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UK stimulates automotive demand; unravels "green" tax structure

Editorial Staff

The UK has backtracked on a high-cost "showroom tax" on cars, and whilst the cost will reduce substantially for all cars, for some the tax will actually turn into a rebate. But it won't save the UK car industry. And behind it all, there are some very questionable dealings.

Aston Martin is to extend its Christmas shutdown period due to falling sales, says the company. However, its Middle Eastern backed owners are not seeking government support for the company. Contrast that with Jaguar / Land Rover sold by Ford to India's TATA for not much more than asset value only a few weeks ago: TATA is rumoured to be making direct approaches to the Prime Minister's Office to seek support of as much as GBP1 milliard.

It has to be remembered that the UK's Labour government has previously been involved in scandals involving the Hinduja brothers in a "cash for passports" scandal. Labour MP Kieth Vaz was castigated over his connections to the Hindujas. In a separate incident, it came to light that Lakshmi Mittal had been a major donor to the UK Labour Party - and Tony Blair wrote to the government of Romania telling them that a sale of a steel plant to Mittal Steel would be in the best interests of their country. So far as various investigative journalists have been able to find out, Blair never offered any such support to Corus, the company that grew out of the wreckage that was British Steel. The Hindujas and Mittal are often cited as being high in the UK's rich list.

Labour MP Kieth Vaz returned to become Chairman of the Home Affairs Select Committee - but in recent weeks, he has been accused of improper conduct. A London lawyer, Shahrokh Mireskandari, who is central to a series of racially motivated claims against London's Metropolitan Police, was involved in a case where liquidators for a failed airline were trying to recover GBP400,000 in costs. According to some media reports, if the claim against Mireskandari were to be successful, he would face personal bankruptcy. Vaz wrote to the Judge in the case alleging that the conduct of the case had been racist and biased, said The Daily Mail as part of an extensive investigation. Mireskandari has been demonstrated to be a substantial donor to the Labour Party.

And so to TATA's plea for money. It paid GBP1.7 milliard to Ford to take over the combined Jaguar and Land Rover operations in June of this year. Now, as global markets follow the path that was predicted at that time, TATA says it needs support for its UK operations. An interesting issue arises: the Labour government was prepared to let Rover fail - and that was British owned. Will it be prepared to put a far greater sum than Rover needed to support an Indian owned business that was bought so recently when market conditions were not only predictable but, one might consider, inevitable?

And if it does, will there be a close examination of the relationships that give TATA direct access to the Prime Minister's office and to Peter Mandelson who was so central to the Hinduja affair?

Already the Treasury has unravelled its plans for a showroom tax that would have added GBP900 to the price of Jaguar and Land Rover products (and others with large engines but of UK producers, it is that company that is most likely to be affected by such a tax) and today Alistair Darling announced that, when implemented, the highest tax on the biggest engined cars would now be "only" GBP300 and that some cars would actually have a negative tax if they were particularly environmentally friendly. Also older cars would not suffer a huge rise in road tax, a concern that had afflicted may people who suddenly found that the cars they drove had become almost unsaleable.