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Clegg warns that bail-outs for carmakers may snowball; POLITICS.

The Government should be "wary" of using public money to support the automotive industry, Liberal Democrat leader Nick Clegg has warned.

He said carmakers could not expect a "blank cheque" from the taxpayer, after Jaguar-Land Rover requested loan guarantees to help the business stay afloat during the credit crunch.

The Lib Dem leader, who recently visited Land Rover's Solihull plant, said he did not rule out public funding.

But there were worries that if the Government bailed out carmakers, it would face demands to lavish more Treasury funds on other sectors of the economy, he said.

In an interview with the Birmingham Post, Mr Clegg said the banking sector, which has received hundreds of billions of pounds, was a unique case because of the essential role it played in the economy.

Jaguar Land-Rover is believed to have asked for credit guarantees of pounds 2 billion, which it would pay back. Other carmakers have also requested credit lines.

Peter Mandelson, the Business Secretary, complained earlier this week that the Bank of England and the Treasury had delayed his department's attempts to make a decision on the requests.

Mr Clegg said: "What I have always been slightly wary of is the obvious risks of writing a blank cheque for one sector after another.

"First of all it was the banking system, but I think we all understand why the banking sector is so different to other sectors.

"It produces the blood that courses around the veins of the economy. Without a banking system, nothing else moves."

He said the Government must avoid a situation where people asked "if it's the car sector then why not the steel sector, and so on".
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Publication:The Birmingham Post (England)
Date:Mar 13, 2009
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