Hidden agenda behind scrappage

Sep 18 2009 Ian Johnson

Hidden agenda behind scrappage

IT'S little wonder the National Franchised Dealers Association is up in arms about Lord Mandelson's rejection of the possibility of continuing the vehicle scrappage scheme without even the courtesy of a meeting with the industry.

You have to understand that tremendous boost the scrappage scheme has given the new car market has been a ray of sunshine in a gloomy outlook for the industry.

Latest Government figures show that 195,009 cars and light vans have been ordered through the scrappage scheme since it went live in May. But with sales continuing to grow, the Government's £300million funding for the scheme is expected to be exhausted before the end of the year.

According to the Association, continuation of the scheme should not cost the taxpayer anything. Because scrappage sales are purely incremental, the VAT earned on them has made it a self funded scheme. Indeed, if VAT were to increase the Government could be in receipt of a surplus.'

With the retail economic climate still fragile and an increase in VAT scheduled for January 1 2010, an extension of the initiative has to be vital for the industry.

The scrappage scheme has played a part in putting the market where it should be.

But we are seeing a number of knock-on effects at the moment from the sad state of the market before the scheme came into play. One such is the recent rise in used car prices dictated by the shortage of vehicles coming through the system because of the pre-scrappage new car sales slump.

But does this suggest a side-agenda by the Government? Wipe out the bangers, see used car prices inflate and keep the poorer motorist off the road? It certainly makes you think.