The introduction of a car scrappage scheme - months after similar schemes have boosted flagging sales in Germany and other EU countries - was the Government’s sole concession to the ailing automotive industry in the Budget.
Announcing the £300 million temporary scheme (it will expire in March 2010) chancellor Alistair Darling said he wanted “to help the UK’s automotive industry, which has been one of the British success stories of the last decade”.
But he did not say that the Government’s contribution would have to be matched by manufacturers taking part in the scheme.
That lurked in the small print of the Treasury press release that accompanied the Budget speech.
The scrappage scheme, which comes in next month, will give owners of cars more than ten years old a discount of £2,000 when they trade in their bangers for new, cleaner and more fuel-efficient models.
A similar scheme in Germany helped boost new car sales by 40 per cent in March while the UK market fell by some 30 per cent in its most important month of the year.
The Society of Motor Manufacters and Traders (SMMT) estimates that a scrappage scheme has the potential to take more than 9.5 million old cars and nearly 994,000 vans off the road.
“This is good news for consumers and will get people back into showrooms, kick-starting demand in the market,” SMMT chief executive Paul Everitt said.
“The scheme recognises the economic value of the motor industry and we are determined to make it a success.”
Critics say the scrappage scheme will only boost sales imported volume cars, but the SMMT points out that 67 per cent of cars sold in the UK are built by manufacturers with operations here.
“Automotive is a global business and the UK will benefit from global demand and support,” the organisation says.
Peter Mathews , president of the Black Country Chamber of Commerce, said critics were missing the point.
“Nissan, Honda, Toyota, Ford, Jaguar Land Rover and other may all be foreign owned, but they still employ of hundreds of people making thousands of cars here in the JUK.
“These cars are built from parts made in the supply chain right here in the West Midlands so an incentive for people to buy new vehicle will mean confidence and money will filter right down the economy.”
Professor Baback Yazdani, dean of Nottingham Business School and a former car industry executive, said last night: “After months of falling sales the news of a scrappage scheme is a welcome measure.
“This scheme has proved to be successful in stimulating demand in Germany, France and Spain.”
Professor Yazdani, however, would have liked the scheme to have encompassed a wider segment of the market.
“The finer details of the scheme will be important and they should apply to all new cars, rather than a specific sector, to help the UK car industry equally,” he added.
Elsewhere, reaction to the Budget focussed more on what the chancellor is not doing for the automotive industry.
Jerry Blackett, chief executive of Birmingham Chamber of Commerce and Industry, said he was disappointed by the lack of a wage subsidy scheme for sector.
“The net result of this for employers is to make it harder to retain skilled staff, giving long-term implications for the industry,” he said.
“The car scrappage policy may help suppliers in the region and stimulate sales for car dealers, but given that 80 per cent of cars are imported to the UK, it will have a qualified impact.
“One of the serious failures of this Government has been hollow promises about help for the automotive industry announced by business secretary Lord Mandelson in January.
“We urgently need speedy implementation of flagship policies to stop even more businesses going to the wall.
“The Government can announce tax increases on alcohol and tobacco within hours, but takes months to provide help for one of the West Midlands’ more important industries.”