Budget 2009

'Deals for new wheels' welcome but motorists will pay at the pumps

22 April 2009

The AA today welcomed the Chancellor's plans for a vehicle scrappage scheme whereby the consumer will receive a benefit of £2,000 (£1000 government grant and £1000 from vehicle manufacturers) if they cash in vehicles registered before 31 July 1999, but attacked the unexpected plans to hike fuel duty by 2p per litre in September as a "body blow" and "fuel duty bombshell".

In effect, motorists will be paying for the scrappage scheme at the pumps.

AA comment

Edmund King, AA President, said:

"Drivers will be delighted that a scrappage scheme has been given the green light, however, motorists will be furious that he has landed a fuel duty bombshell to pay for it.

"The AA first raised the scrappage issue with Downing Street last September so we are pleased that a scheme has finally been given the go ahead.

Using latest vehicle licensing stats the AA estimates that around 10 million 10 year old cars may be eligible for the scrapping incentive.

"A £2000 incentive from Government and manufacturers will help the economy, environment and employment. Cleaner, greener and safer cars will replace some of the older gross polluters. The pot of £300 million could benefit 300,000 drivers. In our AA Populus Poll of 17,481 drivers, 28% said that they would consider taking advantage of a Government incentive scheme to scrap older cars if one was available.

White van man

"White Van Man" will also benefit from the 'deals for new wheels' scheme as it will cover vehicles up to 3.5 tons.

Edmund King continues, "Van mileage has grown much faster than car traffic over the last three years so there is a good case for replacing some of the dirtier vans with cleaner models. White Van Man is essential for the economy and is struggling in the current recession. A grant to bring newer shinier white vans onto the fleet would also help the environment, economy and employment.

"We are pleased that the scheme has been kept relatively simple without any CO2 restrictions on the type of vehicle to be purchased.

"If every ten year old vehicle were replaced with today's equivalent we would see a 30% increase in fuel efficiency and almost 30% decrease in CO2 emissions.

"Today's vehicles are almost twice as safe as ten year old vehicles as they are more likely to have EuroNCAP 5 star crash protection, ABS, Electronic Stability Control (ESC) and sophisticated air bag protection. The consumer will welcome the 'Darling's deals for new wheels' but will not welcome the way motorists will pay for it at the pumps."

£200 fuel duty bombshell for families

The average UK car consumes 1286 litres of petrol a year. The 2.12p duty and VAT increase in April added £27.26 to the cost of fuel, or £54.53 for a family with two cars.

With 2p in September, VAT back up 2.5% in December and duty up by inflation + 1p next April, this will add 4 x 2p within almost a year. This will pump up the family expenditure by around £200.

Price of petrol today is 95.62, rising by 2/10 of a penny a day – close to the pace of rise in the summer of last year.

Road tax

The budget also confirmed that the new road tax bands/rates announced in last November's pre-budget statement will come into effect from 1 May 2009.

Check road tax bands and rates here »

Scrappage background

New car sales increased 40% in March in Germany with a 2,500 Euro scheme whereas in the UK they fell 30%.

Almost all European countries except Poland now have a scrappage scheme in place.

In 1996, 21.2 million private cars produced 71.8 million tonnes of carbon dioxide, or 3.39 tonnes per car.

In 2006, 27.8 million private cars produced 68.7 million tonnes of carbon dioxide, or 2.47 tonnes per car.

That means the average UK car is producing 27% less CO2 than 10 years ago.

Read latest information about the scheme on direct.gov.uk »

  • Participation in the scrappage scheme by specific car manufacturers is voluntary
  • The funding will be made up of £300million from the government – a figure that will be matched by manufacturers participating in the scheme
  • The scheme is expected to be introduced in mid-May
  • The scheme will run until the start of March 2010, or until all of the government funding has been used
  • The discount will be offered to consumers buying a new vehicle to replace a vehicle which they have owned for more than twelve months
  • The registered keeper must have a UK address
  • Eligible vehicles must have been first registered in the UK on or before 31 July 1999 and have a current MOT test certificate
  • Scrappage savings apply to commercial vans (up to 3.5 tonnes) as well as cars
  • The scheme will be audited by the DVLA
  • Scrappage trade-ins can only be made against new cars

The fuel duty increase was not included in the pre-budget report and comes on top of an increase of over 2p on 1 April 2009.

Join the discussion in the AA zone


1 May 2009