jobs within the trade have remained roughly constant. So big number small number, 2005 or 2009, what is going on? Do we spot more than a little spin here? And if so who would have planted this thought? In 2005 unemployment was not a political problem, it is now. Has the government department with the long name and the noble Lord at its helm spooked a few in the media, 'get this out or there will be the best part of a million extra on the dole',?

Credit is tight now so not too many people would be able to get the finance for a new car, government scheme or not. So the middle class few would be subsidised by the struggling less wealthy who pay tax. Is this Nulabour policy?

Rusty car prolific hedge Rusty car prolific hedge
If Mandy had wanted to 'save' the UK motor industry, then 2005 was too late; to attempt to do so now and with this scheme is risible, after all there is no rush to save Hedge Funds. With this scheme imports will rise and personal debt level continue on upwards. Too many people had silly 125% style mortgages and the UK housing market fell from grace. The personal debt levels in the UK cannot cope with the idea that now is the time to by a new car. There can be no environmental or financial merit in scrapping sound cars. Alistair Darling doing something right, hard to imagine but true!