David Prosser: Cars are special, but not because of those marginals

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The Independent Online

Outlook Let's start with a given: all job losses are miserable and grim, whether they take place a few days before Christmas or at any other time of year, and whether they're at a well-known high street retailer or a tiny business of which you've never heard.

That, however, does not mean that all jobs are of equal importance. It may be a pretty unpalatable truth for those on the wrong end of the comparison, but the truth is that it is more worthwhile saving some jobs than others.

The obvious example is the sort of state intervention in banking seen in this country and elsewhere around the world. We may not like the bankers who brought us the credit crunch, but we can't do without them – they supply credit to economies that would seize up without it.

The question for Lord Mandelson, the Business Secretary, is whether Britain's car industry falls into the same category as banking.

It's a tough call politically. The UK's motor industry is inconveniently based in the constituencies of Labour MPs defending small majorities. On the other hand, as he mulls a Government rescue for Jaguar Land Rover, Lord Mandelson's finely tuned political brain will no doubt also be acutely aware of the envy such a bailout will cause elsewhere – most obviously among the tens of thousands of employees at Woolworth's whose new years are looking far from happy.

There are certainly plenty of reasons for Woolies staff to feel disgruntled that Lord Mandelson is even considering state aid for Jaguar. Up to 30,000 people will lose their jobs when the retailer finally closes its doors – that's twice the number of staff employed by the car manufacturer.

And while Jaguar points out that around 75,000 people depend on it for employment, once you take into account suppliers, dealers and others, there are just as many – if not more – jobs dependent on Woolworths. Some of those jobs, at record labels and distribution companies, for example, have already gone.

One argument the US makes for its massive bailout of the American motor industry is that such a large percentage of its economy – around 4 per cent of GDP – is car manufacturer-related that letting it fail is not an option. That argument does not apply here, where car manufacturing accounts for more like 1 per cent of GDP – certainly considerably less than the retail sector.

Woolies staff might also point out that Jaguar has a giant multinational parent company in India's Tata. It paid £1.7bn for Jaguar Land Rover only six months ago, proclaiming that the business had "worldwide growth prospects". If anyone is going to bail out Jaguar, surely it ought to be Tata?

Unfortunately, Tata has its own problems right now (though they haven't stopped the company announcing a Formula One sponsorship deal with Ferrari). Sales of cars in Tata's home market are slumping and the businesses it has invested in around the world are in many of the sectors most exposed to the global slowdown – notably the steel industry.

Back to Lord Mandelson then. If Tata can't – or won't – put its hand in its pocket to save the British car manufacturing industry, should the taxpayer step in?

The answer, with all due respect to the good staff of Woolworth's and many other people losing their jobs, is yes. Every other country in the world with a car industry of any note regards it as a special case – for reasons that are now more apposite here than anywhere else.

The unique aspect of the car industry is the highly skilled nature of many of its employees. These hi-tech skills are not limited purely to the process of car manufacturing. Much of the highly sophisticated engineering knowledge that Britain can boast has been built up in and around companies associated with the motor industry but not necessarily directly involved in it.

Moreover, in a post-credit crunch world, this sort of hi-tech engineering is the type of economic activity that Britain must do its utmost to encourage. If we are to successfully rebalance our economy away from financial services – and services generally – we need to support manufacturing of this sort. We will never again compete with China and others on mass-market production, but for now at least we have a skills advantage over many competitors that it would be foolhardy to abandon.

What an irony it would be if Britain were to abandon one of our most successful export industries just as the declining value of our currency offers unparalleled opportunities for those selling goods to overseas buyers. If we ever do manage to improve our trade balance, the car industry will be a prime factor in the achievement.

For these reasons, a bailout of the car industry is justified. Lord Mandelson, of course, may be more swayed by the issue of Labour marg-inals in car manufacturing heartlands (though such considerations did not prevent the collapse of MG Rover four years ago). But while such motivations would be cynical, if the end result is salvation for a car industry that in better times for the global economy stands a chance of really prospering, it doesn't really matter.

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