Government officials have given the strongest indications yet that a car scrappage scheme will be announced in April’s budget.
Under the scheme, owners would receive payments of up to £2000 in return for swapping cars at least nine years old for either a new car or a nearly-new car less than a year old.
The system has been successfully used in Germany already, helping to stimulate the car market and get cleaner cars on the roads.
Estimates suggest it could stimulate 250,000 car sales a year in the UK.
Car makers have put the UK Government under pressure to introduce a similar scheme for months, and there are now growing indications that it will get the go-ahead.
Lord Davies, the Trade Minister, told The Times newspaper, "The scrappage scheme has potential. It's been tried in other countries ... we're looking at it very closely."