The Director General of the Society of the Irish Motor Industry (SIMI) is disappointed that Brian Lenihan opted to omit a car ‘scrappage scheme’ from his Emergency Budget plans.

Alan Nolan said that the potential benefits of such a scheme were ignored in the Budget represented a lost opportunity to generate extra revenue for the State and “stem the rate of job losses in the sector”.

While stating that no-one within the motor trade believed such scheme would prove the catalyst for a sales bonanza, Mr Nolan opined that it would “have produced a win-win situation for the consumer, for the industry and could have produced additional tax revenues for the State”.

He added: “The failure to act is likely to result in significant job losses, adding further unemployment costs to the State.

“This really is a lost opportunity and the failure to implement this scrappage initiative will actually cost the Government in excess of €100 million between the lost tax revenue and unemployment costs.”

The AA’s Conor Faughnan had hoped the Government would announce a scrappage scheme last week, given that “new car sales this year have fallen off a cliff”.

As reported last week, new car registrations are down 66 per cent, with revenue down by over 80 per cent, with many of those who are buying opting for smaller, less expensive cars.

“We support industry calls for a scrappage scheme,” said Mr Faughnan.

“It makes perfect sense to help people to buy cleaner cars and this would provide a much needed boost to sales, an increase in exchequer revenue and will speed up the trend of cars becoming cleaner and greener.”

Ford Ireland Chairman Eddie Murphy said that a scrappage scheme was widely acknowledged as “a proven stimulant”.

He added: “We are witnessing its positive impact on state revenues in other countries.

“That our Government should fly in the face of this evidence is disappointing to the point of perplexing.

“Aside from the increased Exchequer revenues, each 1,000 cars sold through the scheme could have saved 780 tonnes of CO2.”

Sticking with the environmental theme, Alan Nolan referred to his industry’s support of the emissions-based road tax implemented last July.

“However, we are now less than one year on and none of the CO2 benefits have been felt from the change as old cars are not being replaced by new ones at any sort of sustainable rate,” he added.

“A scrappage scheme would have ensured that the environmental aims would have been sustained; the environment is clearly not a priority anymore. The environmental benefits of reduced CO2 from a new car far outweigh the environmental cost of manufacture.

“The Government’s failure to act will certainly accelerate the rate of job losses in the Motor Industry and this will directly affect tens of thousands of families and communities nationwide.”

Striking a more positive note, Alan Nolan said that the proposed change in the VAT treatment of used cars may well prove a welcome move, “if intended to resolve the problem of Clawback VAT”.

He added: “However we need to see further details before we can be certain regarding the precise nature of the proposals.

“Up to this point, dealers have had to pay VAT on losses and hopefully the Budget provisions will provide some relief in relation to this burden. This will be very welcome.

“A change from the current VAT system to a Margin Scheme, in line with other EU countries, means that Clawback VAT due on losses can be resolved but there is a cost to dealers in this change and we need to be certain of precisely what is proposed.

“It is important to note for consumers that this move is an administrative one, relating to VAT on losses and the rate of VAT that applies to used cars remains unchanged at 21.5 per cent.”