The Government is demanding unprecedented control over the day-to-day running of one of the UK's biggest car companies in return for help to secure an emergency cash injection.

Ministers want the right to choose Jaguar Land Rover's chairman, take a seat on the board and hold a veto over investment and employment issues in a move described as "backdoor nationalisation" by one critic last night, reports the Guardian.

The car manufacturer, owned by Tata of India, is threatening to walk away from an £800m rescue package because it regards the terms as too onerous. But the Government insisted last night it was doing all it could to safeguard what it described as an important British company with good long-term prospects.

"We have been talking to banks on their behalf, have appointed financial advisers to assist, and are prepared to guarantee loans from the European investment bank on the right terms," said a spokeswoman from the Department for Business, Enterprise and Regulatory Reform (DBERR)."Any government financial assistance must, of course, protect taxpayers' money. On this basis we are prepared to help, although not on any terms."

Jaguar, once part of state-owned British Leyland until it was privatised by the Thatcher government, has been in months of talks with Lord Mandelson's department since a slump in sales triggered by the credit crunch left it needing short-term and long-term funding.

Tata has asked the government to provide guarantees that would enable it to tap into £340m from the European Investment Bank (EIB), while a further £450m of funds is being negotiated with Royal Bank of Scotland and Lloyds Banking Group, both now in effect under government control.