Should government bail out carmakers?


On Sky News this week I debated Derek Simpson of Unite, who thinks the government should give short-term subsidies to the car industry in order to preserve its long-term future.

He's wrong. There's no point bailing out carmaking in the short term, because it won't survive in the long term. UK carmaking has been on the skids since the 1960s. Once it was low-cost competition from Japan, now Slovakia, India, China and many others can produce cars more cheaply than we can. The only reason car sales have held up is because we've had a huge boom, engineered by governments. Now we're in for a huge bust. When the dust clears, it'll be obvious that we've been producing too many cars, too expensively, for more than a decade.

And where would a subsidy to carmakers come from? From the pockets of people running small businesses, shops, cafes, hairdressers, who are all struggling to pay their rates and National Insurance. Every pound you take from them drives them nearer to bankruptcy. The cost of saving thousands of jobs in Sunderland or Coventry is losing thousands of other jobs in other places. But those jobs are lost a few at a time, so politicians don't notice them, and don't realize the damage that their policies inflict.

Most carmakers are foreign-owned anyway. I don't know why a barber in Bolton should pay higher taxes in order to bail out the Indian billionaire who owns LandRover. And we could bail out Honda or Vauxhall, only to find that their bosses in Tokyo and Detroit pull the plug anyway, and our cash has been wasted.

The whole country is going to be bailing itself out, at this rate – paying out money with one hand as taxes and getting it back with the other as subsidies. It's no way to run an economy. Business should be driven by market returns, not by the arbitrary vote-garnering whims of the political class.