Leading article: Help for Jaguar could set an expensive precedent

Ministers would have to explain why the car company is a special case

With job losses mounting, the Business Secretary, Lord Mandelson, has confirmed that the Government is considering a request for state help from the car company Jaguar Land Rover. Any assistance, it is being emphasised, would not be a bailout as such, rather a two-year bridging loan to the tune of £1bn – sufficient to tide the firm over difficult credit conditions. Such caveats, though, do not make the decision any easier or less sensitive.

There are many questions that need to be asked here. Let's start with the obvious. Is the minister who has been talking to Jaguar Land Rover by any chance the same Lord Mandelson who played the uncompromising free-marketeer in relation to another, rather bigger, company in recent difficulties. Commenting on Woolworths' decision to close all its remaining shops, with the loss of 27,000 jobs, he said its fate served as a warning to other established high-street names. Woolworths, he said, was a company "that did not... change with the times in the way you need to in an increasingly competitive marketplace". Does this not sound just a little reminiscent of Jaguar Land Rover, especially to those about to be laid off by Woolworths?

There are differences, of course. The retail sector, Woolworths included, is scattered throughout the land. The majority of employees will not be highly paid or highly skilled. They may have a chance of another job – although it will not be easy as vacancies everywhere contract. Jaguar Land Rover, although it employs fewer people than Woolworths, has workers whose skills are not easily transferable. Its plants are concentrated in the West Midlands and Merseyside, and its closure could blight a region – a region, moreover, with several marginal constituencies that Labour could lose.

Among the arguments for helping Jaguar Land Rover, the party political one is by far the least sustainable. But nor should emotion govern the decision. Both the Jaguar and Land Rover marques hold a special place in British hearts. Something would be lost if they were no more. But the cruel truth is that Jaguar, if not Land Rover, may be ill-equipped to survive ever more rigorous competition. With appeals for state aid bound to multiply in coming months, the considerations for granting it must be primarily commercial and secondarily social. The Government must be convinced it is not throwing good money after bad.

That Jaguar Land Rover is now foreign-owned makes the decision additionally sensitive. It could be argued that the Indian company, Tata, should have had some idea of what it was taking on, as well as the trend in market conditions, when it bought the company for a knock-down price in June. Might this not be a case of a wealthy foreign company holding British jobs to ransom in the hope of minimising its losses?

Trading conditions are exceptionally difficult across the global car industry. But construction, retailing and services are also facing acute problems in Britain. Is there something intrinsically different about car-making that makes it a special case? After much wrangling, the US Congress decided there was not. But George Bush may decide to advance the money anyway.

The last word on Jaguar Land Rover rests with Gordon Brown. As Chancellor during the failed effort to rescue MG Rover three years ago, he should be well acquainted with the perils that can flow from loans advanced unwisely. His motto should be: creditor, beware.