Economics Coursework - Demand&Supply

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Economics commentary number:   Standard Level #2

Title of extract:   Car industry begs for budget boost from Alistair Darling

Source of extract:   The Guardian (www.guardian.co.uk)

Date of extract:  10-03-09

Word Count:   748 words

Date the commentary was written: 05-05-09 

Section of the syllabus to which the commentary relates: Section 2

Candidate name: Falk Konstantin Luebbe

Candidate number:

Car industry begs for budget boost from Alistair Darling

07/04/09 – guardian.co.uk

Manufacturers and dealers want UK to follow Europe into scheme to give cash to drivers who scrap old cars to buy new

The government was facing renewed pleas to bail out Britain's ailing motor industry yesterday as figures showed sales of new cars had dropped by almost a third year on year.

Only 313,912 cars were registered in March - a 30.5% fall in sales from this time last year, figures from the Society of Motor Manufacturers and Traders (SMMT) showed, prompting fresh calls for the government to pay motorists to trade in their old cars for new ones.

The motor industry and lobby groups are hoping this month's budget will include a scrappage scheme, under which car owners are given a financial incentive of about £2,000 to swap their old vehicle for a new greener model.

Treasury officials have told the industry they are seriously considering including such a stimulus in the budget a fortnight tomorrow although ministers publicly insist that no decision has been taken.

A scrappage scheme in Germany - which offers car owners €2,500 (£2,263) for getting rid of any vehicle over nine years old - has attracted more than half a million buyers, with sales soaring 40% there in March.

The SMMT estimates that 280,000 Britons would take advantage of a similar programme over an 18-month period. This would cost around £560m, a figure the SMMT told the Guardian would involve a net cost of £150-160m. The rest of the money would come from the VAT charged on new cars.

But green groups counselled against such a "knee jerk" response and said the money could be better used to fund sustainable transport solutions. Some environmental organisations fear funds could be diverted from existing pots of money set aside by the government for investment in green technologies, such as the £400m earmarked in the pre-budget report for an "environmental transformation fund", which supports the development of new low-carbon energy and energy efficiency technologies in the UK.

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Pro-motoring lobbyists argue that if the government does not move quickly to boost the industry, further jobs would be lost and some manufacturers may transfer their business to other countries.

In Whitehall, the debate is still swirling over the wisdom of adopting a "scrappage" scheme. Lord Mandelson, the business secretary, said in February that his department was examining the experience of other countries, notably Germany, to see whether it would work in Britain and carmakers were asked to produce costed proposals, but no decision has been made.

David Cameron told the Guardian in January that the Tories were looking at ...

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