Scrappage scheme was a success

IN response to James McGrath’s negative comments on scrappage (Letters, June 22), I would have to disagree with the points he raises to support his view:

* Scrappage was designed to collect extra tax from cars that would not otherwise have been purchased (people with 10 year old cars don’t generally buy a brand new one).

* It was therefore not a cost on the State but actually generated an additional €85m in badly needed revenue.

* In addition to protecting thousands of jobs, some 3,000 extra jobs have been generated in the motor industry as a result of the impact of scrappage, saving the State some €69m per annum.

* Environmentally the replacement of old cars with new cars under scrappage will have improved Irelands CO2 emissions by some 40,000 tons this year and each subsequent year.

Mr McGrath also suggests that scrappage has resulted in perfectly roadworthy cars being taken off the road and destroyed. As the scrappage incentive amounts to €1,250, if any 10-year-old car presented for scrappage is worth that amount, or more, because it is safe, sound and serviceable, then dealers tend to confirm to the customer that the car is not for scrapping or for a scrappage refund, but will be purchased by the garage for resale. No one in this industry would willingly take a good car off the road if it has a viable future.

Mr McGrath asks why is the motor industry singled out rather than hotels, clothing or other sectors. The answer is because the tax take for the Government in every new car purchase is extremely high. Like many situations in business the Government implemented a formula that usually succeeds, give people a reduction in the price (in this case the tax) and you will increase your income because more will be sold. That turned out to be the case and the State has gained by some €150m as a result. The State did not have any cost in implementing scrappage, it just took a little less per car in the tax it was collecting and as a result increased its income. It would not be easy for the State to produce such a self funding/income generating scheme for any other sector as it would end up costing money because the tax income that can be gained is not as high as from car sales.

The new Government has introduced a different, but equally innovative, incentive scheme for the hotel and restaurant sector, with a targeted reduction in the VAT rate, in the hope that it will help stimulate a similar increase in business, in employment and as a result in the eventual tax returns. This has to be applauded and there is no reason why it shouldn’t deliver as planned.

Any stimulus that the State can find to help generate activity in the economy, at no cost or where the cost can be covered by the return on the business generated, has to be welcomed. Although scrappage is now finished, we are nonetheless grateful for what we have had and we strongly support the Government’s strategy in relation to the tourist sector which has lost so many jobs and which badly needs the VAT stimulus recently provided.

Alan Nolan

Director General

The Society of the Irish Motor Industry

Dublin 2