'Cash for bangers' reaches half-way point

20th Aug 2009 13:06

Just three months after its launch, the car 'scrappage' scheme announced by the government in April has already been hailed as a resounding success. More than 150,000 have participated in the programme, in which the government and the motor industry contribute £1,000 each towards the purchase of a new car to motorists who trade in their old ones. The government has made £300m available for the scheme, meaning that it is now more than half subscribed.'The government's scrappage scheme has been a real success up and down the country,' the Department for Business Innovation and Skills, headed by Peter Mandelson, proclaimed.Aside from the strong take-up of the scheme, the department pointed to figures from the Society of Motor Manufacturers, which reported earlier this month that new car registrations in July climbed by 2.4% to 157,149 units, the first monthly rise in 15 months.Car dealers have been trumpeting the scheme's success too. Trevor Finn, chief executive of the dealership Pendragon, who previously said the scheme did not go far enough, appears to have been converted.'I started off being sceptical about it but I was proven wrong,' he said Its rival Lookers has also hailed the scheme's success, having already taken 3,500 orders through the initiative.Once the £300m stumped up by the government has all gone - assuming this happens before the scheme expires next February - the government will have to decide if further measures are needed to keep the industry's engines ticking over. Car dealers have already started urging the government to extend the schemeFinn points out that the government gets back more than £1,000 from car sales in VAT.'It has brought footfall into the showroom and some people are finding that the cars they want to scrap are worth more than £2,000 - it's heads you win, tails you win,' he said.But is this scheme really a win-win situation?Not everyone is a fan of scrappage programmes, which were pioneered in Germany at the start of the year and which have also been introduced in the US.'I am not a proponent of the scrapping scheme that is applied in Germany,' said Daimler chief executive Dieter Zetsche, a rare dissenter from the car industry. 'Governments should focus on fixing the banking system, or offer loan guarantees, thus freeing up lending to car buyers and the corporate sector, rather than meddle directly with initiatives such as the German scrapping scheme.'In the UK too, it might be argued that the car scrappage scheme is a bandage that doesn't address the structural problems that first got the car industry into this mess. If Pendragon's Finn is really right and the government is giving car-buyers £1,000 only to take it back in the form of VAT, shouldn't the government be looking at the system of taxation generally, looking at other industries too, instead of coming up with a temporary solution?For now, the government, which must hold a general election by June 3, has more short-term considerations to deal with. Having hailed the success of the scheme, it must now decide whether it should extend 'cash for bangers', arguing that it was so successful its benefits should continue, or wrap it up, on the basis that its aims have already been achieved.