Bank 'puzzled' by Mandelson view

The Bank of England says it is "puzzled" by Lord Mandelson's comments about the car financing scheme.

On Wednesday, Business Secretary Lord Mandelson said he wished talks with the Treasury and Bank of England on help for the schemes had "gone quicker".

He said the Bank was "doing its best" but it was a "very complex area".

The Bank said it was "puzzled" by his comments, saying that providing "sector specific support... is clearly and properly a matter for the government".

In a statement, the Bank said: "At working level, talks have taken place with the relevant government departments and representatives of the motor finance industry at which the Bank explained the liquidity support it is providing to the banking sector."

It added that it had taken measures to boost consumer and corporate loans - including motor vehicle financing - and said the new Asset Purchase Facility "is open to all non-financial companies that meet the eligibility criteria".

'Worrying division'

The Department for Business said it was not going "to get into a battle of words" with the Bank of England, stressing that it was "perfectly reasonable" for Lord Mandelson to stand up for the interests of business at this difficult time.

But the Conservatives said it pointed to "worrying signs of division" at a time when the government and other important bodies should be united in fighting the recession.

Car manufacturers have been lobbying for help for their finance arms - which provide people with loans to buy cars.

These have been hit by the credit crunch, hampering their ability to raise funds.

In January, Lord Mandelson announced a package of government support for the car industry - including a scheme to unlock �1.3bn of European loans - and a government pledge to guarantee up to �1bn of further loans.

But he was criticised by the Conservatives for only saying that he was "looking at steps" to improve car financing arms' access to funding - he said he had asked trade minister Lord Davies to look at the issue.

As the industry continues to announce output and job cuts amid continued poor sales, there was a meeting on Wednesday at the Department for Business for car company officials, bankers and union leaders.

In a BBC interview later Lord Mandelson said the government was "looking at" the possibilities of a car scrapping scheme - paying drivers of high polluting cars to switch to more environmentally friendly models - but no decision had been made yet on this idea.

'Pole position'

Asked about help for financing arms of car manufacturers he told the BBC: "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 discussions are nonetheless making progress and I hope that it will be possible to help those car financing arms because that goes hand in hand with our other efforts to boost this market and give a shot in the arm for the demand for cars."

Asked if the Treasury and the Bank of England were holding things up, he said: "I wouldn't put it in that way, no, because they are our colleagues and they're doing their best to find the right area, but I can assure you this is a very complex area."

A Treasury spokesman told the BBC it did not regard the comments as critical and thought them a reasonable thing to say.

Shadow chancellor George Osborne said: "There are deeply worrying signs of division in the government that is supposed to be leading Britain out of recession.

"What Britain needs now is unity, direction and decisiveness. Instead we have dithering, division and delay that are doing real damage to Britain's ability to fight recession and undermining our ability to recover."

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