United Kingdom Creates $870 Million 'Cash For Clunkers' Program
By Greg Johnson April 22, 2009
Consider it an Earth Day celebration of sorts.
The United Kingdom today joined the growing number of countries that are offering cash or tax incentives to consumers who agree to scrap their old cars and trucks and buy new vehicles.
The "scrappage" plan announced Wednesday by the Chancellor of the Exchequer Alistair Darling follows the lead of such European countries as Germany, France and Italy, which earlier announced similar programs that are designed to rev up stalled automotive industry sales.
On this side of the pond, Congress is considering an Obama administration plan that's been dubbed "cash for clunkers."
Depending upon how such a program is structured, it could be effective when it comes to stimulating new vehicle sales and getting older, dirtier cars and trucks off of the road. But we maintain that participation should voluntary. The government shouldn't penalize car collectors, rebuilders, hobbyists and others who have solid reasons for owning old vehicles.
The U.S. proposal has won endorsements from the United Autoworkers and the country's Big Three automakers. Goldman Sachs estimates that cash-for-clunker proposals being considered by Congress could boost vehicle demand by 500,000 to 1.5 million during this year alone.
The U.K.'s auto industry certainly could use a push. The Society of Motor Manufacturers and Traders said that 313,912 new cars were registered in March in the U.K., a 30.5% drop from last year and the 11th consecutive monthly drop.
The Guardian reports that the $868 million program would award $2,896 (half of which would be paid for by the automobile industry) to vehicle owners who trade old vehicles for new ones. The newspaper adds that the program will be "markedly smaller" than the $2-billion German program that awards about $3,300 to consumers who trade in old vehicles.
German car sales have soared by 40% since the cash-for-clunkers program began earlier this year. The U.K.'s program will begin in May and continue until next March or the funding runs out.
The U.K.'s Society of Motor Manufacturers and Traders described the scrappage plan as "good news for consumers and will get people back into showrooms, kick-starting demand in the market."
Stephen Glaister, director of the RAC Foundation, a nonprofit that lobbies on behalf of U.K. motorists, faulted the program for not going far enough on the emissions front: "If [the scrappage program] does not encourage people to buy green vehicles it is a missed opportunity as far as the environment is concerned."
The UK scrappage program has a large pool to draw from. The SMMT estimates that there are 9.5 million cars and about one million light trucks that are at least 10 years of age.
Greg Johnson, Contributor
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