Business Secretary Lord Mandelson has given his biggest hint yet that he will introduce a scrappage scheme in order to stimulate the ailing UK car market.
Scrappage schemes have already been introduced successfully in Germany and France, where owners who trade-in cars of around nine-years-old receive a cash incentive of almost £2000 if they subsequently buy a new environmentally friendly car.
The car industry is lobbying hard for such a scheme to be introduced in the UK, and the Government has already asked car makers to supply costed proposals.
However, the Treasury has reservations about the incentive, fearing it could subsidise manufacturers based in Europe and not the UK.
Paul Everitt, the chief executive of the SMMT, said scrappage incentive schemes would help stimulate consumer demand.
'The production facilities in the UK and Europe will not begin to function properly until the market is moving satisfactorily,' he said.
'There is a significant amount of inventory out there. If we can use a scrappage mechanism to shift that inventory and begin to create a steady flow of demand, then production facilities can start to operate.'
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