From The Times
April 11, 2009
Budget row over £2,000 payout to scrap a car
Suzy Jagger, Politics and Business Correspondent, and Francis Elliott,
Deputy Political Editor
The Treasury is blocking plans to give motorists £2,000 towards the cost
of a new car, The Times has learnt.
The decision is a huge blow to Lord Mandelson, the Business Secretary,
who has staked his reputation on rescuing the beleaguered car industry.
It has caused a deep rift between him and Alistair Darling, damaging
relations between two government departments at the centre of efforts to
lift Britain out of recession.
Lord Mandelson wants the Chancellor to make his scrappage scheme the
centrepiece of the Budget on April 22. However, Mr Darling and some
Treasury officials have expressed deep anxieties about the cost and
terms of the programme, which would encourage drivers to scrap old
vehicles for new, cleaner cars. It would also give the motor industry a
sales boost.
Under Lord Mandelson’s plan, motorists who owned cars more than nine
years old would scrap their vehicle and obtain a certificate. This could
be presented at any car dealership in Britain to claim a £2,000 discount
on the price of a new car or one less than a year old. The scheme is
based on one in Germany that has been hailed as a huge success.
The deadlock is a sign of growing differences between the Treasury and
Lord Mandelson’s Department for Business, Enterprise and Regulatory
Reform and is likely to reinforce the perception that Lord Mandelson is
a potentially divisive force within the Labour Party.
He has already expressed publicly his frustration at the speed with
which the Treasury is addressing the crisis facing the car industry. In
private, he has also let his increasing irritation with Mr Darling and
the Treasury be known. According to officials, the Business Secretary
has been heard openly to ask: “When was the last time we had a
successful Budget?”
The Society of Motor Manufacturers and Traders (SMMT), which represents
the motor industry, handed its scrappage proposal to Lord Mandelson in
February. There has been no formal response from the Treasury, which
must sign off the programme. Officials are understood to be concerned
that the scheme will prove expensive to implement and that drivers will
spend most of the money on imported vehicles.
The SMMT has blamed part of last month’s 30 per cent fall in new car
sales on uncertainty about scrappage. A spokesman said: “Motorists have
held off from buying a new car until they know whether the scheme is
going to happen. You wouldn’t buy a car today if you thought you could
get £2,000 off in a few weeks.”
March and September, when new car registrations are released, are
traditionally the busiest months for new car sales. It is estimated that
the British car industry supports about 800,000 jobs, including car
factory workers, mechanics and salesmen.
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