Car Scrappage scheme leaves Government open to huge financial exposure

Following the release of further details, please see comments below this blog.


Today, the Chancellor announced plans to compensate owners of vehicles over 10 years old who scrap those cars with £2000 toward the purchase of a new vehicle.  The number of cars over ten years old in the UK is about 7 million.  That has the potential to cost taxpayers £14 billion if everyone cashed in on the option.  If only 40 per cent of these car owners scrap their car, the cost would be a staggering £6.6 billion.


While we do not know the exact details of the scheme, i.e. how the scrapped cars are reused or the intended benefits to the industrial sector, the raw data suggests that the scheme could impose a huge burden on the British taxpayer.  Purchasing new cars will inevitably pump money into foreign car companies without guaranteeing any consumer support of British car parts manufacturing.  According to the Economist, only 14 per cent of cars purchased in the UK are made here, clearly indicating that the scheme will benefit foreign firms first.  This means that of the potential £14 billion in credits to new car buyers, there is a chance that as little as £2 billion would go towards the UK car industry.


Again, the full details of the scheme have not yet been released.  When the plan comes into action, the Chancellor may find that the scheme he intended to benefit the UK car industry has done little to help it.  Speculation aside, the potential £14 billion bill is cause for concern.

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