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Ian Pearson: I agree with the hon. Gentleman that there have been big problems with regard to the dealer network in the United Kingdom. In large part, those problems have been driven by the fact that people have not been buying new cars, which is why a lot of people who are working in the dealer network very much support what we are trying to do.
I want to return to the second-hand market.
John Hemming: I thank the Minister for allowing me to stick to the original point, about the efficiency of vehicles. Obviously JLR has also been working on making its vehicles more efficient, so the more modern Jaguars or Land Rovers are not excluded, if one is looking at a more efficient vehicle compared with one that is 10 years old. However, given that the system is cash-limited, why can we not try to do both things at once, which is to improve the efficiency of vehicles and to give the kick-start to the business so that we do not have everyone folding all over the place? What is the problem with trying to do two things at once?
Ian Pearson: We are trying to introduce the scheme as quickly as possible and it will be introduced next Monday; that is our clear intention. In response to the hon. Member for Hertford and Stortford, we have always said that the scheme will go on until March 2010, or until the £300 million has been exhausted. We will follow up that scheme very closely indeed.
John Hemming rose—
Ian Pearson: I have not even answered the hon. Gentleman’s question yet, but I will give way to him anyway.
John Hemming: I just want to add one little bit to that original question. Would the Minister agree to keep this particular issue under review, because we are not agreeing the words of the scheme here, so the scheme could vary as time goes by? Perhaps, therefore, the Minister could keep the issue under review.
Ian Pearson: We always keep issues under review. However, I think that it is clear that we have designed a scheme here that we believe will be effective in helping to see a boost in car sales in the United Kingdom. That would help the dealer network and some of the manufacturers in the United Kingdom directly. Also, because we import a lot of cars as well as exporting a lot of cars, foreign car manufacturers will be helped as a result of this scheme, just as we have been helped by the boost in demand in Germany, because our supply chain was assisted. All that work will continue and I believe that it will make a difference.
The hon. Member for Hertford and Stortford asked why we have not introduced the German scheme. We looked very carefully at the German scheme and to my mind it is a very expensive and generous scheme. When we came to consider what was the best use of taxpayers’ money, we thought it right that there should be a matching contribution from industry. He will be aware, from some of the newspaper comments that were made a few weeks ago, that there was some push-back from industry about that idea. I am pleased to say that the industry now completely accepts the scheme that is being introduced and actively wants to participate.
One has to make judgments. In our judgment, £1,000 matched by £1,000 from industry is a better scheme design than the €2,500 one that was introduced in Germany.
Mr. Prisk: The Minister is characteristically generous in giving way. Is he therefore saying that he would not expect the German scheme, which achieved a 40 per cent. increase in sales, to be similarly successful here? By what rate does he expect car sales to rise—20, 30 or 40 per cent.?
Ian Pearson: I would not want to put a figure on it. In my introductory remarks, I suggested that our scheme was likely to be closer to the French scheme than the German one. The hon. Gentleman will be aware that the French scheme is, for instance, less generous. He spoke about a €1,000 contribution. Obviously, there will be some price-demand effect. It is difficult at this time to provide a reliable prediction of what that might be, but we will know very soon. Let us wait and see what the actual results are.
Finally, I want to offer some comments on the second-hand market, which was raised by the hon. Member for Gravesham. As he will be aware, the second-hand market is holding up reasonably well at present, with residual values not far off what they had been previously. Demand for new cars has fallen dramatically in comparison. When we were designing the scheme, we actively sought to minimise the impact on the used car market. That is why the scheme is for brand-new cars only, as opposed to nearly new cars. We are all aware of schemes where one can buy a nearly new car, and that is why we have limited funding to what we believe is a reasonable limit. Again, that was a matter of judgment. The German scheme has cost billions of euros. We will spend £300 million on ours.
Mr. Holloway: I was talking to a friend who is a Mitsubishi dealer. He said that there is not really a feel for what will happen to the market in used cars that are under 10 years old. Those people who want a cheaper car—£1,500 or so—may find that the price has gone up because supply has gone down.
Ian Pearson: The hon. Gentleman’s friend may have a point. There is some uncertainty, and we will obviously monitor developments in the second-hand market closely as the scheme is introduced. However, I hope that he will be reassured by the fact that manufacturers are under an obligation to pay dealers quickly—within 10 working days—and that it will be the manufacturer who pays the £1,000. We want to ensure that the cash gets moving through the system as quickly as possible. That is an important part of the scheme.
Overall, I believe that we have designed a scheme that uses a prudent level of taxpayers’ money to meet a clearly defined problem: the fall-off in automotive sales in the United Kingdom. It will give a boost to the industry—not just to the manufacturers but to the dealer network and supply chain as well.
The experience from car scrappage schemes elsewhere is that there is a tendency for consumers to choose smaller, more fuel efficient vehicles. We will not be prescriptive in the UK and absolutely require them to do that, but that has certainly been the experience in Germany, which did not implement any environmental standards but has seen a big demand for vehicles such as the Ford Fiesta and the Opel Corsa. I have no reason to believe that there will not be a similar trend in the UK, so I believe that the concerns of my hon. Friend the Member for Morley and Rothwell about environmental standards are likely in practice to be misplaced.
I repeat that the scheme will give a big boost to the automotive industry. We want to get on with it and provide real help now for businesses that need it.
Question put and agreed to.
That the Committee has considered the motion, That this House authorises the Secretary of State to undertake to pay, by way of financial assistance under section 8 of the Industrial Development Act 1982, in respect of the Scrappage Scheme, sums exceeding £10 million and up to a cumulative total of £300 million to vehicle manufacturers for the assistance of the automotive industry.
7.14 pm
Committee rose.
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