How should taxpayer-funded car scrapping schemes be designed?

United Kingdom – Following the introduction of scrappage schemes by a number of vehicle manufacturers, the UK government has launched a consultation process whose objective, among others, is to assess whether there is a role for further targeted schemes of this type. The consultation period runs until January 5 next year.

Stakeholders are being asked to comment on how any taxpayer-funded initiative ‘could be designed so that it complements existing schemes, represents value for money, is deliverable without introducing significant fraud risk, and is suitably targeted’.

The key objective for such measures would be ‘to support people and businesses impacted by local air quality measures’, the government states.

In the UK’s latest Budget statement, plans were confirmed for a £220 million (US$ 290 million) Clean Air Fund to provide support for the implementation of local air quality plans.

Under a scrappage scheme, the government explains, owners could be given an incentive to remove older, more polluting cars from the road. Potential rewards for scrappage could include: cash; a discount on a new, cleaner replacement vehicle; a discount on a second-hand replacement vehicle; or vouchers to switch to a different form of transport.

The UK government acknowledges that scrappage schemes ‘can be expensive’ and potentially ‘a poor use of taxpayer money’, with the main beneficiaries often being those people who were planning to purchase a new vehicle in any case.

Any scheme should avoid not only market disruption but also openness to fraud and abuse, it adds.