Saturday, May 30, 2009
Happy car owners, miserable tax payers
Why hasn't the car scrappage scheme generated mass protests from taxpayers? It must be because we have become totally numb to this kind of fiscal stupidity. Nothing shocks us anymore.
This scheme has a budget of £300 million. Since the payment for each car scrapped is £2,000, this means that 150,000 lucky new car owners will benefit. There are approximately 35 million taxpayers. This scam will take approximately £8.50 from each one of them and arbitrarily give it to a tiny minority of people who want to buy new cars.
What is the logic of this brazen redistribution of wealth? According to Mandelson, it is to boost the car industry. Why is car production so special? Why shouldn't fish and chip shops or pubs be protected with tax payers money? How about internet cafes? There are plenty of firms suffering right now, yet there are no taxpayer financed product scrappage schemes designed to boost sales.
There is also a spurious environmental argument floating around. Cars older than ten years are supposed to pollute more. Yet, we all know that the reduction in CO2 emissions from this scheme will be marginal. Besides, new car owners will have an extra £2,000 in their pockets, part of which will be spent on petrol, negating the minimal reduction in C02 emissions.
So why did the car industry receive this unpardonable subsidy? They shouted the loudest; they complained the most; they scared New Labour with hairy stories of job losses, while other firms were silently shedding jobs. It was a classic case of corporate welfare, with ordinary taxpayers silently subsidizing the personal consumption of a minority.