All Mouth And No Trousers

Cast your minds back to January this year and we got lots of big talk from the aptly named Department of Business of how it had introduced a scheme to support the car industry pledging up to £2.3bn in cash for loans.

This week we have heard that despite the bravado and big talk, not a single penny of that money has been given to the car industry. There have been plenty of meetings and negotiation, with Jaguar trying to get its hands on around £300m at one stage but for one reason or another, no firm has received any benefit for a scheme that was largely advertised with the sole intention of grabbing the headlines and making it look as though ministers were actually doing something about the potential collapse of an entire business sector on which around 800,000 jobs depended.

The grandly called Automotive Assistance Program (AAP) offered minimum loans of £5m to ailing car firms while the Enterprise Guarantee Scheme (EGS) offered loans of up to £1m - clearly any component or distribution firm in the car industry that wanted a loan anywhere between £1m and £5m was scuppered from the start. But then came the conditions. Far from taking on risky loans as the scheme was intended, with £400m of potential toxic debt write off written into the scheme form the start, firms who applied for the scheme found the rules too inflexible.

The Government, meanwhile, claim that there are 10 firms in negotiation on the scheme needing as much as £2bn of loans or guarantees. It seems that during the period of inertia from the beginning of the year, the scrappage scheme, successfully cloned from the continent, has filled a gap which has helped rescue rapidly falling car sales by offering incentives directly to customers to promote buying new cars - a simple and sensible proposition, easily aimed at the right point. It seems that simple, well directed applications of money get immediate and exciting results whereas complex, airy ideas which are difficult to implement but far more grandiose sounding and headline grabbing get no results whatsoever.

If only the Government had looked at its history in education and health it would have realised that smaller packets of focused money deliver greater results than shed loads poured down a hole with no real objectives and spurious measurements of results.

The Automotive Assistance Scheme has been an object lesson in how to waste time and money and get zero results but good headlines. It also illustrates that spin gets the desired results as everyone will see car sales recovering and believe it was the AAP that helped. Instead it was a continental idea that had already brought spectacular results in France and Germany - both of whose economies were out of recession at the end of the Summer.

IT seems that inaction speaks louder than words.

Another fine fiasco has been the trade credit top up scheme, designed to help small companies where their credit insurance has been lowered or withdrawn. The Department of Business, once again, offered £5bn in another headline grabbing initiative which was said to help companies maintain trade with one another. It is a testament to the fortitude and invention of treasury departments that just 72 UK businesses have benefited from the scheme utilising just £18m of the £5bn funds (less than 4% of the total).

Now Lord Mandelson has said that he will withdraw the scheme as it was no longer required, which has sparked uproar among small to medium sized business owners. The issue is that during the recession, businesses have focused on cutting their cloth and recognising more profitable business opportunities where credit is easier to cover. Now that we are entering the recovery phase, businesses will be gearing up to get a little more creative and risk-taking as markets pick up speed.

Once again, companies have felt that the scheme was too inflexible, restrictive and prohibitively costly to use. However, rather like the AAP and the EGS, great sounding, ostentatious schemes have delivered nothing to British business and it is little wonder that when so much was given so cheaply to banks and so little and expensively to business generally that the recession has lasted far longer in the UK than anywhere else. Grand ideas with little substance packaged with large business in mind always.

Too much money given to too few too cheaply, and too little to many too expensively equalling a long recession. It's a lesson in mathematics and economics that I hope Mandelson remembers in future.

Boilers Galore

Boiler scrappage scheme announced - no mother-in-law jokes, if you please. This is a politically correct blog.

I had to read the detail again and then realised that Gordon and his brother must have had a boiler breakdown in the last year at their flat and so need to have the old one replaced. Hey presto, we get a super new scrappage scheme that knocks £400 off the cost of a new boiler. Rush out and place your orders, folks.

I guess it will mean plenty more imports as with the cars, but as a household with a thundering great of hulk from Potterton that pumps out plenty of poisonous smelling vapour, I can wholeheartedly applaud this cosmetically green initiative. My garden isn't quite large enough for a wind turbine and we are in a Conservation Area and we so can't put up solar panels even if we wanted, but a new boiler will come in handy.

The last quote I had was close on £2,000 fully fitted - a pound bet says the next quote will be £2,400 for the same unit. Ah, cynics - unite!

Podcasting Our Way Out Of Recession

In the face of the heinous postal strike, our glorious leader has embraced modern technology and launched his latest piece of 'reassurance propaganda' on YouTube to show that, contrary to all indicators, the economy is behaving exactly as it should and he's on top of the situation.

Rather like the superb 'legal' promise that he and his team would halve debt by 2015, he has now pledged that Britain will have an upturn by the turn of the year. No, he was specific, he did mention 2010 for those sceptics amongst you. He got right to the point. Part of the deal was that he would reform banking and make those suddenly, vilified types embrace the kinds of values that we all share - 'hard work, responsibility, integrity and fairness'.

Of course, it does make you wonder why he tolerated such people who earned millions and did not adhere to those values beforehand, but hindsight is always 20:20, is it not? The hollow words of Lord Mandelson must chime in his ears of how Labour did not mind people making loads of money under their regime. How that has come back to haunt them all.

Another piece of late hindsight is that he will clamp down on lending sharp practice like credit card people and those who raise interest on loan repayments putting people into difficulties. He must not use a credit card himself as interest rates on such instruments have always been at least 10 times that of base rate interest, and some are multiples of that again. It is again, one of those stark moments of realisation for the poor PM where he finds out what is going on in the financial world. There is a good reason why the financial industry is almost without exception very well off and that is because they have carte blanche to do exactly as they like. It's nice of him to change this now but, to be frank, if he ever gave a damn other than saving his political neck, he would have stepped in long ago. It is not as if this is an issue that has arisen recently - it has gone on for years.

Just like the whole banking bubble which is busy re-inflating as we speak.

The final call to arms was that he was working with an international melee of leaders to ward off a Second Great Depression. I should imagine he has missed a few headlines as most other countries, including Italy, have returned to growth while Britain languishes bottom of the league table for economic dunces. He pleads that 'It would be suicidal to put recovery at risk by suddenly cutting off the funding and investment that is supporting young people, families and businesses'.

The funding and investment he talks about is pretty pathetic. While VAT is reckoned to have had a £12bn stimulus to the economy, profiling how it helps us is in real terms would be an interesting exercise. You see, even in modern monthly bills, power, fuel, insurance, food and school things are high on the agenda which are not affected by the VAT decrease. Meanwhile, consumer items are and that was the aim, to keep the High St going. It wasn't to help families and young people.

Over 1m of the unemployment number are now young people - this whole recession and crisis has affected them worse - so where is this mythical help he is giving to them? As for support to businesses, apart from copying the Continental scrappage scheme on a minor scale, he has done little beyond complex loan guarantee schemes to help business and overall business lending is down by nearly £15bn.

The vast majority of any stimulus money went into saving the very industry he now vilifies - how clever was that?

Perhaps he should have thought of that before he gave them a blank cheque to save their businesses, decrease the value of toxic debts so that they are now bargains again and allowed the banks to rekindle their feeding frenzy at the trough of easy money. Not one single, stupid bank was allowed to fail, sending the one message they all wanted to hear to them - 'If the brown stuff hits the fan, then we will get bailed out. So let's party like there's no tomorrow, we have zero liabilities'.

Perhaps, podcast rhetoric would have been unnecessary had the PM thought of all this before he handed out our hard earned cash to save those greedy bankers and gave the proceeds of all those who earned their money through, 'hard work, responsibility, integrity and fairness' to them to help them preserve their current millions and earn more millions again.

It's like Communism in reverse.

What a fitting epitaph for the biggest failure of a PM we have had, perhaps ever.

Putting Money In The Right Places Not Where Your Mouth Is

A study by IAB labour market has concluded that Germany will not suffer the same scale of job losses as the UK. The main reason is that Germany pumped money into wage subsidies which supported employment.

It's more than that. I sit here having spent this and the last few weeks in Germany and it is clear there is a profound difference to the way in which Germany has spent money to stimulate its economy and how the UK has. There are obvious things - Germany and France are pulling out of recession and there are signs that it is sustainable. Germany put money into wage subsidies for firms to help stop widescale, automatic redundancies which has been the first port of call in the UK in response to the recession. Germany and France put around €5bn into the car scrappage scheme to stimulate sales rather than dither over helping mothball factories and then go to scrappage in the UK at a paltry £300m. Angela Merkel pledged €6bn into the wage subsidy scheme but she fought, along with France, the wholesale and unlimited bail out of banks much to Gordon Brown's annoyance in the G20 meetings. The results have been impressive with no huge increase in unemployment and an early exit to the recession while Britain reels at 2.4m unemployed (some say the real figure is 6m) and this will peak at over 3m before the year ends - as yet there is no sign of the end of the recession for the UK.

Germany got it right - we didn't.

Don't React, Think

Another of my New Scientist articles caught my eye. Notice how Government's over react to situations rather than think them through - the soundbite is better than the diligence in most cases as it sustains or wins votes. But you only have to look at Britain's reaction to swine flu to understand we have committed huge resource to try to cover something which could have been contained far more easily and with less cost, and we have simply saved no more lives by doing so. That is one example - another would be how, in the face of a rail disaster we pour millions into rail safety. The result is that we have no more rail disasters in 2008 over 2007 saving a few lives. Meanwhile around 279 deaths happened as a result of trespass and suicides on the rail network in 2008, around the same amount as 60 years ago.

In other words, we tackle the headline, not the real problem costing far more.

We could get onto road saftey but that is its own nightmare deserving far more airtime while all the heightened security, a war with Iraq and spend after 9/11 did not stop 7/7 occurring under our noses. There is now clear evidence that George W. Bush actually got briefed on a threat to hijack US planes just a month before 9/11 and his recation was, 'You have covered your asses, now go.' The subsequent spend on two major wars has got us no further in making us safe - if anything, we are far worse off.

So back to the point. While Germany put specific money like €10bn into education which has to be spent by the end of 2010 on refitting schools or new interactive learning techniques to lay a foundation for the future, Britain chose to put huge sums into bank bail outs without any idea how much was required or when it would stop. In fact, we knee-jerked into taking Northern Rock into public ownership before we had even time to think and then plunged incredible sums into banks and a further £175bn into Quantitative Easing without any idea what the real results would be. Germany and France were right on their game - specific sums for specific effects and no wanton bail outs with incalculable effects.

Guess who is in the better position.

But there is far more. Eminent economists like Kenneth Rogoff argue that we have thrown money at the problem of the banking system with little thought, especially when it comes to regulation. You do not have to be a genius to realise that banks worldwide are now using easy and cheap loans from Governments to fund incredibly high risk debt swap and the likes as they did before but now under the umbrella of taxpayer guarantees should they fail again.

What does it do? Obviously, it will bring vast, short term profits which banks will want to pay high bonuses on - and guess what we have got? Rogoff goes into far more detail but basically he highlights the knee jerk reactionism by the US and UK over Northern Rock and Lehmans as examples of reacting without thinking which has caused a cascade of similar, more profoundly expensive mistakes.

Time and again, we see that Governments react with short term thoughts that have major effects in the long term. Germany and France campaigned against some of the stupidity Britain went for and they have been the quiet, unassuming winners because they put their money into the exactly the right places to get the desired effects.

At the time, Merkel was seen as the ditherer while Brown was seen as the superhero flying from country to country to save the world even if he did inexplicably go through Brazil. Merkel has proved to be right, choosing the thoughtful and precise approach. Brown has a dog's dinner on his hands thanks to his knee-jerk responses to crises. The difference being is that Merkel knows pretty much how much it has cost to get out of the recession - Brown has zero clue and we will pay yet more as banks behave in the same way as before the crisis.

Regulation and reformation of the financial system was the key if £billions were to be thrown at it. We have none and we are faced with the sight of banks paying a thin layer of superstars bonuses that make it look as though we are rich again. Instead we are paying off debts that will last until 2032.

This is not an issue between employer and employee as Darling would have us think, this is about what banks are really earning, what they can sustain and what we have paid them to survive. We are the 'Masters of the Universe' but we need politicians to enforce it. It's our money, after all.

Why Germany And France?

We could bore ourselves silly recalling Gordon Brown's fateful, progressively more desperate, words of how robust our economy was, how it we could out-run a recession, how we would handle one better than others and why we would recover first. The fact remains pretty much all the clap-trap he gave us was complete horse manure - and not the sort bought on MPs' expenses.

Rather than labour the point, let's just say he called just about every point in the credit crunch and recession wrong and that his understanding of economic matters was not as cerebrally enlightened as he led us all to believe. So much of all that leads to ask, well if he called it all so wrongly did he get the cure right? If not, have we spent all those £billions correctly or were they all wasted?

Two things this week brought this question into sharp focus. First, there are now doubts over whether Quantitative Easing (QE) is having the desired effect of getting us all spending with abundant credit again - as I blogged yesterday, there is now evidence that between banks missing lending targets and their hoarding of new money there is little stimulus reaching the likes of consumers and small businesses in terms of increased credit. Secondly, France and Germany have announced that they have, technically speaking, exited the recession. It must come as a hard blow to Brown's fallen economic ego that these two countries, who have typically led Europe in terms of their consistent economic sense and who fought him so hard on the issue of unlimited bail outs, have broken free of the grips of the financial chaos well ahead of Britain.

In fact, as France and Germany announced growth in their economies, Britain enjoyed a further significant decrease in its economy. So why did Gordon Brown call it so wrong and how little did he understand the pillars of sand upon which he had built what he thought was a robust economy?

Relative Cause and Effect

There is no doubt that the US and the UK had built much more unstable economies over the 10 years. The French and the Germans had struggled in relative terms over the same period, Germany particularly with the post-wall integration issues while France seemed to constantly wrestle with demons from within. We, meanwhile, enjoyed a bonanza pretty much built on thin air. Property prices began to rise on both sides of the Atlantic at alarming rates and many people dipped into their new found net worth by leveraging the equity increase in their mortgages - we effectively became our own banks. It caused a credit bonanza on an unprecedented scale as each new debt taken out was traded and traded again for incremental commissions each time and there seemed an unlimited supply of money.

What this illustrated for Britain was how important the finance sector is to us. Many assume that as it is contributes just 9% to our GDP it is not significant but the reality is that it was the pillar on which our whole system and people depended. As a society we saved negative amounts of what we earned and over the 10 year growth period our average household incomes had actually decreased in real terms - we were supplementing our incomes with our equity gains and that was purely finance driven and at the heart of which were our houses. As the world frenzy for cheap and unlimited money continued, the gamblers in the finance world thought they were cleverer than logic - they traded any old debt and in fact, there was no need to check the worth of an asset as while values rose if a repayer got into trouble they could just leverage more borrowing on each increase in asset value.

It was an upward spiral based on flawed thinking.

So when the bubble popped, US and Britain felt it hardest as we had been by far the most stupid. The other countries like France and Germany had stumbled and nearly lost banks but the reality was that their exposure to the whole 'scam' had been less due to their more conservative approach to simple things like mortgages, where in Germany around 60% deposit is required.

The cause and the effect of the credit crunch were much more exaggerated in the US and Britain.

Other Dependencies

Brown's frustration must have been that if there had been no credit crunch, then Britain was actually well set in terms of handling a recession - in theory. Germany, in particular, and France are the heart of the manufacturing engine in Europe. Their fortunes depend heavily on exports and so when the global economy dipped sharply, they were hit very badly. So much so that at the start of the year, while the British economy dropped 4.9%, the German economy dropped 6.7% and correspondingly, the fall in output was far greater too.

But any economist would tell you that as a recession ends, there is much sharper gains to be had as restocking occurs. Also, France and Germany quickly turned to within to stimulate demand and they introduced scrappage schemes immediately for their car industry that ensured that home sales never really dipped and so they weathered the storm more sensibly while Britain dithered.

Britain, meanwhile, more heavily dependent on the finance sector, saw a much slower recovery and this week we see that this recovery is merely banks recharging their batteries at the expense of taxpayers while the stimulus intended is absorbed by wounded balance sheets rather than getting money into the economy. It was really flawed thinking to believe that pumping so many billions into banks was going to mean an automatic resumption of the 'good times' but this has been the hallmark of the response to the whole crisis - wrong assumptions and undesired outcomes which seemed all too obvious from the amateur economists' armchairs and front bars.

Were The Bank Bails Out a Waste?

Individually, it is easy to identify that the knee jerk saving of Northern Rock was an unmitigated disaster and still is. For banks in general though, we had little choice but to act. However, the sheer quantity of money and immensity of the guarantees and loans required showed just how completely defunct our system had become purely because banks had strayed so far from the basic formula upon which all banks are founded - liquidity. It was as if the whole banking community had lost the ability to add up or to spot the obvious - the whole system had to collapse because it was trading on air not solids.

But getting back to how the countries tackled the issues they faced, Britain really did little more than Germany in terms of stimulation. We decreased VAT and this accounted for around a 1.6% of GDP stimulus while Germany pumped in around the same with around 2% next year while France was less bullish with just 0.7% of GDP. Our boost stops next year while Germany continues to recognise that it has to be a sustained boost.

In an odd quirk it is reckoned that the German and French social security systems helped consumers more than in the UK. As Britain sought to get glamour in loud shouts about how it was 'saving the world' and the PM was shuttling across the world on a fruitless journey for publicity, his continental counterparts just got on with the job logically and quietly. They became Brown's combatants at the G20 by forcing through toned down bank bail outs and wholesale squandering of money and they proved to be, annoyingly, right.

But here is the rub - as Britain pumped £billions in to save the banks, the Germans and French pumped some €5bn into the car scrappage scheme against the paltry £300m we have, of which, only £180,000 has been used to date. Meanwhile we have spent an estimated £1.5trillion bailing out the banks and this is the massive difference in approach in terms of % of GDP used.

Germany and France focused defined sums of money into specific key areas while protecting consumers well while Britain squandered £billions saving the necks of the very people who ruined us while umming and ahhing over whether to save any industries which would have provided direct stimulus to the economy and consumers.

It Was The Economy, Stupid

The problem stems back to Brown's belief that the British economy was in good stead and stable. It simply wasn't - it was built as a house of cards and every corner was a potential weak point as each depended on the unlimited supply of money which relied on no one questioning underpinning asset values, in simple terms. It was so obvious that it makes you scream but more gifted people than me seemed to think that all the great mathematicians of the past clearly had no idea how to add up - they knew best.

And they knew best because they were getting incredibly rich and the nation appeared better off. Indeed we seemed to be - every new gadget was bought voraciously, we bought second even third properties here and abroad, we holidayed more lavishly, we ate more at restaurants, became coffee and wine snobs foregoing staples like beer and tea and we shopped more avidly - like there was no tomorrow. And that was the formula - tomorrow never came. No matter that our wage packets were diminishing, there was always an endless supply of credit, loans, mortgages - all cheap at that and easily accessed thanks to the increased value in our homes. If the debt get on top of us, we simply took a little more money out of our 'banks' and postponed the whole thing.

Tomorrow was never going to arrive, was it?

Our economy had been bolstered alarmingly by all this to an extent that it could handle a recession, even higher interest rates but as long as property values rose, we were laughing. Nothing could stop that - except of course the money tap being turned off. The credit crunch was the 'Black Swan' in the system, according to apologists. The concept that a single, rogue and random event entered the system and proved to be the one thing that would bring it down. It wasn't a black swan at all, it was pure logic. The moment just one person questioned the value of underlying assets and then asked who was doing the due diligence and the whole thing imploded. It was simple accounting, adding up and logic - nothing more.

Sub-prime was just a manifestation of the whole banking flaw, it was not the cause.

Subsequently, we have the FSA squeezing out Independent Financial Advisers and making 30% of them leave the industry as they fingered bad guys but it was the clever people in the financial system who, unchecked, just traded anything for profit with no questions asked and became unfathomably wealthy in the process.

Britain's problem is that our over-reliance on that financial system to underpin our economy was our downfall and it is also the reason why it is taking far longer to recover. Unemployment has yet to peak and is already at 2.4m and the Fiscal Stimulus money will end next year - the pot is then empty. The danger is that if the German and French experience is a false dawn and they lurch into negativity again then the news is very bad for us. We need their recovery to drag us out of the mire too.

People who argue that our GDP is not dependent on finance as a contribution know little about how the economy works. The flow of money affects everything and so our economy became like a clogged engine, unable to operate without the financial lubricant. All that money came from the wrong sources and these are lessons we should have learnt, understood and applied new methods to avoid the problem in the future.

The problem is that in our blind, knee jerk haste to patch up a broken system, little thought was put into what caused it an so how to avoid it again because we had so little understanding of our own economy. Just take a quick glance at the renewed call for bonuses in banks here and the US and the soft regulatory response and you will see that little has been learnt and far less has changed.

We may yet recover, but we just have primed the system for the next fall.

April Showers

April wasn't long ago. In it we had a budget which pledged a load of money for wind projects and preferential treatment to businesses which created 'green collar' jobs.

In the preceding months we had seen the Government pledge around £2.1bn to the ailing car industry and there has been an unseemly scramble to save the European arm of General Motors. The two things did not seem to go together but it was all part of a policy announced back in February by the Business Secretary to save key businesses on a priority basis and favouring those who had a green edge - thus laying a platform for a greener industry base for the future.

It was all very idealistic and a lot of talk. It took ages to get a 'Scrappage' scheme to help the car industry when the scheme in Germany had already led the way and then we had GM come begging. Of course, the car industry is a big employer and should it fail some 800,000 jobs in direct and related businesses are at risk.

But make no bones about it, we don't have a car industry of our own in Britain - it as all owned by foreign companies.

So saying all this, was it not a surprise to see people picketing the site of the largest manufacturer of wind turbines in the world at Newport, Isle of Wight last week? They were picketing as Vesta had announced the closing of its factory in the UK due to slow orders and in favour of cheaper manpower elsewhere. When asked about this, the Business Secretary, Lord Mandelson, said it was a commercial decision and nothing to do with him.

I don't get it. If so much money was pumped into wind schemes around the country AND we are favouring green collar jobs, then why are we not bailing out this business? True, the parent company may be making a commercial choice and it is still surviving but if we truly want a green based industry platform for the future then Vesta was worth 'enticing' to stay at minimum.

Are we not going to need more turbines for the future? And we will have to import them when we do, now?

It was another example of plenty of talk and no action by particularly Mandelson but the Government in general. As we bail out banks with sums that we have no idea about and then help industries which clearly help to pollute, we allow a manufacturer of green energy systems to simply up sticks and move from our islands. Vesta may be Danish but there was no attempt made to avoid this. When steel making in Sunderland is threatened, everyone starts to help the parent, Corus, which is also a foreign company.

In another move by Mandelson, he is to make a speech in which he will say that rising tuition fees should not make further education the domain of the better off. After a report was shown only a week ago that says the professions like Law are dominated by privately educated people, it seems ever more appropriate that the whole policy is reviewed. But the Labour method is to pay lip service, highlight it as something that 'needs to be looked at' and then raise the tuition fees anyway.

Time and again we get these well crafted 'soundbites' that sound as if something is being done yet produce no change and long term we will reap the effects of poorly implemented policies. Tuition fees rising does affect the levels of education of poorer people - there is no doubt. There are more foreign students who attend our universities now than ever before because they can pay the fees and our kids can't. In 12 years, our system of education has gone backwards at all levels and the standards have dropped which means Britain will be far less competitive in the future.

Couple that with the fact that valuable jobs in green based industries are leaving this country with no attempt to stop them and you have a completely incoherent policy that flies in the face of what ministers say. In this case, it is just one man - Mandelson - as in the role created for him in his rescue mission of a totally failed Government, he is responsible for high education and business.

We could not have picked a worse person.

Putting Your Money Where Your Mouth Is

In the month of the year, March, when the car industry usually sells 17.9% of the total annual car sales in the UK, sales dropped by over 30% from the same month last year. There is no point making cars if you can't sell them and so this was about the worst possible news for the car industry - even these figures were around 5% worse than expected.

The Government will troop out the excuse that this is symptomatic of a global slump caused by the recession. That is not entirely true.

In Germany, there was a corresponding 40% increase in sales while in France it was nearly 10% up. So what is the difference between these countries and the UK?

Bail Out, Schmail Out

Business Secretary, Lord Mandelson, announced a £2.3bn bail out for the car industry back in January. By March, companies were already moth-balling production lines, putting workers on less hours and there were talks of widescale redundancies. For some peculiar reason, the bail out was stalled, according to Mandelson, in negotiations with the Bank of England and The Treasury, presumably after he had washed his hands of it.

It is very vogue to talk of big numbers as they impress everyone and by mentioning them it seems the problems, or at least the public scrutiny of them, will go away. However, as I have blogged of late, it is all very well conjuring up these ideas with vast sums of money but it is all about how each penny is spent - that will determine how effective these plans are.

In this instance, a cursory glance would suggest that both Germany and France have gone to the very heart of the problem. Instead of trying to preserve production or help tiding car makers over, Germany and France have gone directly to the consumer and given a direct incentive - a scrappage deal. This, coupled with aggressive offers from the dealer network and vendor in unison, good credit deals and plenty of direct advertising appeal, has effectively dispelled the consumer gloom and not only kept sales going but, of course, kept production going.

Instead of pointing fingers at others, these countries sought to directly solve the problems with deals that they can account for every penny for to the taxpayer. The British Government response to such a deal was that they a were not sure it was the best value for money.

Cutting Through The Bull

The UK response to the car industry plight has been to not just dither but grind to a halt - blaming other factors and saying it's a global slump issue. Germany and France saw no such obstacles and issues - they addressed the problem with a carefully calculated plan that was instantly executed and the result was spectacular.

In contrast, we look at the bank bail outs which seem to grow daily by small or large billion amounts and we have no idea how the money is being spent or whether it is working or not. Interestingly, it was both France and Germany who balked at the US and UK lavish bail out plans and managed to curb the senseless, ever increasing bail out funds being lobbed down a financial drain.

I have no idea whether these two countries are right but there does seem to be a stark contrast between the British approach and theirs. Time will tell but each day the clock is ticking for the British car industry - I have a suspicion that if it does take a beating in the next year as the recession really grips due to lack of constructive action, then it will never recover to the same levels again in this country. There is simply too much competition elsewhere for the work and we own none of it to influence it.

That will be right at the doorstep of the Business Secretary, in my opinion.