Car scrappage scheme saves 4,000 jobs - but for how long?

The Government hails the success of its scrappage scheme. But it'll be a while before we know for sure.

Last Updated: 06 Nov 2012

All good things must come to an end, as they say, and the same goes for the Government’s car scrappage scheme. Since the initiative began in May last year, it has helped turn a 30.5% annual decline in car sales into a 57.6% increase, apparently saving 4,000 jobs in the UK car industry in the process. Naturally the Government is cock-a-hoop, hailing the scheme as a huge success. But before they get too excited, they may want to take a look at the industry’s predictions for the year ahead – which show, predictably, a big fall in car sales. Now it’s quite possible that the scheme may have been a better bet than the alternative, i.e. doing nothing. But we suspect we won't really be able to judge its success for a year or two yet...

On the face of it, the car scrappage scheme does seem to have had the desired effect of propping up the ailing auto industry. In last year’s Budget, the Government put aside £400m for the scheme, which gave customers a £2,000 incentive (half from the state, half from the manufacturer) to replace cars that were over ten years old with new ones. Buyers were soon lining up to take advantage of the handout, and as many as 400,000 cars ended up leaving the forecourts – which, according to the Government, saved some 4,000 jobs. So it’s no wonder business secretary Lord Mandelson was feeling mightily pleased with himself today: ‘I am pleased to see scrappage has delivered the results we aimed for,’ he crowed.

But it’s not all good news. As the scheme comes to an end, the worry is that car sales will now plummet again. Did it actually create fresh demand, or did potential buyers just bring their purchases forward (if you were planning to buy a new car in 2010 or 2011, why would you not take advantage of that £2k incentive)? Either way, with consumer spending still tight, as the UK embarks on the long, slow and arduous road to recovery, it’s hard to see many people splashing out a new set of wheels this year. Indeed, the Society of Motor Manufacturers and Traders is already forecasting that sales will fall 10% in 2010 to 1.82m.

And what of the 4,000 jobs that were ‘saved’ through the scheme? Were they really saved in the long run, or have they just been rescued for the time being – only for the axe to fall a bit further down the line? We hope it’s the former, but time will tell.

In today's bulletin:

How to chop £70bn of costs from the UK's bloated public sector
Ofcom says Sky must charge rivals less for sport rights
Gartmore woes highlight danger of over-reliance on stars
Car scrappage scheme saves 4,000 jobs - but for how long?
Jaded jobseekers jiggered by limp handshakes

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