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Government insists aid package is right option

The Government has denied reports ministers are warming to the idea of a scrappage scheme to boost new car sales and is instead insisting the industry buy into its £2.3 billion aid package.

A national newspaper claimed the Department for Business Enterprise and Regulatory Reform (BERR) is backing a plan to offer motorists up to £2,500 in taxpayer funded handouts for trading in their old car for a new or nearly-new model.

A number of EU countries operate similar schemes: in Germany payments of €2,500 for trading in cars more than nine years old was credited with a 21% surge in new car sales last month.

A BERR spokeswoman said: “Reports of our backing the scheme didn’t come from us. Our official line is that we are considering it. There is no timetable for when we will reach our decision.”

A Treasury insider put its position on scrappage more strongly. “We don’t believe it’s the right thing to do for various reasons,” he told AM. He wouldn’t go into the reasons.

The Government appears determined to see industry take-up of its £2.3 billion Automotive Assistance Scheme announced by Lord Mandelson in January.

Exchequer Secretary Angela Eagle said: “The Government understands that, in theory, a car scrappage scheme could help promote the purchase of lower-emitting cars – but there are questions about how effective this would be in practice.
“This is why Government has put forward measures focused on targeting the production and sale of low-emitting vehicles, by providing loan support to manufacturers, as well as a further £250 million for supporting ultra low-carbon vehicles.”

Business Minister Ian Pearson met manufacturer and supply chain representatives to explain what they need to do in order to apply to the Automotive Assistance Programme.

The meeting is understood to have included representatives from Jaguar Land Rover, Vauxhall, Ford, Honda, Bentley and Toyota as well as trade associations.

The Government’s £2.3 billion scheme to facilitate loans and loan guarantees has now had clearance from the European Commission and is “open for applications”, the BERR spokeswoman said.

It applies to the UK auto-motive sector and supply chain with a turnover of more than £25 million.

Speaking after the seminar, Pearson said: “We are determined that this scheme delivers support as quickly as possible. We have already received a number of expressions of interest, and we look forward to other companies coming forward shortly.

“The Automotive Assistance Programme is an opportunity for manufacturers and companies in the supply chain in the automotive sector to get ahead of the game and be leading global players in a low carbon economy.

“The Government has put the scheme in place and has now clearly set out the criteria against which applications will be judged. Now it’s up to companies to come forward with their bids.”

Retail Motor Industry Federation director Sue Robinson said: “It is imperative that the Government declares its intentions on the introduction of a vehicle scrappage scheme, which we believe will provide a boost to the sector. Other measures that could provide support for the industry also need to be considered.”

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