UK looking at car scrappage scheme

Britain said on Saturday it was still looking into the possibility of introducing a car scrappage scheme to boost the recession-hit vehicle industry, despite a report that the Treasury was blocking the idea.

Under the proposed scheme, cars more than nine years old could be scrapped in return for a £2,000 (€2,233) discount on a new car.

The Times newspaper reported on Saturday that there was a deep rift between Business Secretary Peter Mandelson and the finance minister, Alistair Darling, over the proposal.

The unsourced report said Lord Mandelson wanted Mr Darling to make a scrappage scheme the centrepiece of his April 22 budget but said Mr Darling was concerned about the cost and terms of the programme.

"Officials from both departments are continuing to look at the possibilities of such a scheme. However, no decision has yet been taken," a spokesman for Lord Mandelson's department said when asked for comment on the report.

The aim of the scheme would be to boost the car industry, whose sales have slumped due to the recession, while replacing older vehicles with more environmentally friendly cars.

A similar scheme in Germany helped lift new car registrations there by 40 per cent in March.

British car sales were down 30 per cent year-on-year in March.

The scrappage scheme is top of the wish list for Britain's struggling car industry which is confident it will get a boost in the budget.

British Prime Minister Gordon Brown has said the budget will contain environmental measures to aid recovery from recession, creating thousands of "green" jobs.