Jeremy Bennett Editor Automotive Management AM Bauer Childish VAT Car Industry Puppet Mouthpiece Bias PR views new car Scrappage Scheme Dealers SMMT
Posted on | September 24, 2009 | Comments Off
Automotive Management editor Jeremy Bennett makes a massive childish gaffe, prompting calls from Ling Valentine that he studies basic maths.
AM, the UK motor trade management magazine claims: “The Government looks set to make at least £100 million profit out of the new vehicle scrappage scheme.”
Editor Bennett argues: “It will increase the pressure being put on ministers by manufacturers and trade associations to extend the scheme.” He goes on to say:
“Scrappage has fufilled its goal of boosting a significantly depressed new car and LCV market, leading to an estimated 20% boost in sales. However, the VAT the Government can take from a scrappage deal is greater than the £1,000 subsidy it gives to the owner of a 10-year-old car to buy a new model.
With VAT currently at 15%, the Treasury is in profit whenever a scrappage customer pays more than £7,600 for a car including tax. The average price of cars bought under the scheme has been £9,000.
This means the Treasury is on course to net £405m in VAT receipts, £105m more than is being invested in the scheme, if the Government ceiling of 300,000 deals is reached. The scheme looks likely to end in November.
According to the latest figures, more than 200,000 cars have been sold under the scheme and there is mounting pressure on the Government to extend the project. “To say the scheme has been successful since its introduction would be a mass understatement,” says Paul Williams, chairman of the National Franchised Dealers Association. “But with the retail economic climate still fragile and an increase in VAT scheduled for January 1, 2010, an extension of the initiative is vital.”
His call for an extension is shared by the Society of Motor Manufacturers and Traders and a number of manufacturers including Ford and Mazda.
The premise for the above argument is totally biased, childish, false and totally wrong. It shows how the “independent” trade press’s strings are pulled by the industry.
1) It is not “the Government’s” money, it is public money.
2) The calculations take no account of the VAT levy which would have been taken by the exchequer on car sales, if the scrappage scheme had not been in effect (ie on sales the scheme has substituted).
3) The VAT in total is substitutional as people only have a limited amount of cash to spend. That means, the public who have taken a car on scrappage scheme will not be spending that same money on OTHER STUFF. Other stuff is subject to VAT (and is not subsidised). The VAT “profit” on that “other stuff” people would have bought has been lost to the exchequer. #
In other words, if I have £10,000 to spend, I can spend it on a car (netting approx £1,500 of VAT for the exchequer) or on £10,000 of other lifestyle goods (netting approx £1,500 of VAT for the exchequer).
If the Government had to subsidise that £1,500 of VAT return (on the £10k car) with £1,000 of scrappage subsidy, the net return to the exchequer is only £500, not £1,500. How is that £1,000 of VAT “loss” a VAT “profit”???
So, “the Government” have not “made at least £100m profit” out of the new car scrappage scheme. The argument you make is childish and absurd. It it some industry PR??? Do some basic maths!
Otherwise, the Government should subsidise ALL VAT-able purchases in the UK and make £billions from a magical VAT “profit”. Subsidise everything by 14% and coin it in on the 1% VAT “profit”! £££billions! For the taxpayer, for “free”! A magic kingdom!
Your premise that “the Government” are getting more out than they are putting in is extremely naiive. You could singlehandedly cure the economic crisis with your grasp of economics.
In truth £millions of taxpayers money has flowed (mainly) to Korean economy, as they are the makers who have taken most advantage of the scrappage scheme.
Four-fifths (80%) of the cars registered under the Scrappage Scheme were neither built in the UK or had the engine built in the UK.
All this shows that you can’t believe anything “independent” journalists write.
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