The Government’s “cash for bangers” car scrappage scheme was initially dismissed as doomed to failure. Now it is pretty clear it is working, though it is much less clear that it is a good use of taxpayers’ money.

Pendragon, the country’s biggest motor dealer, sneered at the idea, arguing that the £1,000 subsidy from the Government was just too small to be worth having. But yesterday’s car registration figures for June provide strong evidence that the scheme has put a brake on the industry’s downhill plunge.

Sales to private buyers were up 3.9 per cent on last year, the first rise in 18 months, although the continued slump in corporate purchases left the total figure down 15.7 per cent.

The biggest boost was seen among smaller cars, with Hyundai and Kia racing ahead. That will partly address the environmentalist critics, who had called for the Government to target the subsidy on vehicles with lower emissions.

But the scheme has done less for the sales of more expensive cars, for which the £2,000 subsidy, including £1,000 from the manufacturer, provides a smaller percentage price cut.

Unfortunately, this means that it has had the least impact on British-based manufacturers, such as Jaguar Land Rover, which tend to make bigger cars.

Other countries have introduced similar schemes, notably Germany, which is putting in ten times as much money. But at least most of this will find its way to German manufacturers, while most of the British taxpayers’ money will go to foreign-based carmakers and the dealers.

It is very hard to see why car dealers should be singled out for special taxpayers’ largesse. Why not furniture retailers, who are having just as bad a time?

It makes no sense to subsidise an industry that suffers from huge global overcapacity and to bribe car owners to scrap perfectly serviceable vehicles.

The biggest worry is that, when the industry’s £300 million injection runs out, the Government will come under intense pressure to give it another fix.

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