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The UK's car scrappage scheme may not work, according to the European Foundation

A comprehensive report from a European Union (EU) think-tank has indicated that Britains new £2,000 old car scrappage scheme may not work, because of high levels of UK personal indebtedness.

The paper Recent restructuring trends and policies in the automotive sector by the Dublin-based European Foundation for the Improvement of Living and Working Conditions has shown how Germanys scrappage scheme has been markedly successful in contrast to those in other EU member states, such as France and Italy.

A key reason, noted by the report was that Germans are big savers, compared with many other EU citizens, for instance personally-indebted Britons.

With their high rate of savings, German consumers are presumably much less dependent on increasingly scarce credit and thus have a greater propensity to avail of this opportunity, compared with many other European cash-strapped consumers, noted the report. The total of UK personal debt was £1.4 trillion this April, with the average household debt (including mortgages) being £58,370.

By contrast, Germans are less likely to invest in homes and more likely to buy expensive cars.

The report also noted that the German scheme was strongly marketed as an environmental promotion measure, in a country where green politics attracts a lot of support."

It also showed just how effective a successful scrappage scheme can be in a recession: Originally €1.5 billion was allocated to the [German] scheme, but it hugely exceeded expectations and by April 2009, 1.2 million applications had been made. An extra €3.5 billion is to be allocatedpermitting a take-up of two million cars.


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