UK car-scrapping incentive expected this month

Darling: Budget due on 22 April

The UK is expected to follow the lead of many other European states and launch a scheme to encourage consumers to scrap old cars and buy new replacements.

Chancellor Alistair Darling could announce a so-called "car scrappage" package as part of his Budget on 22 April. The scheme could provide as much as £2,000 for consumers who surrender an old car to be scrapped when buying a new model.

The introduction of the scheme is by no means a certainty, however. The chancellor has reportedly asked the Department for Business, Enterprise and Regulatory Reform to undertake a thorough costing of the proposals before making any formal announcement.

Car scrappage schemes have already been adopted in some other European countries with some success. In Germany and France, consumers are being offered €2,500 to scrap an old car as long as the new replacement meets particular environmental requirements. The UK Society of Motor Manufacturers and Traders (SMMT) is urging the UK to follow suit to help domestic car manufacturers, suppliers and traders compete with those in the rest of Europe.

"There is a real need to ease consumer credit and attract customers back into showrooms and we urge government to move quickly and implement industry proposals," said SMMT chief executive Paul Everitt. "Across the EU, member states have introduced scrappage incentive schemes which have already proved successful in their ability to stimulate demand and minimise the impact on manufacturing and retail jobs. It is vital the UK government reflects the action and pace of support given across Europe to ensure the UK remains globally competitive."

According to the SMMT, new registrations fell 30.5 percent in March to around 314,000 cars and any real recovery in the industry depends on the chancellor announcing "market incentives" in his Budget.

"March new car registrations are a barometer of confidence in the economy, from businesses and consumers alike. The fall in the market shows that government needs to do more to boost confidence," said Everitt. "The UK is the only major European market not to implement a scheme."

Supporters of the scappage plan argue that it will have a net benefit on overall emissions, since new cars are more fuel efficient than those produced a decade ago, and the carbon debt of manufacture can be dwarfed by fuel use during a car's lifetime. Most green groups oppose the schemes, however.

According to Reuters, Greenpeace has sent a letter to EU Industry Commissioner Guenter Verheugen arguing that scrappage schemes are a false economy and won't solve the real problem of overcapacity in the automotive industry.

"These schemes are designed to encourage consumers to buy cars now, rather than later. But all they are likely to achieve is to cushion the sales slump today, triggering an even greater crash in coming years," Greenpeace said.

Greenpeace is also concerned that car makers may simply be using the "cash for clunkers" scheme to sell off current, less efficient models ahead of tighter emissions laws later this year.

Meanwhile Friends of the Earth (FOE) argued that support for the car industry must come with conditions around sustainability. "Any government support for the car industry must be on the condition that it speeds up the manufacture and purchase of greener cars," said FOE transport campaigner Tony Bosworth.

FOE has also argued that the UK government should be focused on getting consumers out of their cars and into more sustainable forms of transport. " Almost a quarter of car journeys are under two miles - the government must do more to encourage people out of their cars and switch to walking, cycling, or onto first-rate public transport," the group said in a recent statement.

For more on this issue visit the BusinessGreen.com blog.