Car scrapping incentive announced

The government wants people to scrap their old cars and buy new ones.

Motorists buying new cars will get a £2,000 discount if they trade in for cars over 10 years old to be scrapped, the chancellor has announced.

Alistair Darling unveiled the scheme - which will run until March 2010 - to help the struggling car industry.

He said he wanted to help the UK's motor industry "which has been one of Britain's success stories".

But critics have said the scheme could hit second-hand car prices and will do little to safeguard UK jobs.

To benefit from the scheme, a buyer must have been the registered keeper of the car that is due to be scrapped for at least 12 months.

Half the scheme will be paid for by the government, with manufacturers contributing the rest.

The government has set aside £300m to pay for the scheme, which will benefit 300,000 customers.

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A similar scheme to the one announced by the chancellor was introduced in Germany earlier this year.

The scrappage scheme announced today risks consigning a lot of perfectly good, and relatively clean, vehicles to the dustbin Professor Stephen Glaister, RAC Foundation director How the Budget affects you Try the Budget calculator Mixed response to car scrapping scheme

It resulted in a 40% rise in German car sales last month, in sharp contrast to the UK where sales slumped more than 30% compared with a year earlier.

Carmakers and dealers hope the UK experience will echo the German one.

"The government has taken the opportunity to boost the new car market, while simultaneously helping consumers buy a new car," said Paul Williams, chairman of the Retail Motor Industry Federation.

RAC Foundation director Professor Stephen Glaister said: "If the scheme leads to a reduction in the average age of the national car fleet then this has to be good for road safety as more modern cars will have a wider range of safety features built in."

The Society of Motor Manufacturers and Traders (SMMT) has said the scheme would also help replace heavily polluting cars with more efficient and less polluting new ones, though the scheme is open for buyers of any new car, not merely small, efficient ones.

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The view from the UK's largest scrapyard in Newport, Gwent

But the car rental and leasing body, BVRLA, whose members supply 2.5 million company vehicles each year, said it was concerned about the impact on the second-hand market.

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"Unfortunately, our ministers have chosen to follow the German model, which has been widely criticised for decimating the country's used car industry," said BVRLA chief executive John Lewis, who predicted that companies would hold on to their cars longer rather than selling them cheap.

The BVRLA is concerned this could result in a fall in demand for new cars from companies that would cancel out the rise in demand from consumers.

Mr Lewis was also concerned that the initiative would do little to safeguard jobs in the UK motor manufacturing industry since most cars bought here are made abroad.

Spare parts suppliers and garages could also suffer from a fall in demand resulting from the mass-removal of old cars from the market.

"Currently the vast majority of cars are still on the road at 10 years old. Indeed at 14 years old, half are still on the road," said Professor Glaister of the RAC Foundation.

"The scrappage scheme announced today risks consigning a lot of perfectly good, and relatively clean, vehicles to the dustbin."