UK still mulling car scrappage scheme

LONDON (Reuters) - Britain said on Saturday it was still looking into the possibility of introducing a car scrappage scheme to boost the recession-hit vehicle industry, despite a report that the Treasury was blocking the idea.

Under the proposed scheme, cars more than nine years old could be scrapped in return for a 2,000 pound discount on a new car.

The Times reported on Saturday that there was a deep rift between Business Secretary Peter Mandelson and the finance minister, Alistair Darling, over the proposal.

The unsourced report said Mandelson wanted Darling to make a scrappage scheme the centrepiece of his April 22 budget but said Darling was concerned about the cost and terms of the programme.

"Officials from both departments are continuing to look at the possibilities of such a scheme. However, no decision has yet been taken," a spokesman for Mandelson's department said when asked for comment on the report.

A Treasury spokesman denied any rift between the ministers and said: "This is one of a number of measures the Chancellor (Darling) will consider in the run-up to the budget."

The aim of the scheme would be to boost the car industry, whose sales have slumped due to the recession, while replacing older vehicles with more environmentally friendly cars.

A similar scheme in Germany helped lift new car registrations there by 40 percent in March.

British car sales were down 30 percent year-on-year in March.