Business Secretary Peter Mandelson revealed that 38 manufacturers had signed up to take part in the £300 million initiative, which is aiming to provide a much-needed kick-start to the ailing automotive industry. 

Under the scheme, which was first announced by Chancellor Alistair Darling during his Budget speech and will run until next March, motorists who scrap vehicles that are more than 10 years old will get a £1,000 grant from the Government towards buying a new model, with car dealers providing a similar amount. 

Launching the scrappage subsidy, Lord Mandelson said: 

“I am delighted by the response of the motor industry. This means more choice for consumers and a boost for British brands.  

“The scheme has been met with a flood of enquiries from customers. It will provide a boost to the industry and kick-start sales.”  

Similar schemes have already been introduced across many European countries. In Germany, for example, a scrappage incentive has been credited as a major factor in sales of new cars rising by 40% during March.

David Frost, director general of the British Chambers of Commerce, has welcomed the move.

He said:

“A scrappage scheme is exactly the sort of policy we need during a recession. It will boost demand and help the environment at the same time.

“The automotive industry will be central to driving our economy out of recession, and it employs thousands of highly skilled people producing efficient vehicles for the global market. It would be a tragedy to lose these precious skills during this downturn.”

However, environmental groups have criticised the plans, claiming that subsidies should only be used to encourage drivers to buy smaller, less polluting vehicles. 

Andy Atkins, executive director of Friends of the Earth, argued the Government's proposals were a "lost opportunity".

He explained:

"A well-designed scheme could have played a limited role in cutting emissions from our roads, but - unlike some other countries - the UK scheme doesn't prevent motorists part-exchanging an old small model for a brand new gas-guzzler."

Green Party spokesman Peter Cranie had previously said the scheme was “fundamentally flawed”:  

“Scrappage is not going to help the environment. What has happened in Germany is that people trade up to get bigger cars, so it doesn't reduce emissions.”  

Earlier this year, Greenpeace sent a letter to the European Union’s Industry Commissioner Guenter Verheugen, warning that scrappage schemes did nothing more than create a “false economy”.

Source: BERR, 18/05/2009