COMMENT: Subsidy for new car should be waved through

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The Independent Online
If Ford had known in 1989 what it knows now, it would never have considered paying pounds 1.6bn for Jaguar. More likely it would not have bought the company at all. Jaguar has lost almost pounds 800m in six years, and has been kept alive because to have shut or sold the plants would have cost more than pressing on. Ford decided to take on the chin a mistake which - in purely cash terms - has proved to be of Barings proportions.

Its decision to invest more than pounds 400m in a production plant for a new small Jaguar was therefore more than an act of faith in a subsidiary which has cost a fortune to maintain in a viable state. It was also a formal recognition that Jaguar's long-term future is secure in the UK.

Ford had already demonstrated its commitment to Jaguar and there was no question of the company closing the existing production plant. Indeed, Jaguar's recent export success is expected to return the company to profit this year. But to prosper long-term in full frontal competition with BMW, Jaguar needed to produce a new car with wider appeal. Ford threatened to build it in the US unless the UK government contributed pounds 80m in aid towards the costs.

In an ideal world, government aid for a foreign-owned private company of pounds 13,000 per job (including those created at suppliers) is a nonsense, especially when the recipient is already firmly established in the UK. But Jaguar is a special case for a rather brutal reason. Ford was not bluffing when it said it would build the plant in the US. In the real world, this is the kind of deal a government somewhere is forced to negotiate every day. Considering how much cash Ford has poured into Jaguar, it would have been churlish as well as foolish to refuse to negotiate.

Car buffs claimed the public would recognise tatty American trim or fake walnut at a hundred yards. But Ford studies found that the US car-buying market - Jaguar's biggest - did not care. It would have been just as keen on an American-made Big Cat.

The European Commission, whose scrutiny of the aid package appeared at first to be just a formality, was yesterday trying to sound tough by saying it had not yet made a decision. Perhaps Karel van Miert, the competition commissioner, is embarrassed to wave Jaguar through at a time when the Spaniards are running rings round his transport colleague Neil Kinnock over enormous government grants to Iberia.

The Iberia package is patently illegal under EU rules, but it would be extremely hard to find a rationale for putting Jaguar in the dock. Mr van Miert should get a move on and say as much.

LDDC still has work to do

The City Corporation stuck a new scalp into its belt this week, when Deutsche Morgan Grenfell decided to base its European HQ in the City rather than the upstart business district down the river. It was part of the City's rearguard action against Docklands.

But you win some, you lose some: the London Docklands Development Corporation is still in chirpier form than at any time since it was founded in 1981. Of the 40,000 jobs that have either been created or moved into the area during that time, 8,000 have been in the past 12 months. Unencumbered by the heritage lobbies which are getting in the way of the City's efforts to provide attractive, modern space, Docklands is finally on a roll.

The LDDC has achieved such rude health even as it begins the process of dismantling itself. The area south of the river in Bermondsey was handed back to the borough of Southwark last October and the agency is scheduled to complete its withdrawal from all 5,500 acres under its control by March 1998.

It is easy to forget what a mess the former docks were 15 years ago after the completion of the move down river to Tilbury finally tore the heart out of what had been the world's busiest port. To create a new business and residential area has involved walking a precarious political tightrope, not least in negotiating with initially hostile local authorities.

A lasting achievement has been to put in place an infrastructure, though far too slowly and with grudging help from government. More than 100 kilometres of roads, including one of the UK's most expensive pieces of tarmac in the Limehouse Link, a light railway whose passenger capacity will have grown from 3,200 an hour in 1987 to 24,000 by the end of this year, and finally the Jubilee Line extension - due by March 1998 - are beginning to make the area workable.

Now the LDDC is privately talking about extending its remit beyond 1998, in the important region around the Royal Docks, the eastern end of its empire, where it feels there is unfinished business to complete. It has a strong argument for maintaining a specialist authority there, rather than handing the land back to a local authority with much wider demands on its time and resources.

Plans in the Royals include a million- square-foot exhibition centre on a 70-acre site. It would be minutes from London City Airport and have unmatched road connections, a vital development for the UK, which commands just 4 per cent of the international conference market compared with Germany's 35 per cent. It is estimated that 10,000 jobs could be created indirectly. Europe's largest regeneration scheme has plenty in the pipeline - a new university, business park and retail development are yet to be started. It would be wrong to turn out the lights at the LDDC before the job has been done.

Simple solutions for secrets

As a rule of thumb, the likelihood of a secret leaking rises with the square of the number of people in the know. Not only does spreading the information increase the risk of it reaching an insider trader or a blabbermouth, it also makes it far easier for the leaker to escape detection, an added encouragement to break a confidence.

This is an observation that escaped Professor Stephen Littlechild, the electricity regulator, who dispatched confidential advance copies of his report on distribution prices to a dozen electricity companies last week and was then surprised that it got into the market. Birmingham is a hard- headed business centre, but its worldliness has not rubbed off on the Prof, whose office is sited there.

Michael Lawrence, the Stock Exchange chief executive, is furious with the Prof and wants an agreement from him - and the other regulators - that they will refrain from scattering price-sensitive paper around like confetti. The Stock Exchange regulates companies, not regulators, so this has got to be a voluntary deal, and it has about as much chance of lasting as a July snowball. It is hard enough for the exchange to stop listed companies leaking information, even though it has powerful sanctions against offenders.

The Government should instead be asked to instruct the regulators not to release advance information to anyone at all, including the companies affected, until after the markets have closed in London and New York (in the case of firms whose shares are traded there). Publication should be before the markets reopen. Simple solutions are best.

Edited by Peter Rodgers

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