SCRAP: Expert backs us
April 1st, 2009 by Richard Aucock
INDUSTRY commentator Roy Kishor has backed Car Dealer Magazine’s calls for a new car scrappage scheme.
Writing for us, he said that the economic benefits of a system are clear.
It would boost the industry, cut the threat of job losses – and the VAT raised would offset the cost of setting up the scheme.
Therefore, it really is a win-win all round. Read on for Kishor’s EXCLUSIVE words below!
WILL the scrapping scheme help government to realise its economic objectives?
Critics may say that the proposed scrapping scheme is simply giving taxpayers’ money to the motor industry, and ask why one industry should be favoured over others.
Yet, the broader economic advantages such an incentive would have are considerable.
The scheme will stimulate demand, reduce stock and debt, as well as replace older cars with higher emissions with ones that are significantly less polluting.
It is worth pointing out that the projected costs of the scheme would be largely recovered. A £2000 scrapping incentive per vehicle would cost £1 billion for 500,000 vehicles. The VAT received by the Government on the sale of 500,000 vehicles at an average selling price of £10,000 would be £750 million, in other words a 75 percent recovery of the projected cost.
In addition, the increased sales activity that will be seen in dealerships will improve the profitability of these businesses and mitigate the risk of job losses, which can also be offset against the cost of the scrapping incentive. The associated benefits of stimulating demand for other parts of the motor industry, such as vehicle logistics, servicing and preparation, finance and insurance, are harder to quantify, but will certainly occur.
Government could make good practical use of this initiative to ensure that the publicly owned banks make affordable credit schemes available. This would demonstrate a clear response to previous criticism around the availability of credit and at realistic terms. With the BoE rate at 0.5 percent, it should be possible to offer finance at a cost of no more than 4 percent.
Government would be seen to be working with industry and the banks to achieve what it has declared many times – namely to stimulate demand and get the economy moving, and ensure that credit is available at affordable terms.
In short, a scrapping scheme will have economic effects that are felt beyond the motor industry and will certainly help government to realise its broader economic objectives.
Roy Kishor, Director, Permanence Ltd
SCRAP SCHEME NOW: A call to arms
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Tags: roy kishor, Scrappage