Bank of England rebuke for Mandelson

The Bank of England delivered a slap-down to British Business Secretary Peter Mandelson today over his comments that it needed to move faster to improve car financing schemes.

The Bank of England delivered a slap-down to British Business Secretary Peter Mandelson today over his comments that it needed to move faster to improve car financing schemes.

Mandelson yesterday said negotiations with the British Treasury and the Bank had gone too slowly over a deal to give people credit to buy cars. The Bank was in "pole position" on the matter, he added.

But the Bank said it was "puzzled" by his comments, adding: "It is not the role of the Bank to provide sector-specific support. That is clearly and properly a matter for the government."

Carmakers worldwide have been crippled as the credit crunch makes car loans dearer and scarcer, while economic uncertainty deters worried consumers from expensive "big-ticket" purchases.

Last month sales of new cars were almost 22% below a year earlier, according to the Society of Motor Manufacturers and Traders (SMMT), while UK manufacturers have shed thousands of jobs.

Mandelson announced a package of support for the industry in January, including a scheme to unlock £1.3bn (€1.4bn) of European loans and a British government guarantee for up to £1bn (€1.07bn) of further loans. The peer also said he would look at steps to give people who could afford it credit to buy cars.

Asked by the BBC about the plans, he said: "I wish our discussions with the Treasury and the Bank of England - and it is the Bank of England that is in pole position on this - had gone quicker than they have. I readily acknowledge that."

The Bank said talks "at working level" had taken place with British government departments and representatives of the motor finance industry, at which the Bank explained the support it was providing to the banking sector.

Since last autumn, the Bank has extended the collateral it accepts to include securities backed by consumer and corporate loans, including those for motor vehicle finance, it said.

The Bank added that its new Asset Purchase Facility - which it is using to buy up corporate debt as well asBritish gGovernment bonds in a bid to boost the flow of lending - was "open to all non-financial companies that meet the eligibility criteria".

The rebuke to Lord Mandelson comes less than a week after he was targeted by climate change protester Leila Deen, who flung a cupful of green slime in his face.

A spokesman for the Department for Business, Enterprise and Regulatory Reform said: "We are not going to get into a battle of words with the Bank of England.

"But the recession is really hurting the economy and it is perfectly reasonable for the Business Secretary to speak up for the needs of business during these tough times.

"As the full text of Lord Mandelson's comments makes clear, these are complex talks and we are making progress."

However, shadow business secretary Ken Clarke said: "We urged the Britsh government to take action several weeks ago, but at the time, all Peter Mandelson did was to ask one of his junior ministers to study it. Now he's complaining about the delay.

"But whilst the government dithers and indulges in internal rows, the situation is getting worse for all car companies, week by week. Whether it's Peter Mandelson's fault or the Treasury's fault, urgent action by government is now essential."

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