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UK government under pressure to extend car scrappage scheme

As we indicated yesterday, the UK government is coming under increasing pressure to extend the £300 million car scrappage scheme which has seen a significant number of older cars scrapped in exchange for discounts on new vehicles. However, a 31.5% reduction in new car production in August has hit the UK car manufacturing sector very hard with fears of a return to the depressed situation experienced only a few months ago. So what can the government do?

While the scare stories may suggest that the U.K.'s car scrappage scheme could "run out of money" sometime next week, it is likely it will continue for some time to come. However, when the £300 million investment runs out the UK government will have a very difficult choice to make. But is the choice really so difficult?

It is worth remembering that not only would an extension of the UK car scrappage scheme reduce emissions in the UK and increase UK car production but it would also increase VAT receipts for the UK government from the sale of cars. This is a fact which up until only a few days ago appeared to have been overlooked by many and the figures seem to suggest an extension of the scheme would be a "win-win" situation.

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