Scrappage & petrol: Petrol price hikes will put cash in No 11's tank

Motorists to get £2,000 for trading in 10-year-old cars for new vehicles
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Indy Politics

The Chancellor provoked outrage from drivers yesterday with the return of the fuel price "escalator".

Mr Darling announced plans for fuel duty to go up by 2p per litre in September and by another 1p per litre in real terms every year for the following three years, helping to balance the public books and save 2 million tonnes of carbon-dioxide emissions over five years.

But motorists' groups say that the measures – taken alongside the 2p rise that came into force at the start of this month, and the end of the VAT holiday in December – will push tax on fuel up by a whopping 6 per cent over the next 12 months, adding up to £200 to the average family's costs.

The fuel price escalator was introduced by the Conservatives in 1993, and by the time it was scrapped in 1999 had pushed tax up to account for over 80 per cent of the price at the pump. Fuel is currently around the 92p a litre mark, nearly 55p of which is duty.

Adrian Tink, at the RAC, said: "Today's announcement is another brutal blow for motorists who have already witnessed a decade of non-stop rises."

Not all Alistair Darling's motoring pledges are so unpopular. Yesterday's Budget also confirmed plans for a car scrappage incentive designed to boost new car sales (which are down by nearly a third this year). The government will put up £1,000, to be match-funded by the carmaker, for drivers replacing a car or small van more than 10 years old with a new alternative. The scheme will start in May and will cost the government £300m.

Car companies have been lobbying hard for measures to raise demand, and similar schemes already in place across Europe have had some significant results. In Germany, sales shot up 20 per cent following the introduction of a €2,500 (£2,240) incentive. Paul Everitt, at the Society of Motor Manufacturers and Traders, said: "The industry is primarily interested in getting consumers back into the showrooms. If you own one of the 10.5 million vehicles that qualify, then this will get your attention."

But experts say the 50:50 funding split undermines the plan, and smacks of hard bargaining between its supporters in the Department for Business and those holding the purse strings in the Treasury. "The vehicle makers are putting a brave face on it," Professor Garel Rhys, at Cardiff Business School, said. "This is the compromise the Treasury was prepared to accept, kicking and screaming." There is also likely to be little direct effect on the car makers. With only 14 per cent of the vehicles bought in the UK actually made here, the chief benefits will accrue to the rest of the sector – to the component makers, dealerships, service centres, and insurance companies that employ some 600,000 people across the country.

Case Study: 'Pay more and I might scrap it'

Ben Anderson, 29, Trainee forester

Mr Anderson owns a 38-year-old VW Beetle with 200,000 miles on the clock, valued at £3,000.

"I listened with interest to the car scrappage scheme because it almost tempted me. My car is a historical vehicle, so I don't pay tax on it, but then I am concerned about the environment and I recognise new cars are more fuel-efficient.

I worry that if I buy a new car its value might depreciate by £2,000 in a year anyway, so maybe I should just wait and buy it in a year's time. Ultimately, I only drive a few miles a day. On balance I think I'd rather keep my car than trade it in for £2,000, though if they raised the discount I might reconsider.

If the Chancellor is really serious about the environment then he'd have invested much more in it. The billions on offshore wind, energy efficiency schemes and low-carbon energy sound like publicity-seeking spin to me."

Loyal Labour supporter. Preferred Blair to Brown – prefers either to the Tories.

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