Government incentive to change old cars

1984ReturnsForReal_2

Pew_Pew_Pew_Lasers! wrote: »

What a load of piffle. .......

This is about buoying up an industry with new sales, not about winning an election.

One born every day.

Tell me, did Labour get back the millions they pumped into Rover just before the election?

NEXT!

Lemonade_Pockets

1984ReturnsForReal wrote: »

One born every day.

Tell me, did Labour get back the millions they pumped into Rover just before the election?

NEXT!

It amazes me that you can take such a simplistic view on it, but present your self as a regular oracle on such matters.

Let me take a few points raised over the past few post.

Firstly price rises: this has little to do with MFR's pre-empting a scrappage bonus but is wholly due to the £ being on its !!!!. Renault, Ford, Fiat, PSA, BMW, Seat to name a few bear most or in some cases all of their manufacturing cost in Euro's, so when they sell their cars in the UK the revenue compared to cost is reducing everytime the value of the £ goes down. This means over the last few months that "cost price" in £ of most cars sold in the UK has shot up dramatically thus the list price has gone up too.

Secondly as someone mentioned it's primary objective is not to save the customer lots of money. However i can gaurentee that consumers will see more benefit with this sort of scheme rather than if the goverment just pumped a few billion in direct ala USA.

Thirdly what the goverment gets back for this is up for debate.
But consider a few things: The motor industry in Britain alone employs 850,000 people. Now i accept that not all of these will directly benefit from a scrappage bonus but the majority will.
But consider even if 10% of those people are made unemployed because of lack of demand then how much revenue does the goverment lose from 85,000 people not paying income tax or national insurance. How much will it pay out in jobseekers allowance etc?
The a scrappage bonus would help keep most of these people employed. They all still earn money, still pay taxes and buy other goods and services which in turn keeps other people from loosing their jobs etc etc etc. I beleive in economics its called the multiplier effect


Fourthly it does work: Compare a few new car sales figures for the month of March 2009 compared to 2008. France up 8%, Italy up 36%, Germany up 40% you can guess what all these countries have in common! Oh Britain down 28%. I can't be bothered to work out how many jobs this has saved in the respective countries but its lots 100's of thousands.

Now should the goverment bailout anybody - i don't know. Personally i think they should if it helps get the economy back on track quicker.
Is this the rightway to bailout the motor industry absolutley - theres no point propping up their balance sheets if demand isn't increased as it will only postpone the problem. Its much better to stimulate some "genuine" demand.


Potential pit falls: Well if they don't balance it right a surge in demand now could leave to sharp drop later on however the idea is that demand is only stimulated back to normal levels. If the timing is right by the time the scrappage bonus comes to a end then demand should have returned to normall levels of its own accord.


Now i realise thats a perfect picture but its far from a pipe dream and has very real chance of hitting all its goals. I'd challenge anyone to come up with a better idea.

NEXT!!!!

cos69

BBC reports that UK car sales are down more than expected with calls for a "car scrappage" scheme to help increase volumes
http://news.bbc.co.uk/1/hi/business/7985173.stm

Difficult to understand why government has not already done this, unless its the only thing in the budget that might sound like good news

Most people driving around in 10-year old cars do not tend to buy new, so the scheme should in part be self financing from the VAT on new cars that would not otherwise be sold.

kristian_1

that would be great as i may buy the wife a new car, however would it be better not to give the money and let the used car prices drop further? i`m sure we would get a better deal and a 10 year+ car is not worth much anyway.

1984ReturnsForReal_2

Lemonade_Pockets wrote: »

It amazes me that you can take such a simplistic view on it, but present your self as a regular oracle on such matters.

Let me take a few points raised over the past few post.

Firstly price rises: this has little to do with MFR's pre-empting a scrappage bonus but is wholly due to the £ being on its !!!!. Renault, Ford, Fiat, PSA, BMW, Seat to name a few bear most or in some cases all of their manufacturing cost in Euro's, so when they sell their cars in the UK the revenue compared to cost is reducing everytime the value of the £ goes down. This means over the last few months that "cost price" in £ of most cars sold in the UK has shot up dramatically thus the list price has gone up too.

Secondly as someone mentioned it's primary objective is not to save the customer lots of money. However i can gaurentee that consumers will see more benefit with this sort of scheme rather than if the goverment just pumped a few billion in direct ala USA.

Thirdly what the goverment gets back for this is up for debate.
But consider a few things: The motor industry in Britain alone employs 850,000 people. Now i accept that not all of these will directly benefit from a scrappage bonus but the majority will.
But consider even if 10% of those people are made unemployed because of lack of demand then how much revenue does the goverment lose from 85,000 people not paying income tax or national insurance. How much will it pay out in jobseekers allowance etc?
The a scrappage bonus would help keep most of these people employed. They all still earn money, still pay taxes and buy other goods and services which in turn keeps other people from loosing their jobs etc etc etc. I beleive in economics its called the multiplier effect


Fourthly it does work: Compare a few new car sales figures for the month of March 2009 compared to 2008. France up 8%, Italy up 36%, Germany up 40% you can guess what all these countries have in common! Oh Britain down 28%. I can't be bothered to work out how many jobs this has saved in the respective countries but its lots 100's of thousands.

Now should the goverment bailout anybody - i don't know. Personally i think they should if it helps get the economy back on track quicker.
Is this the rightway to bailout the motor industry absolutley - theres no point propping up their balance sheets if demand isn't increased as it will only postpone the problem. Its much better to stimulate some "genuine" demand.


Potential pit falls: Well if they don't balance it right a surge in demand now could leave to sharp drop later on however the idea is that demand is only stimulated back to normal levels. If the timing is right by the time the scrappage bonus comes to a end then demand should have returned to normall levels of its own accord.


Now i realise thats a perfect picture but its far from a pipe dream and has very real chance of hitting all its goals. I'd challenge anyone to come up with a better idea.

NEXT!!!!

Now, imagine taking all that money & pumping it to an industry & jobs that doesnt need supporting.....

Lemonade_Pockets

1984ReturnsForReal wrote: »

Now, imagine taking all that money & pumping it to an industry & jobs that doesnt need supporting.....

Yet again completly failed to grasp the point.

Putting that money into a industry that doesnt need supporting will do very little to help the economy.

Well spent money does the following:
Increases aggregate Demand
Increases Output
Increases or maintains Employment
Increases Consumer Spending
Increase Goverment Revenue from VAT, Income tax etc etc.

Which Increases demand
Increase output......................and so the merry chain goes round and round. Untill we are all happy again and the credit crunch has been forgotten

I.e. a little well spent money by the goverment has much greater effect on GDP.

Any industry that doesnt need supporting at the moment in all probability has "normal" or high demand and is probably not likely to be laying off thousands of people. Therefore increasing goverment spend on this business probably wouldn't increase demand any further, which wouldn't increase or retain employment levels.........etc etc.

For most countries the motor industry is a key employer who's demand has been seriously hit by the CC, therefore this type of "bailout" makes sense.


Google Multiplier effect.........you might learn something

1984ReturnsForReal_2

Lemonade_Pockets wrote: »

Yet again completly failed to grasp the point.

Putting that money into a industry that doesnt need supporting will do very little to help the economy.

Well spent money does the following:
Increases aggregate Demand
Increases Output
Increases or maintains Employment
Increases Consumer Spending
Increase Goverment Revenue from VAT, Income tax etc etc.

Which Increases demand
Increase output......................and so the merry chain goes round and round. Untill we are all happy again and the credit crunch has been forgotten

I.e. a little well spent money by the goverment has much greater effect on GDP.

Any industry that doesnt need supporting at the moment in all probability has "normal" or high demand and is probably not likely to be laying off thousands of people. Therefore increasing goverment spend on this business probably wouldn't increase demand any further, which wouldn't increase or retain employment levels.........etc etc.

For most countries the motor industry is a key employer who's demand has been seriously hit by the CC, therefore this type of "bailout" makes sense.


Google Multiplier effect.........you might learn something

I do grasp the point.

but I also disagree with it.

In effect (whichever way you look at it) £x leaves the country & therefor has a long term negative effect on the economy.

Unless of course you can assure me that no dividends will be paid over the full accounting periods involved & any REAL profit (ie profit that doesnt mysteriously disappear via dodgy accountancy methods) is reinvested.

In short FULL NATIONALISATION.

Lemonade_Pockets

1984ReturnsForReal wrote: »

I do grasp the point.

but I also disagree with it.

In effect (whichever way you look at it) £x leaves the country & therefor has a long term negative effect on the economy.

Unless of course you can assure me that no dividends will be paid over the full accounting periods involved & any REAL profit (ie profit that doesnt mysteriously disappear via dodgy accountancy methods) is reinvested.

In short FULL NATIONALISATION.

Well you clearly don't because It doesn't all leave the country tho does it? The cars aren't gonna sell, service, transport or make themselves. Plus the cash that flows out is counter acted by the cash that flows in.
Just one small example if pug sales go up in france, bridgend and dagenham have to build more engines. Likewise if mini sales go up in europe guess what all those people that lost their jobs at in oxford might get some work back. Same goes for nissan in sunderland.

Also what difference does dividends make to it. It still contributes to the economy. And as one of the financial centres of the world i'd suggest we'd benefit more than anyone else.

Protectionism isn't gonna fix anything!

Also as bailout its about as far removed from nationalisation as you can get!

1984ReturnsForReal_2

Lemonade_Pockets wrote: »

Well you clearly don't because It doesn't all leave the country tho does it?

Lol.


I was beginning to think that you might know what you are talking about but thats just put a stop to it...

Lemonade_Pockets

1984ReturnsForReal wrote: »

Lol.


I was beginning to think that you might know what you are talking about but thats just put a stop to it...

Ditto

I don't suppose you would care to explain what the 850,000 ppl that work in the motor trade in this country get paid in then? I suppose they all shop abroad and pay their taxes to foreign governments too!!! :rolleyes: