Drivers could be paid to trade in gas-guzzlers

Motorists could receive cash payments from the Government of up to £2,000 to trade in their old gas guzzler for a new eco-friendly model, The Daily Telegraph has learned.

By Rosa Prince, Political Correspondent Last Updated: 6:57AM GMT 06 Feb 2009

Ministers are actively considering a "scrappage" incentive scheme, similar to those already introduced in a number of European Union countries.
It would be introduced as an emergency measure during the recession, and would have the additional benefit of helping the industry to reach the Government's green targets.
In Germany, where drivers receive 2,500 euros (£2,325) to trade in cars older than nine years, hundreds of thousands of extra car sales are expected as a direct result of the scrappage scheme.
Motorists in France receive 1,000 euros (£930) to exchange their old vehicles for a new car, while a scrappage scheme was also recently introduced in Spain.
Lord Mandelson, the Business Secretary, is due to meet representatives from the Retail Motor Industry Federation, when he will be presented with their plans for a British version of the scheme.
Ministers are keen to examine how well the system operate in other countries before giving scrappage the go-ahead here, with officials at the Department for Business expressing some reservations about how many drivers in this country would benefit.
If those concerns can be overcome, then ministers are said to be keen to go ahead with the idea.
In a speech at the Confederation of British Industry last night[thurs], Lord Mandelson said: "Last week we committed to guarantees and loans that should help the UK's vital automotive sector draw down more than two billion pounds in investment ... in its vital transition to low carbon vehicles.
"That is effectively the same as underwriting the entire vehicle sector's research and development and capital expenditure for a year.
"We are working to find ways to help the finance arms of the car sector keep providing the credit that keeps the industry moving. I am also looking at other countries' experience with scrappage schemes."
He was speaking as figures released yesterday[thurs] showed that new car sales fell by 30 per cent in the last month alone, and as Ford announced 850 redundancies, with up to 500 job losses at the Transit plant near Southampton.
Figures released by the Society of Motor Manufacturers and Traders showed that last month's sales figures were the worst for a January since 1974, with just 112,087 new cars registered.
Paul Everitt, the society's chief exective, said: ``There is a clear need to stimulate demand for new vehicles in the UK market.
"A number of EU member states have launched scrappage incentive schemes, which have the benefit of boosting consumer confidence and delivering significant environmental improvements.
``The UK motor industry is urging the UK Government to introduce a similar scheme and help sustain jobs and businesses throughout the sector.''
Sue Robinson, director of the RMI National Franchised Dealers Association (NFDA), which will present detailed proposals for a scrappage scheme to the Department for Business next week, said: "A self-financing scrappage scheme could help revive car sales, and remove high-polluting cars from the road at the same time.
"The RMIF will shortly be presenting a paper to Government that puts the case for a self-financing scrappage scheme in the UK that mirrors those successfully adopted in other EU states."
The new car market is predicted to decline by 19.3 per cent in 2009 to 1.72 million, 410,000 fewer than last year and 685,000 down on 2007.
Howard Archer, chief economist at Global Insight said: ``Sharply deteriorating car sales provide further clear evidence that consumers are very reluctant to spend, particularly on major costly items."
Mark Prisk, the shadow business minister, added: "Last month's car sales confirm that the industry needs action not words. Ministers are still dragging their feet."