Car makers call for tax breaks to scrap cars

BY RUSSELL HOTTEN

Motor industry leaders yesterday called on the Government to consider tax breaks to get older cars off the road after new sales figures showed continued weakness in the retail market.

Sales in the UK increased slightly last month - only the second time since November - but that was due to the buoyant fleet sector. Figures from the Society of Motor Manufacturers showed a 1.72 per cent rise in sales in May to 152,658 vehicles. Fleet sales jumped 11 per cent, but private sales continued their decline, falling another 7.7 per cent. The total number of new cars sold in the first five months of the year is 816,792, a drop of 0.57 per cent on 1994.

Ernie Thompson, SMM director general, said: "The UK should consider offering scrappage grants to reduce the number of old vehicles on the road."

Tax breaks encouraging a trade of old cars for new ones have boosted sales in France and Spain, but there are doubts about whether the UK government would back such a scheme when UK car production is surging due to strong exports.

Ian Shepherdson, analyst at HSBC Greenwell, said the industry did not deserve to be helped. "A large part of the weakness of the car market is self-inflicted,'' he said. "In today's environment the way to higher sales is through price restraint, not asking the Government to help with grants."

The market is entering its traditionally quiet period ahead of the frenzy accompanying the issuing of new registration numbers in August. But the jump in fleet car sales casts doubt on industry hopes that this August will see a large buying spree due to a change in VAT rules.