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The government is currently considering a scheme for the Budget announcement tomorrow, which would involve incentivising drivers of cars older than nine years to scrap their vehicles in favour of buying a new model. The proposed procedure would take the form of a £2000 voucher to be presented at the dealership when purchasing the replacement car.

The argument for such a scheme is twofold; primarily it will boost the automobile industry’s sales figures, which have dipped 30% since March last year. Secondly, advocates suggest that there is the additional environmental benefit of taking less efficient cars off the road and replacing them with newer, ‘greener’ models. This is based on the technological trend towards lower emissions models, whereby the average new 2008 car emits 13% less CO2 than one made in 1997.

Whilst on the face of it, this seems an innovative proposition to counter two of the most pressing national and global issues – economic recession and climate change – it comes with multiple problems.

Firstly, its basic efficacy is dubious, particularly as its success rests upon proselytising people’s behaviours, yet there are few benefits to be had for an ordinary individual committing to the scheme. In practice, what is to prevent car dealers from simply retracting current offers, or raising prices to counter the discount to the consumer? And how long before these vouchers being unofficially touted on ‘the black market’? Also, as soon as this is announced, the pricing of second hand vehicles will become entirely distorted. On the one hand cars will depreciate massively upon reaching the nine year mark. Secondly, old bangers barely worth a few hundred pounds are suddenly ‘worth’ £2000, leaving a baseless valuing system.

Realistically, people who drive cars for ten years or more usually do so either because the vehicle in question is reliable, it has sentimental value, or they can’t afford any better. Thus the incentive is unlikely to persuade them into bearing the cost of the other £12000 of the average car price. On the other hand, those with the affluence to be able to buck the trend of thriftiness will be able to take full advantage. However there is no stipulation that the car in question must be environmentally friendly, and thus there is nothing to prevent them from buying any mid-range or high-consumption vehicles instead, undermining the ‘green’ argument.

Secondly, the scheme’s capacity to buoy the British industry is unknown. The current condition of production is such that there far more cars bought from international companies than British manufacturers. The only tangible benefits would lie with the factories owned by foreign manufacturers that employ British workers, but still, 70% of cars bought in this country are manufactured abroad. The problem is that the model is based primarily on the roaring success of such a scheme in Germany where car sales jumped 40% in a year. But the difference is that Germany actually has a number of globally successful manufacturers, notably Volkswagen, Porcshe, Mercedes-Benz, Audi, BMW and Europe’s Opel. Are there any similarly successful British manufacturers to benefit from such a scheme?

More worryingly, such a manipulation of the market and artificial inflation of demand will inevitably just drag forward future years’ demand, leaving a gaping hole in the industry in the near future. It seems to be yet another temporary quick-fix solution concurrent with the same old boom+bust mentality we’ve supposedly discarded.

Thirdly, there are a number of wider financial flaws. The feasibility of funding such a scheme is up for debate. As it is, the government’s coffers are being spread thinly with other financial stimulus packages, so is using public money to shore up another failing industry appropriate? Supporters however suggest that the income generated from VAT on new car sales will offset the cost to the government overall.

I can’t help thinking that once again the government is selective in the industries it chooses to bail out. All in all 800,000 people are employed in the British car sector, so it is clear that there are a vast number of jobs at stake. However, the commitment to a short-term solution means these people are likely to lose their jobs en masse in 2010, instead of through a managed reduction in workforce over the next few years.

Also from an ethical perspective, the government is unscrupulously trying to convince us that we all NEED new cars, and that currently owned vehicles are mostly inadequate. And what of people who do not plan on owning cars at all? They don’t benefit from the scheme but still have to subsidise it. Its basic prudence to suggest that cars should actually be built to last, perhaps even with the capacity for upgrading or retrofitting to adapt with times of limited resources.

Finally, and most aggravating, are the supposed environmental credentials this scheme pertains to. It completely overlooks the energy wasted in the manufacture of new vehicles, and in the scrapping of old ones. It would take years upon years of running a ‘low emissions’ model to balance those out. Crucially, as mentioned earlier, there is no proviso for forcing recipients into purchasing cars that meet any green specifications. It also seems to run entirely counter to the government’s other policies of encouraging people away from personal car usage and onto public transport through service improvements and taxation.

So what alternatives are there? If the government is adamant on trying to meet those two targets of boosting the industry and curtailing environmental damage, an RAC report suggests that taking older cars off the road:

The research shows that in the UK, to reduce emissions, the ideal age to incentivise car scrappage would be for 17-18 year old cars. Such a scheme would remove most of the last non-catalytic cars.

RAC Foundation

Alternatively, they could scrap tax on electric, hybrid and LPG cars, both stimulating industry to grow towards cleaner transport options, and helping reduce our impact on the environment. Or more awareness could be raised for ‘Green Driving’.

Most problematically, almost every other industry has reduced their prices to stay afloat, so why should automobiles be exempt? It seems that we are still relying on artificial quick-fix packages for industries that should accept their diminished demand. My suggestion? Perhaps the incentive should be gifted as a personal allowance, and ‘the markets’ should, rightly, be allowed to decide what to do with their own money. Then maybe we’ll see the true value of continuing unnecessary and wasteful vehicle production.

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4 thoughts on “A Load of Scrap?

  1. Pingback: A Load of Scrap? | Automobiles @ U Want 2 Know .Info

  2. After reading through your post I have to agree with virtually everything youve said.

    The reason that the scheme has been such a success in Germany is that Germany, unlike the UK actually has an automobile industry left, whereas all the great British brands have been sold off ages ago.

    Also, the main reason for the scheme has nothing to do with being ‘green.’ It is more-or-less a propaganda stunt to get the ailing, over-priced car market on its feet again, to generate income. If any governments were truly interested in being green, they would invest far more money into researching more efficient electro/hybrid vehicles, but that is a two-edged sword for them as they would loose alot of revenue which petroleum across the country generates.

    “…people who drive cars for ten years or more usually do so either because the vehicle in question is reliable, it has sentimental value, or they can’t afford any better”

    Agreed – even if I would trade my old Escort in for a 2 grand reduction, I would be unable to afford a new vehicle.

    Could you ellaborate your suggestion at the end with a bit more detail? Who exactly do you mean with ‘the markets’?

    To be honest I think the scheme isn’t bad, nicer to have it and have the option to use your old vehicle towards something greater – the problem is that the administration/money etc invested in it could perhaps have been put to better use on something else instead.

    • Thanks! The budget was announced today, and the scheme confirmed, check it out here. The changes from the original proposals are that only cars over 10 years old can be scrapped, and only those with UK-manufactured parts would qualify for purchase. And my suggestion is a more tongue-in-cheek one, where we (‘the markets’) just get given the cash into our bank accounts than being coerced into buying a new vehicle ;)

      Confusingly enough, in the same Budget, Darling announced a 2p increase in fuel duty. Combined with the Government’s multiple local schemes trying to get people onto public transport, I’m not entirely sure what the message is; buy more cars that I can’t afford to run, then scrap them when they get to 10 years, and in the interim use the bus whilst the car sits on my driveway?!

      Overall though, I’m not sure how many will take up the scheme, and therefore how much damage it can do. Also, I don’t think it’s too costly, given that Government would make back revenue on new sales, and is getting the industry to part-subsidise the grant. I think perhaps the reason this particular policy annoyed me so much is the structural economic/environmental attitudes behind it, and the Government’s apparent decision to make policy for policy’s sake. It’s, exactly as you say, a propaganda stunt to boost that ever elusive non-tangible ‘confidence’ that seems to make the world go round these days!

      • The problem with public transport is that alot of it sucks bottom – hard!
        Often it isn’t on time, and usually it isnt exactly cheap either (formerly-known as Central trains – I am looking at you!).
        Perhaps this is because alot of it is private, I do not know, however I do know for a fact that the trains in Germany are ridiculously precise and alot cheaper and until the UK can match a similar standard I just cannot see many people leaving the comfort of their own vehicles behind – even if it is to save the environment.

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