Drivers with cars and vans at least ten years old will qualify for a £1,000 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 buy any type of car or van under 3.5 tonnes rather than limiting the grants to greener models with low emissions.

Mr Darling claimed that the scheme would be worth £2,000 per car because car companies would be required to match the Government grant with a £1,000 discount on the list price. In reality, companies already offer discounts of at least that amount on most models and therefore many buyers taking part in the scheme will save only £1,000.

The scheme will start in mid-May and end by March 1 next year, or earlier if the £300 million earmarked by the Government is used up before then.

A maximum of 300,000 drivers will be able to take advantage of the scheme. An estimated 9.5 million cars in Britain are at least ten years old. More than 90 per cent of the new cars purchased under the scheme are likely to be imported. Drivers will have to prove that they have owned the car being scrapped for at least a year and that it has an MoT certificate.

Car dealers will do all the paperwork and arrange for the old vehicle to be scrapped. The grants will be available only for new cars despite requests from dealers for the scheme to include much cheaper one-year-old cars.

The RAC Foundation said that many cars scrapped would be in good condition.

The AA welcomed the scheme but said that drivers would pay for it at the pumps. Edmund King, the president, said that the 2p a litre increase in September would cost drivers £590 million a year, double that being spent on the scheme.

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