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.
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.