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The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Ian Lucas):
I congratulate the hon. Member for Mid-Bedfordshire (Nadine Dorries) on securing this timely debate. She made a stimulating contribution, giving many ideas concerning an interesting and, to date, successful scheme. Of course, the scrappage scheme was brought in because of a crisis in one of our most important industries. Manufacturing in general, and the automotive industry in particular, are of key importance to the United Kingdom’s economy. However, in recent months the automotive industry has been one
of the sectors worst affected by the current global economic downturn, so let me begin by reaffirming the Government’s absolute commitment to safeguarding the industry’s future and providing support in these difficult times.
The scheme was brought in at the request of the motor industry, which pressed hard for a scrappage scheme; it was in answer to representations that the scheme was introduced. The Government responded because the automotive industry employs nearly 1 million people in manufacturing and retailing, and it contributes £10 billion annually to the economy. It is a major contributor to research and development, and supports many highly skilled workers and a wide supply chain.
In the United Kingdom, the sector has been under great pressure in recent months, but the Government are determined to ensure that it remains one of the central pillars of British manufacturing. The vehicle scrappage scheme, which, as the hon. Lady said, was announced in the Budget and introduced on 18 May, is one of the mechanisms that we are using to achieve that objective and stimulate demand. I emphasise that it is one of a number of different methods. It has its own particular purpose and remit.
The decision to implement a scrappage scheme was taken after careful consideration of a wide range of evidence, including the lessons learned from other European schemes and evidence on the possible impact of such a scheme on other sectors of the economy. We have endeavoured to introduce the most effective scheme for the sector, while ensuring that we look after taxpayers’ interests properly and minimise the possible effects elsewhere in the economy.
The Government have ensured that advice about support on offer specifically tailored to the needs of the automotive sector has been distributed to the UK automotive supply chain through the manufacturers. In addition to that support, which is available today, there are a number of other sources of support. The new automotive innovation and growth team—a Government-facilitated, industry-led, independent group of experts—published a report on 6 May. It rightly emphasised the scale and continuing importance of the automotive industry to the United Kingdom’s manufacturing sector and wider economy. However, the NAIGT recognises that to secure that position for the long term the United Kingdom needs to become a leading global player in the development of low-carbon road transport. Its work is particularly timely in view of the announcement on 16 April of the Government’s vision to develop ultra low-carbon transport over the next five years.
Let me touch on the legitimate points that the hon. Lady raised about the green aspect of the scrappage scheme. It is especially important to observe that the scrappage scheme is a particular proposal for a particular time. It was introduced in response to demands made by the motor industry, which requested a stimulant in the market at a particular time. It is for that reason that the Government decided to introduce a scheme that was time-limited and budget-limited. It has been extremely successful to date. As the hon. Lady said, some 60,000 vehicles have been sold under the scheme; that is about 10,000 or 12,000 vehicles a week. That is a direct stimulant to the economy.
However, in order to observe the requirement for low-carbon transport, the Government have made it clear that the scheme will be time limited. Our calculations indicate that the scheme as a whole will be carbon-neutral, because there is evidence that newer cars use less fuel than older cars. Vehicles over 10 years old are being taken off the roads and replaced by vehicles new to the roads, which use lower amounts of fuel and emit less carbon into the atmosphere. They therefore make a positive green contribution.
It is important to realise that the scrappage scheme is only one of the schemes that the Government are introducing in the automotive sector. The automotive assistance programme is another device instigated by the Government to assist the industry. That has particular environmental aspects which require the manufacturers to take environmental steps in order to qualify for assistance. The Government recognise the importance of offering specific incentives in order to address the needs of the environment.
Let me deal with some of the specific issues raised by the hon. Lady. She referred to the compliance review. That is an audit of compliance with the scheme which will take place at the two-month point, as promised. It is not a review of the scheme. It looks at the way the scheme is working and how it is affecting the industry as a whole, to see whether the systems in place are working properly, not incorrectly or fraudulently.
Nadine Dorries: If the compliance review looks at the way the scheme is working and finds areas in which it is failing, would the review take account of proposals to improve the scheme not just to meet the present criteria, but to an enhanced level for the remaining 10 months?
Ian Lucas: Proper compliance with the scheme is important. We need to ensure that the taxpayer is protected. I am keen to see the proper operation of the scheme. All the evidence so far indicates that it is successful. With 60,000 vehicles sold under the scheme since 18 May, there is no evidence that it is unsuccessful. All the evidence indicates the contrary, which is why the Secretary of State spoke in the terms that he did. In the interests of the taxpayer, we have to ensure proper compliance with the rules of the scheme.
Dr. Ladyman: I understand what my hon. Friend is saying—that the compliance review must make sure that the rules are being followed, that nobody is cheating and that the right things are being done. I accept that the scheme has been a great success, but under different rules perhaps 70,000 cars would have been sold, instead of 60,000. Is there no mechanism whereby we can offer my hon. Friend constructive suggestions for making the scheme even more successful, so that he can consider changing the scheme?
Ian Lucas:
In addition to the compliance review, I am always ready to hear ideas for improvement of the scheme. I add the caveat that the scheme is time limited and budget limited. It has been very successful thus far, and if it were even more successful, the budget might be used up even more quickly than at present. It is a budget-limited scheme; I just want to make that absolutely
clear. Representations may be made to me on the budget in due course, but the scheme is either time limited or budget limited, and the indications to date are that the budget will be used up within the time frame that was set when the scheme was announced.
On the issue of whether purchasers have been able to afford a new car, early indications show that the people who are using the scheme include the elderly. One group who are most likely to take advantage of the scheme are those who—obviously—have had a car for more than 10 years and who directly respond to the scheme’s large incentives.
Of course, the incentives can amount to more than £2,000. I remember hearing on the first day that the scheme was introduced, I think, advertisements for offers of £3,000 and even more for particular vehicles. It appears that such offers have been very successful in encouraging cash buyers to purchase vehicles. The evidence does not indicate that elderly people are being deterred by the scrappage scheme; if anything, the initial evidence appears to be the contrary.
Before the scheme was introduced, the Government considered extending it to second-hand cars, but we excluded them because of the experience of other member states, which suggested that the inclusion of used cars would distort prices in the market. Having considered the situation, the Government decided that the available funds would be most effectively used in the new car market.
On the question of the car mountain and whether the number of vehicles going to scrappage will cause a difficulty in the scrappage market, I should say that consultation again took place and car scrappage operators gave assurances that there would be capacity in the market to handle the scrappage of all 300,000 cars. To date, we have had no indication that that is not the case, but I should be interested to hear representations from that area of the manufacturing market. There appears, however, to be overall satisfaction with the capacity of the scrappage system in the current market.
I actually have evidence myself of the scheme’s success, because, strangely this week, having been newly appointed as the Minister responsible for the scheme, I received a letter from my local Toyota garage, which sold me my car some years ago. My vehicle is just over 10 years old and therefore eligible for the scrappage scheme, and in the letter’s PS the garage told me:
“As demand has vastly exceeded our expectations—most Toyota new car models are now in short supply.”
That is evidence from Wrexham, and I hope that it is an indication that the scheme will be successful, and that its good start will continue.
I am very grateful to the hon. Lady for initiating the debate, and I am anxious to listen to observations that hon. Members from all parts of the House make about the scheme. Clearly, it affects not just the new car market, but the used car market. As I said earlier, the industry is important not only in the new car sector but in the used car sector and the retail sector. For all those reasons, it is very important that, at this very difficult time, we support the industry as much as we can.
10.59 pm
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