THE scrappage scheme has been extended – with the government today putting in another £100m.
Business secretary Lord Mandelson, announcing the move, said: ‘The sector has been strongly affected by the recession, but the scrappage scheme has delivered a boost to manufacturers and the supply chain.
‘We have listened to the concerns of manufacturers and are increasing the funding of the scheme to £400m.
‘But we must make sure that the help we do offer is targeted, limited and proportionate.
‘This is not a blank cheque to the auto manufacturers but recognition that there is still a short term challenge to boost demand and confidence in the sector.’
So far 227,750 orders have been placed through the scheme. The increased funding enables the scheme to fund a further 100,000 vehicles, bringing total budget to £400 million and covering up to 400,000 vehicles in total.
The extension continues as a government and manufacturer partnership, with matched funding providing the £2,000 discount for each scrappage order.
Car owners will also get a boost, with the age qualification changed by 6 months to extend the benefits to cars registered on or before 29 Feb 2000 (V registration).
Alongside the increased funding the government will work with manufacturers to extend the benefits to van owners with vehicles over eight years old rather than the current 10 year requirement.
The scheme will come to an end in February 2010 or when the funding runs out, which ever is sooner.
SMMT chief executive Paul Everitt said: ‘Lord Mandelson’s announcement of an extension to the car scrappage scheme is an extremely important decision that will inspire consumer and business confidence.
‘It will help to stimulate demand, giving more consumers access to it, and create a bridge to a period when economic growth is strengthened and more sustainable.
‘The additional 100,000 vehicles should help to counter the likely negative impacts of a return to the higher rate of VAT and the introduction of first year VED rates.’
The news will delight car manufacturers and dealers – many of whom have been calling for an extension to the scheme for months.
Michael Cole, managing director of Kia Motors UK, said: ‘Kia welcomes this extension. With VAT expected to rise from the current rate of 15 per cent, an extension to the scrappage scheme will help to soften the blow to automotive business in the UK and help maintain momentum across the motor industry.
‘It will also keep footfall high in dealerships across the UK, hopefully protecting jobs and dealers.’
The extension comes just in the nick of time too with the original £300m pot set to run dry in mid-October.