Scrappage scheme paid by fuel duty bombshell
The AA has welcomed the Chancellor’s plans for a vehicle scrappage scheme whereby the consumer will receive a benefit of £2,000 (£1000 government grant and £1000 from vehicle manufacturers) if they cash in vehicles registered before 31 July 1999, but attacked the unexpected plans to hike fuel duty by 2p per litre in September as a “body blow” and “fuel duty bombshell”. In effect, motorists will be paying for the scrappage scheme at the pumps.
The scrappage scheme, due to start in May 2009, will see government offer a £1,000 incentive to be matched by participating vehicle manufacturers when scrapping a taxed, insured and MOT’d car or van over ten years old which they have owned for at least one year.
Commenting, Edmund King, AA President, said: "Drivers will be delighted that a scrappage scheme has been given the green light, however, motorists will be furious that he has landed a fuel duty bombshell to pay for it. The AA first raised the scrappage issue with Downing Street last September so are pleased that a scheme has finally been given the go ahead."
"A £2,000 incentive from Government and manufacturers will help the economy, environment and employment. Cleaner, greener and safer cars will replace some of the older gross polluters. The pot of £300 million could benefit 300,000 drivers. In our AA/Populus poll of 17,481 drivers, 28% said that they would consider taking advantage of a Government incentive scheme to scrap older cars if one was available. White Van Man will also benefit from the cash for clunkers scheme as it will cover vehicles up to 3.5 tons."
Van mileage has grown much faster than car traffic over the last three years so there is a good case for replacing some of the dirtier vans with cleaner models. White Van Man is essential for the economy and is struggling in the current recession. A grant to bring newer shinier white vans onto the fleet would also help the environment, economy and employment.
“We are pleased that the scheme has been kept relatively simple without any CO2 restrictions on the type of vehicle to be purchased. If every ten year old vehicle were replaced with today’s equivalent we would see a 30% increase in fuel efficiency and almost 30% decrease in CO2 emissions. Today’s vehicles are almost twice as safe as ten year old vehicles as they are more likely to have EuroNCAP 5 star crash protection, ABS, Electronic Stability Control (ESC) and sophisticated air bag protection. The consumer will welcome the ‘Darling’s deals for new wheels’ but will not welcome the way motorists will pay for it at the pumps. “.
The average UK car consumes 1286 litres of petrol a year. The 2.12p duty and VAT increase in April added £27.26 to the cost of fuel, or £54.53 for a family with two cars. With 2p in September, VAT back up 2.5% in December and duty up by inflation + 1p next April, this will add 4 x 2p within almost a year. This will pump up the family expenditure by around £200.
Price of petrol today is 95.62, rising by 2/10 of a penny a day – close to the pace of rise in the summer of last year.
New car sales increased 40% in March in Germany with a 2,500 Euro scheme whereas in the UK they fell 30%. Almost all European countries except Poland now have a scrappage scheme in place.
In 1996, 21.2 million private cars produced 71.8 million tonnes of carbon dioxide, or 3.39 tonnes per car. In 2006, 27.8 million private cars produced 68.7 million tonnes of carbon dioxide, or 2.47 tonnes per car. That means the average UK car is producing 27% less CO2 than 10 years ago.
The fuel duty increase was not included in the pre-budget report and comes on top of an increase of over 2p on 1 April 2009.
The Society of Motor Manufacturers and Traders (SMMT) has laso welcomed government’s introduction of a scrappage incentive scheme to kick-start demand in the car and van market.
Commenting on the announcement made within chancellor Darling’s Budget speech, SMMT chief executive Paul Everitt said, “This is good news for consumers and will get people back into showrooms, kick-starting demand in the market. The scheme recognises the economic value of the motor industry and we are determined to make it a success. There is clearly a great deal to do and we look forward to discussing the finer detail of the proposal with government in the coming days.”
Neville Briggs, Managing Director, Pinewood added: "If the new scrappage scheme proves as successful in boosting sales in the UK as similar initiatives have in other countries, then dealers are likely see a sudden swing in the emphasis of their business away from used car sales and aftersales back to new car sales. They have a very short time to ensure that they have the best possible sales and marketing initiatives in place in order to maximise the opportunities that the scrappage scheme will present."
He added: "We will be working closely with our DMS customers to ensure that the best possible use is made of the data they hold in order to prospect thoroughly and successfully and win their share of the expected sales pick-up. This is a time when dealer technology will be able, more than ever, to make a real difference to the bottom line."
Paul Williams, RMIF Chairman, said: "The introduction of a vehicle scrappage scheme for cars aged ten years and over as announced in the Budget will boost the new car market, encourage consumers to get back into car showrooms, and reduce the likelihood of employee downsizing in this sector."
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