New fridges for old? Now everyone wants scrappage schemes
Now that it’s clear the government’s car scrappage scheme has stimulated sales, everyone wants to jump on the bandwagon with state subsidies for everything from fridges to washing machines. But will car sales stay high, or has the £2,000 hand-out simply pulled autumn sales into summer?
Motor companies and dealers knocked the scheme to give £2,000 to owners trading in 10-year-old cars for new vehicles when it was announced in April’s budget - just like retailers knocked the reduction of Vat last December. Now they are benefiting from it however, companies are pleading to extend the tax-breaks.
The British Retail Consortium has already asked for the Vat reduction to be kept beyond the end of 2009. And having seen the success of the car scrappage scheme the trade body now wants a similar subsidy to boost domestic appliance sales. Oh, and not content with Vat being cut from 17.5 to 15 per cent, the retailers wants that tax abolished altogether on white-goods. The plea has been submitted to chancellor Alistair Darling for inclusion in his autumn pre-budget report.
Cars have a registration plate and log book to say when they were new. You may not know how old your kitchen appliances are but the BRC says there are 15m fridges, freezers and washing machines dating from before 1999. It also reckons scrapping Vat would cost Darling £507m but there is no suggestion of manufacturers providing half the scrappage subsidy, as car makers do.
What the shopkeepers are not telling us is how much the move would benefit the sellers and makers of white-goods. For all the success of the car scrappage scheme, 80 per cent of vehicles bought in Britain are made abroad; the subsidy thus supports jobs in salesrooms rather than assembly plants. Most domestic appliances are imported too. A subsidy on restaurant meals would be better use of taxpayers’ money because most of the costs are UK-based workers.
Instead of economic reasons, the retailers are relying on ecology, claiming that new white-goods are greener than old ones. It has figures for saved carbon emissions instead of saved jobs. But if, as it claims, a new fridge can pay for itself by using less power, then the owner ought to be buying his own appliance instead of seeking a taxpayer subsidy.
And throwing out 10-year-old appliances is a waste of valuable resources, whatever the power saving on their unnecessary replacements.
But the retailers might want to watch what happens to motor sales. The scrappage scheme started in May and July’s sales showed the first increase since April 2008. The change of registration numbers in September usually boosts sales too, accounting for 17 per cent of annual purchases.
However, has the scrappage scheme permanently boosted sales or merely brought forward purchases that would have been made in the autumn or New Year? The government has provided just £300m to subsidise car sales, and while the scheme ends in February 2010 the money is likely to run out by October or November. What will happen to sales then?
