Motion made, and Question proposed, That this House do now adjourn. —(Ms Butler.)

The vehicle scrappage scheme was launched on 18 May and is therefore less than a month old. In a press release today, after just 28 days, Lord Mandelson declared that the scheme was a success and had given the car-making industry the boost that it needed. It is slightly premature to issue such a press release after such a short time. The new car industry may consider the scheme a success, but it has actually failed in several areas and could be improved. I shall highlight some of the many ways in which that might be done.

The Department says that there will be a compliance review in two months' time. Given the statement today by Lord Mandelson, I wonder whether the Minister can confirm whether it will still take place. If the press statement today is a premature finding for that review, it leaves no room for debate or suggested improvements.

I congratulate the hon. Lady on obtaining this debate. I have a big facility in my constituency, run by a company called Copart, which is very interested in the scrappage scheme. Does she agree that getting the scrappage scheme up and running so quickly was a great achievement, but that there are bound to be things that can be done better? The two-month review must be a real review, in which stakeholders can provide information to the Government about what could be done better, and the Government can then react to that positively and incorporate it into the scheme. In other words, the two-month review must be a real review, open to full consultation.

The hon. Gentleman has pre-empted part of what I was going to say. I also have a Copart division in my constituency, in Stewartby. I agree that when the compliance review takes place, consumers, members of the scrappage industry and other interested parties should have the opportunity to contribute to the review.

Problems with the scheme are evident after only a month of its operation. For example, there is limited consumer choice. There is also a focus on new car sales, instead of the entire motor trade. Of course, the scheme was introduced, practically the night before the Budget and released the next day, as an emergency measure to boost the flagging car industry. One cannot say that it has failed in that—today's figures show sales of 60,000 cars in a month—but other parts of the motor industry are as important. Organisations such as Copart are suffering, but there is a way to improve the scheme in all its aspects without having a detrimental effect on new car sales.

In his initial press release, the Secretary of State said that the scrappage scheme was intended to stimulate car sales across the whole motor trade and that the benefits of the scheme would be balanced with the needs of other sectors of the car industry, such as the second-hand car market. However, we know that that has not been the case. In Britain, the only way in which to secure the £2,000 support is for a motorist to acquire a new car or a new van by visiting a dealer. The dealers are generally tied to one manufacturer, as most new car dealers are. Obviously, documentation checks take place through the Driver and Vehicle Licensing Agency database. Manufacturers will invoice the Department for £1,000 and provide match funding. Some manufacturers offer additional incentive finance, whereas others drive a hard bargain, with fewer incentives, particularly with the smaller new cars, which elderly people tend to go for.

The consequence is that in the modern second-hand market there is no benefit for the for people who might wish to trade up rather than commit the larger net amount to an entirely new vehicle. Some consumers who do not normally make new purchases will also be unfamiliar with the credit risk arising from the expensive capital purchase. I believe that some people from lower-income groups and the elderly are disadvantaged as a result. Many people who have a 10-year-old car have a 10-year-old car because they cannot afford to trade up to a new car. The difference between the 10-year-old car and the new purchase is huge.

A £2,000 saving from £8,000 or £10,000 is not that much for a retired couple in their mid-70s to 80s who have had their car for a long time—probably since just before they retired. They do not have much capital, so that reduction in price does not really help. If we had a way of helping such a couple to have access to second-hand cars that were more reliable—after all, one of the reasons why the scheme was introduced is that 10-year-old cars are not as safe—I could definitely see that as an improvement in the scheme. It would boost the automotive industry as a whole rather than just the new car sector.

We do not have a portable voucher such as the one in Germany and California, whereby people can take their voucher wherever they wish to buy their car. They have much greater access to the market and to what is available. That empowers the people who hold the vouchers. They are not then subjected to one particular dealer, or to one particular type of car or manufacturer. They have the buying power because they have a voucher in their hand. We know that that system has been incredibly successful in California and Germany. Perhaps we do not have a portable voucher scheme because our scheme was brought in so quickly and hurriedly due to the circumstances that we faced at the time. Does the Minister believe, now that we have had more time to reflect on the matter, that he will consider the portable voucher scheme in the review that will take place after two months?

I recognise that the strongest driving force behind the new scheme is car sales. My constituency is near Luton, where LDV is suffering its own problems and uncertainties, so I do not want to sound as though I am diminishing the importance of boosting new car sales. I am not. I believe, however, that the portable voucher, by enabling people to trade up, will provide a longer-term stimulus to the automotive industry and new car sales.

There are also valuation problems. People receive £2,000, and it does not matter whether the car is worth more or less in individual part sales. It seems as though there could be some room for work there, too. If consumers are channelled into making scrapping arrangements solely through their local dealership, which will have arrangements with other scrappage dealers, that does not give the consumer power over where they can take their cars. They are tied in to the dealer—not only by the finance available from the Department and the dealer, but on the scrappage side, too.

There are effects on the scrappage trade, too. We would be foolish to sit here and think that 60,000 new car sales and the scrapping of 60,000 cars this month, in addition to what already takes place, will not cause a spike in the scrappage trade that, in turn, will cause a downturn in prices. That is happening and as a result the scheme is suffering.

The Department has not had time to make appropriate due-diligence checks on the organisations that will be intimately involved in delivering the scrappage element of the scheme. Copart in my constituency is a subsidiary of an American organisation and is one of the largest scrappage organisations in the UK where there are 1.5 million scrap vehicles every year. It would be good if the experts on this part of the scheme could be brought in for discussion, with due diligence being paid to how they deal with their scrappage and the effects that the scheme is having on their businesses.

The scrap industry is suffering from cash-flow problems at present, as the price of scrap metal has fallen by 20 per cent. There was great anticipation of the scheme before it was launched and, although I have not had time to check today, I imagine that the fact that there have been more than 60,000 car sales this month means that the price of scrap has fallen even further.

The capacity to deal with the volume of scrappage safely and in a sustainable way needs to be assessed. Nobody wants too few vehicles to be processed, but equally no one wants a car mountain. In the present state of the scheme, there is no strong commercial incentive for parties with large-scale capacity in vehicle scrappage to enter the trade chain. That is another good reason why the organisations to which I have referred should be brought into the review process.

Another element is the EU's end-of-life vehicles directive, whose aim is to achieve a greening of the auto industry. The Department has said that the "green side of things" is secondary to the boost that the scrappage scheme will give the car industry, but I reject that. I am a member of the Energy and Climate Change Committee, and I believe that green considerations are equally important, as they have their own effect on the economy. The green side of the scrappage scheme needs to be given an importance equal to that of boosting the car industry, and we must make sure that people using the scheme are aware of it.

The Department for Business, Innovatina and Skills says that it has urged car manufacturers to review their vehicle disposal arrangements to accommodate demand, but manufacturers and most dealers are locked into sole-source agreements with particular vehicle takeaway companies for the first stage in the vehicle disposal sequence. As a result, any difficulties that arise can be resolved only when there has been a contractual failure and there are vehicle takeaway problems. That is too late, because by then the companies will already have failed to meet the criteria laid down for them. Making sure that that aspect of the matter is given full consideration is another reason why it is important that we have a review at the end of two months. Compliance with the EU's end-of-life vehicles directive may be harder to achieve if the scheme eventually achieves its target of 300,000 vehicles, with the bulk of vehicles being dealt with in a shorter space of time and causing the spikes in scrap management that I have described.

I shall summarise my argument in three minutes. We need to make the scheme fully successful during the 10 months, for the benefit of the economy. No one doubts or disputes that—least of all me, given that my constituency is next door to Luton. As the scheme is constructed and operating, it may not deliver strong benefits for any part of the automotive industry over the longer period.

It is clearly important that the scheme delivers good results for new sales, as that is how part-funding from manufacturers is being leveraged. However, its design has built-in disincentives for consumers to achieve maximum personal choice, and an example of that is the lack of a portable voucher that I mentioned earlier. I hope that the Minister, when he responds to the debate will say something about portable vouchers: has the Department begun to look at them, and does it think that there is any point in making them available? Will they be part of what is assessed in the review?

The requirement that arrangements for vehicle scrappage can be made only through dealerships also limits consumer flexibility, and distorts business volumes in the scrappage industry. The scheme's focus on new sales also disadvantages other parts of the total automotive economy.

The Department has stated that the scrappage industry and green aspects are secondary—an unfortunate and indefensible statement. The scrappage industry has already experienced some economic loss, and it would be wrong to raise environmental risks. Britain should take the opportunity of the compliance review that will be undertaken after the second month of the scheme to put in place new arrangements that open up consumer choice and spread the economic and green benefits across the whole of the automotive economy.

Finally, it is worth considering whether there could be a longer-term scheme. The Government have recognised that the scrappage programme is important to stimulating the car industry. The present scheme may or may not end before a general election is called, but there may be scope for a longer-term arrangement, particularly one based on greater consumer choice and with clearer environmental credentials. So my main points are about: the portable voucher that people are given; the fact that environmental considerations are as important as the stimulation to the car industry; and consumers being given greater access, particularly in terms of the scrappage element of the scheme.

I congratulate Nadine Dorries on securing this timely debate. She made a stimulating contribution, giving many ideas concerning an interesting and, to date, successful scheme. Of course, the scrappage scheme was brought in because of a crisis in one of our most important industries. Manufacturing in general, and the automotive industry in particular, are of key importance to the United Kingdom's economy. However, in recent months the automotive industry has been one of the sectors worst affected by the current global economic downturn, so let me begin by reaffirming the Government's absolute commitment to safeguarding the industry's future and providing support in these difficult times.

The scheme was brought in at the request of the motor industry, which pressed hard for a scrappage scheme; it was in answer to representations that the scheme was introduced. The Government responded because the automotive industry employs nearly 1 million people in manufacturing and retailing, and it contributes £10 billion annually to the economy. It is a major contributor to research and development, and supports many highly skilled workers and a wide supply chain.

In the United Kingdom, the sector has been under great pressure in recent months, but the Government are determined to ensure that it remains one of the central pillars of British manufacturing. The vehicle scrappage scheme, which, as the hon. Lady said, was announced in the Budget and introduced on 18 May, is one of the mechanisms that we are using to achieve that objective and stimulate demand. I emphasise that it is one of a number of different methods. It has its own particular purpose and remit.

The decision to implement a scrappage scheme was taken after careful consideration of a wide range of evidence, including the lessons learned from other European schemes and evidence on the possible impact of such a scheme on other sectors of the economy. We have endeavoured to introduce the most effective scheme for the sector, while ensuring that we look after taxpayers' interests properly and minimise the possible effects elsewhere in the economy.

The Government have ensured that advice about support on offer specifically tailored to the needs of the automotive sector has been distributed to the UK automotive supply chain through the manufacturers. In addition to that support, which is available today, there are a number of other sources of support. The new automotive innovation and growth team—a Government-facilitated, industry-led, independent group of experts—published a report on 6 May. It rightly emphasised the scale and continuing importance of the automotive industry to the United Kingdom's manufacturing sector and wider economy. However, the NAIGT recognises that to secure that position for the long term the United Kingdom needs to become a leading global player in the development of low-carbon road transport. Its work is particularly timely in view of the announcement on 16 April of the Government's vision to develop ultra low-carbon transport over the next five years.

Let me touch on the legitimate points that the hon. Lady raised about the green aspect of the scrappage scheme. It is especially important to observe that the scrappage scheme is a particular proposal for a particular time. It was introduced in response to demands made by the motor industry, which requested a stimulant in the market at a particular time. It is for that reason that the Government decided to introduce a scheme that was time-limited and budget-limited. It has been extremely successful to date. As the hon. Lady said, some 60,000 vehicles have been sold under the scheme; that is about 10,000 or 12,000 vehicles a week. That is a direct stimulant to the economy.

However, in order to observe the requirement for low-carbon transport, the Government have made it clear that the scheme will be time limited. Our calculations indicate that the scheme as a whole will be carbon-neutral, because there is evidence that newer cars use less fuel than older cars. Vehicles over 10 years old are being taken off the roads and replaced by vehicles new to the roads, which use lower amounts of fuel and emit less carbon into the atmosphere. They therefore make a positive green contribution.

It is important to realise that the scrappage scheme is only one of the schemes that the Government are introducing in the automotive sector. The automotive assistance programme is another device instigated by the Government to assist the industry. That has particular environmental aspects which require the manufacturers to take environmental steps in order to qualify for assistance. The Government recognise the importance of offering specific incentives in order to address the needs of the environment.

Let me deal with some of the specific issues raised by the hon. Lady. She referred to the compliance review. That is an audit of compliance with the scheme which will take place at the two-month point, as promised. It is not a review of the scheme. It looks at the way the scheme is working and how it is affecting the industry as a whole, to see whether the systems in place are working properly, not incorrectly or fraudulently.

If the compliance review looks at the way the scheme is working and finds areas in which it is failing, would the review take account of proposals to improve the scheme not just to meet the present criteria, but to an enhanced level for the remaining 10 months?

Proper compliance with the scheme is important. We need to ensure that the taxpayer is protected. I am keen to see the proper operation of the scheme. All the evidence so far indicates that it is successful. With 60,000 vehicles sold under the scheme since 18 May, there is no evidence that it is unsuccessful. All the evidence indicates the contrary, which is why the Secretary of State spoke in the terms that he did. In the interests of the taxpayer, we have to ensure proper compliance with the rules of the scheme.

I understand what my hon. Friend is saying—that the compliance review must make sure that the rules are being followed, that nobody is cheating and that the right things are being done. I accept that the scheme has been a great success, but under different rules perhaps 70,000 cars would have been sold, instead of 60,000. Is there no mechanism whereby we can offer my hon. Friend constructive suggestions for making the scheme even more successful, so that he can consider changing the scheme?

In addition to the compliance review, I am always ready to hear ideas for improvement of the scheme. I add the caveat that the scheme is time limited and budget limited. It has been very successful thus far, and if it were even more successful, the budget might be used up even more quickly than at present. It is a budget-limited scheme; I just want to make that absolutely clear. Representations may be made to me on the budget in due course, but the scheme is either time limited or budget limited, and the indications to date are that the budget will be used up within the time frame that was set when the scheme was announced.

On the issue of whether purchasers have been able to afford a new car, early indications show that the people who are using the scheme include the elderly. One group who are most likely to take advantage of the scheme are those who—obviously—have had a car for more than 10 years and who directly respond to the scheme's large incentives.

Of course, the incentives can amount to more than £2,000. I remember hearing on the first day that the scheme was introduced, I think, advertisements for offers of £3,000 and even more for particular vehicles. It appears that such offers have been very successful in encouraging cash buyers to purchase vehicles. The evidence does not indicate that elderly people are being deterred by the scrappage scheme; if anything, the initial evidence appears to be the contrary.

Before the scheme was introduced, the Government considered extending it to second-hand cars, but we excluded them because of the experience of other member states, which suggested that the inclusion of used cars would distort prices in the market. Having considered the situation, the Government decided that the available funds would be most effectively used in the new car market.

On the question of the car mountain and whether the number of vehicles going to scrappage will cause a difficulty in the scrappage market, I should say that consultation again took place and car scrappage operators gave assurances that there would be capacity in the market to handle the scrappage of all 300,000 cars. To date, we have had no indication that that is not the case, but I should be interested to hear representations from that area of the manufacturing market. There appears, however, to be overall satisfaction with the capacity of the scrappage system in the current market.

I actually have evidence myself of the scheme's success, because, strangely this week, having been newly appointed as the Minister responsible for the scheme, I received a letter from my local Toyota garage, which sold me my car some years ago. My vehicle is just over 10 years old and therefore eligible for the scrappage scheme, and in the letter's PS the garage told me:

"As demand has vastly exceeded our expectations—most Toyota new car models are now in short supply."

That is evidence from Wrexham, and I hope that it is an indication that the scheme will be successful, and that its good start will continue.

I am very grateful to the hon. Lady for initiating the debate, and I am anxious to listen to observations that hon. Members from all parts of the House make about the scheme. Clearly, it affects not just the new car market, but the used car market. As I said earlier, the industry is important not only in the new car sector but in the used car sector and the retail sector. For all those reasons, it is very important that, at this very difficult time, we support the industry as much as we can.

Question put and agreed to.

House adjourned.