How Peter Mandelson saved the rest of the world

In the past I have described how the government's car scrappage scheme has been less generous than it may have seemed because the government insisted that VAT should be paid on the price before rebates. Now it seems, that for all its protestations of largesse, Stephanie Flanders reports that the UK car industry probably benefited more from the German car scrappage scheme than the UK scheme.

Earlier this week, the Minister for Everything-under-the-sun-and-then-some, announced an extension of the UK car scrappage scheme, to bring the total amount up to £400m, but as readers may be aware, of the £300m already spent, 80% has been spent on foreign cars, meaning that only £60m less dealer margins, so let's call it £50m has actually gone to the UK car industry. The other £250m of tax payer money has been mostly blown on overseas manufacturers.

The Germans on the other hand have spent €5 bn (let's call that £4.6bn) on its own scheme. On a per head of population basis that is about 8 times the amount of the UK scheme. Now Germany has a reputation for building large cars, but it seems that in these recessionary times users of the scrappage scheme have opted for smaller cars, and nearly two thirds of cars bought have been imported. For arguments sake, let us call that £3 billion of subsidies going to non-German cars.

Now I don't have the figures, but it is reasonable to assume that UK-based manufacturers such as Nissan, Toyota, Honda and Range Rover would have at least a 2% share of the German import market, or in other words sold more than £60m of cars through the scheme.

Still, that didn't stop Mandelson announcing yesterday that he was going to blow another £80m of tax payers' money on foreign jobs.