More on car scrappage

Well, the government has, indeed, brought in a car scrappage scheme.

This is, as I have already argued, not good news. It could, however, be worse. First, because it seems that the scheme will be temporary, and only run until March 2010 - though it is, of course, possible that it will be extended. Second, of the £2000 discount the car buyer will get, only £1000 will come from the tax-payer. The car maker will have to provide the other £1000.

But it is bad. It doesn't even seem to be that environmentally friendly. After all, it will involve destruction of the vehicle, and there are many 10 year old vehicles that are in good working order. In other words, this scheme will lead to things that have value being destroyed, which is not economically wise (See the "broken window" fallacy of Bastiat and Hazlitt). And is it really a good use of the earth's limited resources to destroy an asset?

Environmentalists have also expressed doubts about the scheme. Phillip Selwood, chief executive of the Energy Saving Trust, has commented:

"The government's announcement on scrappage contradicts the carbon friendly announcements in the budget such as money for electric vehicles, CO2 related Company Car tax and the increase in fuel duty."

"This policy will increase car purchase regardless of CO2 emissions and the government has missed a significant opportunity by spending public money to incentivise any car upgrade when they could have incentivised the lowest carbon emission cars."

Now, I don't agree with all of that, but he is right when he says "This policy will increase car purchase regardless of CO2 emissions." Talk about old cars being dirty and polluting is simplistic. There are ten year old cars which run economically, and don't emit much carbon dioxide. And there are modern cars that are not economical and have high emissions. But under the scheme, you can trade in your old Citroen Saxo and get a new Mitsubishi Evo and be subsidised by the tax-payer.

And by the way, it is the tax-payer who pays. Curiously enough, the Telegraph wrote "The "scrappage" scheme, costing the Government £300 million, is intended not only to boost the ailing car industry, but to take some of the most environmentally unfriendly vehicles off the road."

Costing the government £300 million? Er, no. It doesn't cost the government. It costs us. Don't get the impression that the money will all be coming out of the pockets of politicians. It's your pocket it will come out of.