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Car scrappage scheme appears to be a win-win situation

There is no doubt that the UK government's car scrappage scheme has most certainly had a significant impact upon the sector, but those who believed that the £300 million investment by the government was in fact a waste of money may well need to review their thoughts. It has been revealed that a 20% increase in car sales, predominantly because of the car scrappage scheme, has led to a massive increase in VAT receipts to the government from the sector.

It is estimated the government will in due course receive around £405 million in VAT receipts which is just over £100 million more than has been invested in the car scrappage scheme so far. As a consequence, we may well see the current scheme extended although this will possibly be one of the UK government's election sweeteners early next year.

While on one side you can applaud the government for increasing car sales in these most difficult of times, there is also the fact that the £300 million invested in the scheme may well bring a "profit" for taxpayers. Those operating in the industry have been critical of the government's stance on taxpayer subsidies and when you bear in mind only £10 million of a £2.5 billion rescue package for the car industry has so far been lent out, maybe they do have a point.

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