Drivers with cars at least 10 years old will qualify for a £1000 Government grant towards a new one under a scrappage scheme designed to prop up the ailing motor retailing industry.

Alistair Darling, the Chancellor, angered environmental groups by allowing drivers to purchase any type of car and not limiting the grants to greener models with low emissions. This means motorists will be able to obtain the grants to buy 4X4s, people carriers and other gas guzzling vehicles.

Mr Darling said car companies would be required to match the Government grant with a £1000 discount. In reality, most companies already offer discounts of at least that amount and therefore the actual price reduction under the scrappage scheme will be limited to the £1000 from the Government.

The scheme is expected to start on May 17 and will end by March 1 next year, or earlier if the £300million earmarked by the Government is used up before then. The scrappage scheme applies to cars registered before 31 July 1999.

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A maximum of 300,000 drivers will be able to take advantage of the scheme.

Buried in the Budget documents is an admission that the scrappage scheme is “expected to have a neutral or modestly positive environmental impact”.

The Treasury said that the scheme was “primarily aimed at supporting industry”.

More than 90 per cent of the new cars purchased under the scheme are likely to be imported.

Mr Darling said the new cars would “generally” have lower emissions per mile, however these environmental gains will have to be balanced against the emissions from manufacturing. About 15 per cent of a car’s lifetime emissions come from the manufacturing process.

Drivers will have to prove they have owned the scrapped car for at least a year.

Friends of the Earth said: "This is just an unnecessary subsidy to an industry that has consistently opposed tough legislation to cut carbon emissions.”

The AA said drivers would be pleased with a “generous scheme”.

But car companies had been hoping that the Government would foot the entire £2,000-per-vehicle bill.

Only too aware of plunging new car sales and car plant shutdowns in recent months, Business Secretary Lord Mandelson and Transport Secretary Geoff Hoon had been pushing for the scheme to go ahead in the face of some opposition from the Treasury.

Today’s announcement smacks of compromise between the warring factions within Whitehall, with the scheme only costing the Government £300 million rather than the £580 million first envisaged.

AA president Edmund King said: “Drivers will be delighted that a generous scrappage scheme has been given the green light. The AA first raised this issue with Downing Street last September so are pleased that a scheme has finally been given the go-ahead.

“A £2,000 incentive from Government and manufacturers will help the economy, environment and employment. Cleaner, greener and safer cars will replace some of the older gross polluters. The pot of £300 million could benefit 300,000 drivers.

“In our AA/Populus poll of 17,481 drivers, 28% said that they would consider taking advantage of a Government incentive scheme to scrap older cars if one was available.”

Mr King went on: “White Van Man will also benefit from the ’cash for clunkers’ scheme as it will cover vehicles up to 3.5 tons. Van mileage has grown much faster than car traffic over the last three years so there is a good case for replacing some of the dirtier vans with cleaner models. White Van Man is essential for the economy and is struggling in the current recession. A grant to bring newer shinier white vans onto the fleet would also help the environment, economy and employment.”

Mr King added that he was pleased that the scheme had been kept relatively simple without any CO2 restrictions on the type of vehicle to be purchased. He added: “If every 10-year-old vehicle were replaced with today’s equivalent we would see a 30% increase in fuel efficiency and almost 30% decrease in CO2 emissions.

“Today’s vehicles are almost twice as safe as 10-year-old vehicles. The consumer will welcome ’Darling’s deals for new wheels'.”

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