UK motorists are to be offered subsidies of up to £5,000 to purchase hybrid and electric cars under Government plans to be unveiled today, as figures suggest that scrappage incentive schemes are reversing the slump in car sales across Europe.

The cash incentive will be available to offset the higher upfront costs of hybrid and electric cars, in particular the price of batteries in modern vehicles.

It is part of the Government’s previously-announced £250 million plan to promote low-carbon transport over the next five years and is expected to be discussed today when the Cabinet meets in Glasgow — the first meeting to be held in Scotland in nearly 90 years.

Geoff Hoon, the Transport Secretary, said: “Less than 0.1 per cent of the UK’s 26 million cars are electric, so there is a huge untapped potential to reduce emissions.”

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Meanwhile, Alistair Darling, the Chancellor, is expected to introduce an incentive scheme worth up to £2,000 for motorists to trade old cars in for new ones in next Wednesday’s budget, following successful use of such programmes particularly in Germany and France.

Figures released today showed that sales of new cars in Europe fell by 9 per cent in March on a year-by-year basis — a smaller than expected decline due to government subsidies to encourage buying, the ACEA European carmakers association said.

In western Europe, March sales fell 8 per cent to 1.43 million cars, with figures buoyed up by a 39.9 per cent increase in Germany, the region’s biggest market, where a government incentive scheme was put in place in January.

The German programme, which has seen more than 860,000 car owners sign up for its €2,500 (£2,300) scrappage bonus, has had a significant impact on car sales, with the market rising 40 per cent in March. France, which has a slightly less generous scheme, recorded an 8 per cent jump last month.

In contrast, British sales dropped 30.5 per cent in what would normally be a strong month, as a reflection of overall lack of confidence in the economy, ACEA said. In Spain, sales plunged 38.7 per cent

Analysts were optimistic today that the economic tide had turned in the cars market. Standard and Poor's, the credit rating agency said: “We raise our FY09 EU auto sales estimates given the early success of government scrappage incentives, particularly in Germany.

“Indications of volume also ease our concerns of the added burden of supply chain meltdown and further mark [the first quarter of 2009] as the trough in our view.”

Gordon Brown will make the final decision within days on whether to offer motorists a taxpayer-funded incentive to trade old cars for new.

Lord Mandelson, the Business Secretary, supports proposals to give owners of old cars about £2,000 towards the cost of greener models. At a meeting last week of senior ministers Mr Darling refused to give the scheme the all-clear for inclusion in next week’s Budget. Instead he insisted that Lord Mandelson’s department do more to prove it would work.

Electric cars - the pros and cons

For Very low running costs, tax breaks and exemption from the Congestion Charge in London. For £90,000 you can have a Tesla electric roadster — faster off the mark than a Lamborghini and with a 220 mile range.

Against Too small, too slow, too expensive. Most have a range of about 40 miles. Not many charging points, especially outside London.

Available now G-Wiz city car, £8,000 — absurdly cheap to run, no noxious gases and exempt from the road fund licence. Toyota Prius, £17,495 - green without the compromise; a stylish full-size car that claims to be the cleanest on the planet. Honda Civic Hybrid, £15,900 — powerful, frugal and refined diesel engine, performance, though ride not as good as it should be. Tesla electric roadster — 0-60 in 3.9 seconds and a top speed of 130mph

Coming soon Toyota is trialling the next-generation Prius in Strasbourg later this year. Scheduled for launch 2012, it will be rechargeable from a normal household socket. The Vauxhall Ampera, slated for sale in 2011, was shown at the Geneva motor show last month and is closely modelled on the Chevrolet Volt. BMW has built 500 Mini Es, with a dozen expected to be leased in Britain this summer. This is a pure electric car with 204 bhp motor powered by lithium ion batteries. Top speed of 95mph, range of 150 miles and two hours to charge the battery. The Jad P1-E from John Dowle, a former McLaren designer, uses twin electric motors to give a 0-60 mph of 2.9 secs and a range of 230 miles. The intended price is £55,000

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