I detect a lot of support for my view that government should offer failing banks tough love, not large subsidies. Government should be the lender of last resort to stop untimely bankruptcy, but not the feather bedder of first choice. Government should not offer so much taxpayer cash as equity and easy terms loans so the banks do not have to wake up, shake up and sort themselves out quickly. Changing this policy could save us tens of billions. To those who say this is not public spending as counted by the government , I say “Oh yes it will be, and the bill is on you”.
The same should apply to the motor industry. We learnt on Saturday that Mr Mandelson is not giving up his battle against a reluctant Treasury to put in place a £2000 bounty on every old car more than 9 years old for someone buying a new vehicle. Mr Mandelson has been impressed by the German experience of such a scheme, and thinks the taxpayer could easily afford to help shift some of the surplus car stock out there in the car parks – and more importantly on the import wharves.
Mr Darling clearly worried about how affordable all this might prove. He may even have pointed out it has a different economic impact from Germany, where the majority of the new cars bought would be home built, to the UK where the overwhelming majority of new cars bought are imports.
A day later we read that Mr Mandelson appears to have won, and the Chancellor has come round to see the wisdom of such a scheme. Was he really working on this very point over the Easter week-end? Did he see the light on Saturday morning? Is it good practise to provide a running commenary like this on what could be in the budget, still more than a week away? All that this item can do is to put people off buying new cars until we know the contents of the budget. What happened to the idea that anyone in the know caught leaking the contents of a budget lost their job?
A scrappage scheme will be dressed up as a green measure, but this one draws the anger of the Greens. Apparently you can buy any kind of new car under it, however big and gas guzzling, and scrap any kind of old car, however small and little used. It should boost the prices of old wrecks to nearer the £2000 subsidy level and create a lively trade in old bangers. I hope if they do this they have the wit to demand that the subsidy attracting old vehicle has to be still in use and can be driven to the scrapheap under its own power with its own road tax.
A scheme like this is presumably for a limited time period only. It will bring forward some sales of new vehicles. How many of those will prove to be extra sales once the subsidy is removed is more difficult to tell.