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UK still mulling car scrappage scheme

LONDON (Reuters) - Britain said on Saturday it was still looking into the possibility of introducing a car scrappage scheme to boost the recession-hit vehicle industry, despite a report that the Treasury was blocking the idea.

Business Secretary Peter Mandelson sits in the new Qazana car during a visit to the Nissan factory in Washington, northern England March 20, 2009. REUTERS/Nigel Roddis

Under the proposed scheme, cars more than nine years old could be scrapped in return for a 2,000 pound discount on a new car.

The Times reported on Saturday that there was a deep rift between Business Secretary Peter Mandelson and the finance minister, Alistair Darling, over the proposal.

The unsourced report said Mandelson wanted Darling to make a scrappage scheme the centrepiece of his April 22 budget but said Darling was concerned about the cost and terms of the programme.

“Officials from both departments are continuing to look at the possibilities of such a scheme. However, no decision has yet been taken,” a spokesman for Mandelson’s department said when asked for comment on the report.

A Treasury spokesman denied any rift between the ministers and said: “This is one of a number of measures the Chancellor (Darling) will consider in the run-up to the budget.”

The aim of the scheme would be to boost the car industry, whose sales have slumped due to the recession, while replacing older vehicles with more environmentally friendly cars.

A similar scheme in Germany helped lift new car registrations there by 40 percent in March.

British car sales were down 30 percent year-on-year in March.

The scrappage scheme is top of the wish list for Britain’s struggling car industry which is confident it will get a boost in the budget.

“At the moment the scrappage (measure) is getting more purchase ... The Chancellor (Darling) has been keen not to have announcements made outside of the budget,” the chief executive of the Society of Motor Manufacturers and Traders (SMMT), Paul Everitt, told Reuters this week.

Prime Minister Gordon Brown has said the budget will contain environmental measures to aid recovery from recession, creating thousands of “green” jobs.

But analysts say Darling has to balance the needs of the shrinking economy with the dire state of the public finances.

Reporting by Adrian Croft; Editing by Anthony Barker

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