Fears that scrappage cash could run out early

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Motorists have placed more than 60,000 orders for new cars in the first month of the Government’s scrappage scheme, official figures showed yesterday, raising fears that public money for the initiative could run out.

Lord Mandelson, whose Department of Business published the figures, said the high take-up rate was good news for the British car industry, which saw sales collapse over the past year as the recession took hold. “These figures speak for themselves,” the peer said, a month after launching the scrappage scheme in mid-May. “Car manufacturers continue to report on the success of the scheme with rising sales. It’s the boost that the industry needs.”

The scheme offers owners of vehicles more than 10 years old £2,000 off the purchase price of a new car when they scrap their current one. A buyer must have been the registered keeper of the car due to be scrapped for at least 12 months. Half of the money comes from the Government, which means the scheme has cost more than £60m so far – a fifth of the £300m that ministers promised to spend when it was announced. A spokeswoman for the Society of Motor Manufacturers said that, while the car industry would be pleased with the enthusiastic response to the scheme so far, it was now possible that the £300m budget would run out before scrappage is due to end next February.

“We are going to need to review the scheme over the next couple of months and decide whether to approach the Government for more money,” the the spokeswoman added. “But these figures prove there are people out there who want to buy a car with the right incentive.”

As yet, no breakdown is available of what type of cars motorists have been using the scrappage scheme to purchase, though anecdotal evidence suggests that smaller vehicles, in particular, have seen an uplift in sales. The picture will become clearer over the next month or so, as the orders feed through into new registrations of vehicles. However, it is already clear that foreign car manufacturers will have seen the lion’s share of extra orders.