Rover and Ford: Prices and Sales (Hansard, 4 May 2000)

§ Lord Mackay of Ardbrecknish
asked Her Majesty's Government:
What effect their campaign on the price of motor vehicles in the United Kingdom has had on the manufacture and sale of Rover and Ford cars in this country.

§ The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville)
My Lords, in March 1999, the Director-General of Fair Trading referred the issue of new car prices to the Competition Commission for investigation. The Government's announcement on 10th April of their decision to implement the remedies recommended by the Competition Commission is intended to meet consumers' concerns about whether they are getting a fair deal and to remove any uncertainty in the market.
UK car sales were up by 3.9 per cent in the first quarter of this year compared with 1999. Ford's sales were up by around 6 per cent in the first quarter of this year compared with a year ago, while Rover's declined by a similar amount. However, other factors will have influenced Rover's position, including ageing models and the uncertainty over the company's future. The latest available figures for production for the UK are for 1999 and at 1.79 million are the highest since 1972.

§ Lord Mackay of Ardbrecknish
My Lords, I thank the Minister for that reply and congratulate him on coming here to answer the Question, taking some of the load off his noble friend Lord McIntosh of Haringey, who I see is bowling again today.
Is the Minister satisfied with that Answer? Is it not a simple fact that Rover sales were down by more than one quarter in 1999 and that half of the 50,000 Rover 75s already produced are standing in an enormous car park unsold? Is it not the case that the Government's "Rip-off Britain" campaign encouraged many people to delay buying cars and helped—it was not the sole 1129 factor—to bring about the problems now occurring in Rover and Ford? Do not the Government feel just a tiny bit responsible?

§ Lord Sainsbury of Turville
My Lords, the fact is that in 1999 UK sales were the fourth highest on record. That does not suggest that there was a collapse in the sale of cars in this country. It is strange for me to have to tell Members on the opposite Benches that in a competitive market there are winners and losers and that that is affected by their performance in the market.
We are talking about references to the Competition Commission on the recommendation of the Director-General of Fair Trading. I hope that the noble Lord is not suggesting that it is the role of government to veto such investigations. If he is suggesting that—and it is what he is implying—the campaign which he describes was initiated by the Director-General of Fair Trading in referring matters to the Competition Commission. Is the noble Lord suggesting that those should be vetoed? If he is, many people will be confirmed in their view that the Conservative Party is not interested in open, free and fair trading, but is interested in price fixing and the exploitation of monopoly positions.
Furthermore, we do not claim authorship of the expression "Rip-off Britain". I believe that it was invented by various newspapers to describe life under the previous administration.

§ Baroness Oppenheim-Barnes
My Lords, in favour of openness and fair trading, could the Minister tell the House why the cars imported into this country from very weak euro countries are not being sold a great deal more cheaply?

§ Lord Sainsbury of Turville
My Lords, the whole point of the report of the Competition Commission was that, despite the large number of imported cars, prices here were 10 to 12 per cent higher than those abroad. It rightly concluded that that could imply that there was not a fair, free and open market. That was the judgment of the Competition Commission and it ill behoves other people to query that and argue for price fixing.

§ Lord Jacobs
My Lords, is the Minister aware that if we had joined the euro at its commencement, British car manufacturers would have had no difficulty in greatly increasing their export sales?
Will he further agree that as Rover is able to sell its cars on the continent 30 per cent cheaper than in the UK it would greatly increase its sales in this country if it carried out a similar policy here?

§ Lord Sainsbury of Turville
My Lords, the impact of sterling makes life much more difficult for exporting companies. That goes without saying. However, other factors relate to the performance of Rover and its ability to compete in the market; for instance, dated models and the fact that its productivity is 31 cars per person compared with 106 per person at the Nissan car 1130 plant in Sunderland. That fact is clearly material to the case and relates to the underinvestment at the Longbridge site over many years.

§ Lord Tebbit
My Lords, the Minister referred to winners and losers among manufacturers in the British car industry. In the event that the Government decide to give financial aid to Rover, as they were intending, would they be putting taxpayers' money into a winner or a loser?

§ Lord Sainsbury of Turville
My Lords, the package was put together to help the situation and to protect jobs, as far as possible, using regional selective assistance. It was an attempt to ensure that we continued to have production on that site in a company which had not performed well but where it was possible to retrieve the situation.

§ Lord Clark of Kempston
My Lords, does the Minister agree that the future of the car industry will depend on investment? Do the Government have a view on the suggestion of a tie-up between Frankfurt and the London Stock Exchange? All most people see us getting out of it is the use of their computer.

§ Lord Sainsbury of Turville
My Lords, further investment in the British economy and in the car industry depends on many issues. The most important is the state of the British economy, which is why our macro-economic policies are so important. Within that, the issue of the Stock Exchange is important, but not nearly as important as the issue of macro-economic stability.

§ Earl Ferrers
My Lords, will the Minister pop his mind back to the question asked by my noble friend Lady Oppenheim-Barnes? Is it not a fact that when the pound is high exporting is difficult and imports are cheaper? That happens everywhere. Why is it, therefore, what when we have a high pound imported cars are not cheaper?

§ Lord Sainsbury of Turville
My Lords, I do not want to go into basic economics, but that is exactly what price fixing is about. Of course one would expect to see the price of imported cars falling when the pound is high. The fact that one does not is exactly why one should be deeply worried about the situation.