Ian Lang, President of the Board of Trade, yesterday disappointed the motor industry by rejecting calls for tax incentives to boost the sale of new cars.
Leading executives had asked the Government to introduce a so-called scrappage subsidy, to encourage motorists to trade in old cars for new ones, in next month's Budget. But Mr Lang, whose Motor Show press conference was abandoned in disarray after protests by anti-car demonstrators, said: "There is no intention to start a scrappage subsidy."
His comment is the clearest statement yet of the Government's position after the Society of Motor Manufacturers and Traders submitted proposals for a subsidy to the Chancellor last month. One car executive said yesterday: "If Mr Lang can't see the sense of a subsidy, then no one in the Government is going to push it through."
A scrappage tax in France has boosted sales by an estimated 240,000 and has also been successful in Spain. Ian McAllister, chairman of Ford UK, has been a strong supporter of a subsidy for scrapping cars aged 10 years or older, saying this week that it would improve the environment if more old cars were taken off the road.
The RAC estimates that the number of cars on the road that were more than 10 years old rose to 7.4 million last year from 4.9 million in 1986 because the recession had suppressed consumer demand. Richard Parham, managing director of Peugeot UK, has proposed a graded subsidy of between pounds 500 and pounds 800 depending on the size of new car bought.
Not everyone in the industry was concerned by Mr Mr Lang's comments. Charlie Golden, managing director of Vauxhall, believes a subsidy would be a short-term gimmick. And John Towers, chief executive of Rover, said: "If the industry sells on just one point of advantage - price - then we are wasting our time."
Meanwhile Alex Trotman, chairman and chief executive of Ford, warned of the threat posed by South Korean car manufacturers. With companies like Daewoo making significant inroads in Europe, Mr Trotman described the country as the new Japan.
He said that 100,000 cars were exported from South Korea to Europe last year, but the target was to reach 500,000 by the end of the decade. This new "hyper competition" would be "far tougher than anything anyone has experienced in the past, here in Britain, in the US, or wherever."