Scrappage has come under attack after it emerged that imports of cars surged in the third quarter of this year, worsening the UK's trade deficit and contributing to the recession.
According to the Guardian newspaper, statisticians have singled out rising car imports as the major contributor to a sharp increase in the trade deficit, to £7.2bn, from £6.5bn in the second quarter of the year.
Despite the fact that exports of British cars are also rising, the Office for National Statistics said the deficit on the UK's car trade rose by £400m over the quarter – equal to the total cost of the scrappage scheme to taxpayers.
Karen Ward, UK economist at HSBC, told the Guardian: "In recent years 85 per cent of the new car registrations were of imported cars. If households diverted consumption away from spending on hotels and restaurants to take advantage of the car scrappage scheme, this may have actually served to depress UK GDP."
Vince Cable, Liberal Democrat Treasury spokesman, said: "I was very concerned about whether the scrappage scheme would primarily provide a financial lifeline to German and Japanese industry, rather than our own.