The road to hell

Or a bright new future?

To a bright new future? To a bright new future?

Recently Lord Mandy opened his heart to us, we were told how Nulabour had ruined his career. Well there are many people who could say that right now, but naturally it's all eyes on Mandy.

But simpering adulation where simpering adulation is due, I think we can assume that's what he's after?

First there is the idea, hinted at in the Times article (link above), that this man had a glorious path mapped out for him. But then whoosh! Along came two Scots guys, one really slimy and the other just uggy and life went *gang aft agley soon after that, with poor Mandy hanging on for dear life as the Blair project sped down the road. How unlucky, how unfortunate!

We could then of course ask what glorious path would Mandy have trod had he not been dancing to the same tune as those two guys from Scotland? Outside of Nulabour the man is a good as unemployable, so what would he have been doing? . Also one can imagine Mandy thinks it was not his own foolish actions that caused him to resign, twice, but some extra-terrestrial force. And it could happen to any of us.

Mandy always sees himself as the big-shot with the big idea. We wrote about the tension reported between Alistair Darling, Brown and Mandy over the Budget. It was always bound to be so.

The idea that the Budget would not suffer from Brown's mania for micro-managing was soon dismissed and Mandelson is reported to have said something like; 'it's been ages since a good Budget'; not just as Business Secretary but going back to the dawn of Nulabour Mandy has never been able to mind his own business. So we got the scrappage scheme. Even in the run up to the Budget there was evidence of this being spun. A sort of 'is it on or is it it off'? As if to build up the theatrical tension. The idea here was to lead to a ' will he won't he' effect, finally being grateful when he did with a “thank you Lord Mandy” cry, in unison, from the population.

There is no doubt Mandy is of the opinion that everything he touches turns to gold. History shows otherwise, but we may assume he was looking forward to a positive response from his big idea. It's remarkable how few people have supported this Budget in general and how little comment there has been about scrappage. The scheme was, from the start, under the watchful eye of the experts who have monitored similar schemes in other countries over the years.

So what happens? Well put simply, obviously, people buy a car when they have the money to do so. Normally, this may be hastened either by their disposable income going up, or the cost of the car coming down. If the state intervenes then the moment at which the car is purchased is altered, forwards or back, according to the nature of the intervention. What has been observed is that over a long time period the sales of cars are not significantly improved by these schemes. In fact it would be fair to say that what is achieved is a phase change only and not volume.
Hell, so they sayHell, so they say
And the money? The sum involved is £2000, one half comes from the government and the other from the manufacturer (some may give more). In Germany the cost to the government from implementing a similar scheme has caused alarm. There is no way the take up can accurately be predicted, in Germany it seems to have been too successful. Little has been published by the UK government as to how much it thinks this might cost. So far the only controls appear to be: an end date in mid 2010, not very generous compliance criteria and a maximum number of cars, namely 300,000.

In other words the taxpayer may end up helping a few people buy a car while not being eligible themselves. In turn this will not help the car industry, but then most cars are imported. So what's the point?

Well the scheme makes it appear that the government is doing something. This is important, as Brown has bored the nation rigid by accusing his political opponents of doing the opposite. But if, as thought, one effect may be to depress second-hand car values in the future then the 'help' to the car industry will be negative. Especially as now the UK imports most of the cars sold here, as the retail side now employs more people than the remaining manufacturing plants.

And what of the retailers? Most main dealers would not welcome a reduction in the value of the second-hand stock on their forecourts and, as they will have to borrow the money, £1000, to 'help' the customer purchase the new car this might not be the scheme they really wanted. The reaction to it might be to offer scrappage on certain models only, particularly the models selling slowly. Typically these are the base models or models with an unusual specification or features, the problem being this is not always noticeable at first glance.

Thus highly specified cars with a high second- hand value but bodywork identical to cheaper models will seem to the casual shopper unattractive. One particular manufacturer has a model on the scappage scheme that is, overall, going to cost the customer £14,288. Research of main dealers offering the same model, all specifications, second- hand from their forecourt showed that 39% of the stock was below this price. This means 61% was above this price and so at risk to a massive loss of value, despite these being better cars.
A bargain! A bargain!
In truth this scrappage scheme is just fluff. It is hard to see it helping either LDV see HERE. Or Jaguar see HERE.

The loss of one or both of these factories has immense implications reaching far beyond the Midlands. This should have been the focus for government help.

But how? Direct help to manufactures is forbidden under EU rules but the scrappage scheme is not. Hence Germany, like other EU countries with a large car manufacturing base may see merit in it. The benefit to the UK is not on the same scale. But the UK cannot select its own path to help industry. An example, yet another, of the EU 'one size fits all' approach hindering rather than helping.


* The best laid schemes o' Mice an' Men,
Gang aft agley,
An' lea'e us nought but grief an' pain,
For promis'd joy!

extract from To a Mouse by Robert Burns