For the majority of drivers, Chancellor Alistair Darling could be accused of giving with one hand and taking with the other in this year’s Budget.
According to his plans, vehicles that are aged over 10 years old and have been driven by motorists for more than 12 months will be worth £2,000 when traded in for a new car as part of the Government’s new scrappage scheme which takes much of its inspiration from a highly successful format in Germany.
This could be good news for around 300,000 drivers who would be eligible to benefit with the Government setting aside £300million which will be matched by the manufacturer. The state will provide £1,000 with car makers expected to supply the other half of the cash.
At the same time, however, Mr Darling has announced a two pence per litre increase on fuel duty which will apply from September this year. There will then be an additional one penny increase above the rate of inflation per year from 2010 to 2013.
The increase has been dubbed a “tax of the many” by Conservative Party leader David Cameron. He believes it penalises those who commute and drive their children to school.
For green car enthusiasts, the results of the Budget present something of a mixed bag. On one hand, the scrappage scheme should encourage drivers to take up more fuel efficient cars – although as the Environmental Transport Association pointed out earlier this week (see our article here), driving new and greener cars will not necessarily surpass the environmental impact of disposing of older vehicles.
Furthermore, the increase in fuel duty may be seen as a tax that encourages people to think about how they drive and to take a more eco-conscious approach to limit their mileage. However, many would have preferred to see more positive measures introduced to assist with the promotion of green cars and alternative fuels rather than hitting consumers in the pocket during tough economic times.
The Society of Motor Manufacturers and Traders (SMMT) welcomed the announcement regarding the scrappage scheme with chief executive Paul Everitt claiming it is “good news for consumers and will get people back into showrooms”.
There are encouraging signs for people struggling to buy new cars too. Mark Huggins, director of AA loans, says the average cost of a car loan is £8,000 and the scrappage scheme could provide the funding needed for a new vehicle by a quarter.
According to The AA if all UK vehicles on the road eligible for the scrappage scheme were to be replaced with new cars it would result in a decrease of almost 30 per cent of carbon emissions and a 30 per cent increase in fuel efficiency.
The scrappage scheme will begin next month and run until March next year or until funding is exhausted.
