£2000 scrappage scheme - what a waste

I wrote this rant after getting my car MOT's but forgot to hit 'send'.

In true blogging style and as someone hateful of waste and misallocation of resources, I am compelled to rant about the government's £2000 car scrappage discount scheme.

When I was being driven to the Audi dealership yesterday to pick up my car, I had an interesting conversation with the driver about the government's car scrappage programme. The scheme gives new car buyers a £2000 scrappage discount for their old cars (must be at least ten year old). The driver, who enjoys restoring of old cars, told of how a classic MG was recently brought in to Audi to be scrapped for the discount and how he couldn't save it. It had to be scrapped to get the discount. The MG still had an MOT and it was even roadworthy. I thought this may be a special Audi rule, that they can't or don't want to get involved in old bangers, but this is not the case:

- The cars to be scrapped must have a current tax disc and current MOT certificate. In other words, by law the cars must be perfectly road worthy.
- In order to qualify for the discount (read 'government subsidy') the dealer has to provide a certificate of destruction. There is no saving these cars.

Many cars will be on their last legs but a good portion will be like the MG, perfectly good runabout for a few years longer. They will all be scrapped. To make matters worse, not only does this type of interference severely distort the market but the whopping £300 million size of the government's contribution to the scheme represent a woeful waste of taxpayer resources. Unfortunately, 'solutions' like the car scrappage discount scheme are easy to sell to the public as assistance provided to car buyers and the car industry, but the truth is that it is but a transfer of £5 from each person's wallet (approx UK population is 60 million) to the car buyer and car seller, supporting an inefficient transaction that will often involve scrapping perfectly good cars. The EU rules are that we can't just subsidise the car industry, and rightly so, but this is worse than a subsidy because it encourages inefficiency. In a heavy recession, prices are the best signals for an efficient allocation of resources, and the price mechanism eventually lifts us into a recovery. When prices are rigged like this and when £300m of spending power is misdirected in such a fashion, little good can come of it. I'd rather keep my £5 and spend it as I see fit. Simply giving it away to the first person I see would be more effective than the above scheme because it doesn't involve crushing perfectly working durable goods in the process!

Grrrr short-sighted, self-serving politicians!