MPs attack DTI on funding of car scrapping scheme

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New car prices will have to rise because the Government has failed to sort out who will pay for the scrapping of old vehicles when a new European-wide law comes into force next year, an influential cross-party group of MPs warned yesterday.

New car prices will have to rise because the Government has failed to sort out who will pay for the scrapping of old vehicles when a new European-wide law comes into force next year, an influential cross-party group of MPs warned yesterday.

In a highly critical report, the Commons Trade and Industry Select Committee said it was "alarmed" that ministers had not addressed the issue of funding, even through the new European Union directive takes effect in four months time.

"The question of who pays, and how much, is at the heart of any system of implementation of the directive," the MPs said. "We recommend that the Department of Trade and Industry address the issue of funding, and make public their views, as a matter of urgency."

The End of Life Vehicles Directive requires manufacturers to take responsibility for the disposing of all new cars from April, 2002 and all cars ever sold from 2007 onwards. Government estimates put the bill at £346m a year up to 2015 and then as much as £438m a year after that.

The select committee said it was likely that new car prices would have to rise because producers would ultimately pass the costs on to the original buyer. In Denmark, Sweden and the Netherlands, the last owner of the car or the vehicle dismantler bears the cost of disposal but can then claim the money back from a central fund financed through a tax on car sales or car insurance.

But in the UK, in the absence of clear guidance from the DTI, an argument is raging between the vehicle dismantling and scrapping industry and the car manufacturers over who should bear the costs. The car industry claims that some producers, such as MG Rover, could be rendered technically bankrupt by having to account for the liabilities on their balance sheets.

The select committee rejects a compromise proposal by the Society of Motor Manufacturers and Traders whereby the last owner would be responsible for delivering the vehicle to a dismantler or shredder. The dismantler would be able to choose whether or not to accept the car but the shredder would be obliged to take it unless they could showthey would suffer a loss, in which case the manufacturer would take back the car for free.

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