I’ve just had a fascinating conversation with a senior motor industry analyst, who was able to put some numbers against the potential costs of creating the much-discussed ‘scrappage’ scheme.

It was enough to persuade me that these incentives are a pretty good idea – and a far cheaper way to help blow some of the tumbleweed out of the nation’s car showroooms than the government’s heavy, cumbersome ‘loan guarantee’ scheme.

According to my contact, who has been in on discussions at the highest level, the scrappage scheme would cost the exchequer around £170m. That’s a non-trivial amount of money – but it pales into something approaching insignificance next to the oceans of cash that have been ploughed into Britain’s beleaguered banking sector.

That £170m would pay for a scrappage scheme capped at 250,000 cars and 30,000 commercial vehicles, with the extra VAT the government would rake off the new sales offsetting a fair chunk of the incentive for scrapping an older car, which would be set at around £2000 per vehicle.

From the industry’s point of view, scrappage makes far more sense than the loan guarantee scheme.

Most important, there are no doubts about its legality under EU law and, once put into place, analysts are confident that it would produce both an almost-instant effect on showroom traffic, potentially saving dozens of dealerships from bankruptcy – oh, and also helping to reduce the average vehicle’s CO2 emissions in line with the Government’s stated aims.

£170m. Not cheap – but potentially good value.

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