£2bn car industry package unveiled

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Business Secretary Lord Mandelson said the Government would provide loan guarantees to car manufacturers and large suppliers to try to reverse a huge slump in car buying.

Jobs have already been axed in the industry and a number of plants are on extended shutdowns because of the drop in sales.

Leading car firms including Honda, Nissan and Jaguar Land Rover are among those which have been hit.

Lord Mandelson said the measures offered a "significant boost" to the industry but he denied the Government was offering a "bail out" or a "blank cheque".

He told the House of Lords the Government would offer loans of up to £1.3 billion from the European Investment Bank as well as guarantees of support up to a further £1 billion for lending and loans where appropriate.

The Government would assess any bids on a case by case basis, but the minister stressed the Government was not offering a subsidy or blank cheque to car firms which have been pressing for action for months.

Shadow Business Secretary Kenneth Clarke, making his first Commons appearance since his return to the front bench, said the proposals were not ambitious enough and were a reflection that the country could not afford to underwrite large-scale assistance for the industry.

Mr Clarke told MPs: "I have to say I'm slightly disappointed. I thought the Secretary of State who I am shadowing would produce some new ideas, some dynamite.

"He has been trailing a massive programme of support for the automotive industry - unfortunately the minister has the task of producing pretty small beer here."