No scrappage cash as Darling profits

Tuesday, September 22, 2009

Treasury gets £100 million windfall
No more cash for scrappage scheme
Fears of collapse in car sales

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The scrappage scheme will earn at least £100 million for the Treasury – but there'll be no more cash for bangers.

Despite spending £300 million on the scheme, in many cases the VAT charged on scrappage cars will exceed the £1000 incentive paid to drivers to scrap their 10-year old vehicle – resulting in a profit for the Treasury.

With the rate of VAT currently set at 15%, the Treasury makes a profit on a scrappage sale when the customer pays more than £7600 (including tax) for a car. According to industry research, the average price for scrappage cars has been £9000.

No more cash
Despite the Treasury's windfall, Ministers are set to call time on the scrappage scheme when the current funding runs out.

The Society of Motor Manufacturers and Traders has called on the Government to extend the incentive, because of fears that ending it could send new car sales in to sharp decline.

A Government spokesman said: 'We recognise that there is growing pressure from across the sector for an extension of the Government's scrappage scheme.

'However, it was designed as a limited scheme to ensure its benefits are balanced with the needs of other areas of the car industry, such as the second-hand market, maintenance and repair businesses, and the wider economy.'