Scrappage incentive likely to go ahead

Fifth Gear  Tuesday 14 April 2009

A new-car scrappage incentive is likely to get signed off by Gordon Brown before being announced at the next budget on April 22nd. Chancellor Alistair Darling has been under pressure for months to introduce the incentive, which is designed to stimulate new car sales by offering £2000 against any car more than nine years old that is part-exchanged for scrap. New car sales are almost 30percent down so far this year, and UK production fell almost 60percent in February compared with the same month last year.

However, there are some reports that the government is asking the car makers themselves to put up half of the £2000 subsidy, a solution that the Society of Motor Manufacturers and Traders, which represents the motor industry, claims will not work, not least because it would mean selling some cars at a loss.

Britain is one of the last west European countries to introduce a scrappage scheme, the government wrestling with the fact that around 80 percent of the new cars sold in the UK are imported, benefitting domestic producers less. However, the scheme is nevertheless considered desirable because it will provide support for the country’s hard-pressed car dealers, and because it underpins the wider European effort to help the car-makers, a few of the UK’s factories benefitting from the rising markets in parts of mainland Europe.

Scrappage schemes have been highly effective in Germany, where sales rose 40percent in March, as well as in France, where sales climbed 10percent in March.