Car scrappage scheme: 'cash for bangers' has difficult start

The Government's "cash for bangers" car scrappage scheme appeared to be in danger of unravelling after several manufacturers including Honda and Ford put deliveries on hold.

By David Millward, Transport Editor Published: 3:56PM BST 18 May 2009

Within hours of the Government's scrappage scheme coming into force, a number of disputes came to a head over the fine print of the scheme.
Many car makers believed that the industry's £1,000 contribution would be shared between the manufacturers themselves and the dealerships – which are independent companies.

But the Government has insisted that the carmakers should pay the £1,000 in full. There is also a separate dispute over how VAT should be calculated in scrappage transactions.
This followed a meeting between the industry and officials from the Department of Business Enterprise and Regulatory Reform (BERR) in London last week.
As a result Ford has delayed implementing the scheme, as has Honda. Fiat, meanwhile, said that it had "raised concerns with reference to the lack of clarity" in how scrappage will work.
Despite the problems, it has emerged that luxury car firms including Bentley, Rolls-Royce and Porsche have signed up to the scheme.
The luxury car makers have been hit hard by the recession especially with the collapse of the banking industry.
Several have been forced to cut production and jobs at their factories as they found they were not immune from the economic downturn.
As a result they have signed contracts to participate in the Government's scrappage scheme under which drivers get £2,000 off the price of a new car if they trade in a car which is at least 10 years old.
At Bentley, the woodworking shop in Crewe even started making customised furniture to keep busy.
"The scrappage scheme is designed to stimulate demand for cars and if a potential Bentley customer was hovering, it would be churlish of us not to support the scheme," said a company spokesman.
"Of course the Government would get an awful lot more back in VAT."
Even Aston Martin, which has not signed up to the scheme, admitted that it was still "open minded" over whether to participate.
Prime Minister Gordon Brown said the scheme, under which owners of cars and small vans more than 10 years old will get £2,000 off the price of a brand new vehicle when scrapping their old motor, will prove to be a great help to the British vehicle industry.
The Government and manufacturers are sharing the cost of the scheme, which will last until the end of February 2010 or until the £300 million Government funding runs out.
A spokesman for BERR said: "It was clear in the contracts that it was the manufacturers who should provide the £1,000 subsidy. We are confident that they will get the paperwork sorted out."