That there is an economic case for the proposed €32.6bn (£29bn) merger between Fiat Chrysler and Renault goes without saying. A link between the two companies to form the world’s third-biggest carmaker after Volkswagen and Toyota has always made a lot of sense. If the deal is scuppered, it won’t be due to a lack of business logic; it will be because politics gets in the way.
There are two big arguments in favour of the deal. The first is there is a global glut of automotive capacity that is already forcing companies to cut production, close plants and lay off workers.
The second is the age of the internal combustion engine is drawing to a close. Technological change has meant progress being made towards autonomous, self-driving cars, while the need to combat the climate emergency has forced car companies to think about a new generation of electric-powered vehicles.
These changes – the biggest in the industry for 125 years – leave companies in a bind: they either have to come up with the massive investment required to deliver the cars of the future against new rivals such as Google’s Waymo, or become museum pieces. The tie-up between the Italian-American Fiat Chrysler and the French-Japanese alliance of Renault, Nissan and Mitsubishi is primarily about generating economies of scale in order to save €5bn a year that would be available for R&D and product development.
This is a hefty sum to make from efficiency savings and there has to be a suspicion that the merged company would also look to take costs out of the business by getting rid of excess capacity. The French government, which has a 15% stake in Renault, is certainly alive to this possibility, which is why Bruno Le Maire, the finance minister, is seeking explicit guarantees there will be no job losses.
That’s one potential political complication. Another is that Matteo Salvini, Italy’s deputy prime minister and the leader of the far-right League, has expressed a desire to take a stake in the new company. This would be no problem were relations good between Paris and Rome, but they are not. There is absolutely no love lost between Salvini and the French president, Emmanuel Macron. That, coupled with the fact car companies tend to be national virility symbols, suggests the negotiations will not be trouble free.
Mortgage approvals increase is no sign of a boom
April marks the start of the property buying season and, as if on cue, a report shows house purchase mortgage approvals from seven high street banks rose sharply to their highest level in more than two years.
There are a number of possible explanations for the increase. Mortgage approvals gyrate from month to month, so the figure for April may just be statistical noise. That would fit with weak consumer confidence and the reluctance to splash out on the two big-ticket items in many household budgets: houses and cars.
On the other hand, fears of a no-deal Brexit evaporated during March and that may have been the trigger for some pent-up demand. That, though, doesn’t seem entirely consistent with reports from estate agents suggesting new buyers are thin on the ground.
A more convincing explanation is high street banks are dangling attractive mortgage offers and customers are taking the bait. There is no immediate prospect of the Bank of England raising interest rates and that is feeding through into cheaper deals for homebuyers. There is not the slightest chance of a runaway housing boom, but until interest-rate expectations pick up, the property market will keep ticking over.
The taxing reality about how to pay for social care
Councils have been in the austerity frontline for the past decade. As a report from the Institute for Fiscal Studies shows, spending by English councils is down by 21% since 2009-10, with even bigger falls in spending on roads and leisure services needed to provide some protection for social care budgets.
Life is not going to get any easier even with an end to overall cuts. That’s because there is a mismatch between the money that will be raised from council tax and the rising care needs of an ageing population. The IFS calculates that adult social care could account for 60% of council spending within 15 years, up from 38% now.
The conclusion is simple. Unless councils get more funding, they will inevitably provide less good care to fewer people. That is not a realistic proposition, so central government will have to stop ducking the issue and commit to funding social care in the way that it funds the NHS – through general taxation.
