Business Secretary Lord Mandelson and Alistair Darling, the Chancellor, were still locked in talks last night over proposals for a long-awaited “scrappage” scheme to boost the car industry.
With the Chancellor due to announce more large increases in borrowing in today’s Budget, negotiations were continuing over the key measure which could kick-start demand in the new vehicle market.
Manufacturers have been calling for the measure, based on a similar scheme already operating in Germany. The Society of Motor Manufacturers and Traders said the Budget “may prove a decisive moment for the automotive sector”.
But Government sources said negotiations were continuing over whether a scrappage scheme could be included in today’s statement.
Business Secretary Lord Mandelson has been pushing for the scheme but the Treasury was initially reluctant to endorse it, and remains concerned that it would benefit overseas manufacturers who export to the UK.
Expected spending announcements include a £1billion housing package, to help the construction industry and allow homes to be bought and sold.
The Chancellor will also extend the extend the stamp duty “holiday”.
In September 2008 Mr Darling said the one per cent stamp duty would not be paid on any property purchased for less than £175,000, but the exemption was due to end in September this year.
Instead, he will announce it has been extended to December.
The Chancellor will announce £500million to create jobs in environmental technology, and funding for businesses investing in low carbon products. There will also be £100million to pay for better insulation of council housing, along with £200million to promote wind and wave power.
He will also name the first official “city regions”, where local councils will have more autonomy and the ability to raise extra funding. A partnership of councils in Birmingham, the Black Country and Coventry is in the running.
However, the Budget is likely to be dominated by the state of the economy, with Mr Darling expected to admit it will take nearly ten years to get the public finances back in shape.
He will unveil a large increase in borrowing, and warn that it will take longer than expected to end the budget deficit.
And he will admit that taxpayers are likely to face losses of £60billion from money used to bail out the banks.
Mr Darling will announce efficiency savings to trim £15billion off Whitehall’s planned spending growth, spread over four years. He will also to predict that the economy could shrink by between 3 per cent and 3.5 per cent, which would be the worst recession since 1945.
Six mortgage lenders announced yesterday they are taking part in a new Government scheme to help people who lose their jobs stay in their homes.
Gordon Brown insisted there was evidence that action taken by the Government to tackle the recession was having an effect as he met Cabinet colleagues.