A scheme under which motorists could be paid to trade in their old cars for new, less-polluting models is being looked at by ministers, according to business secretary Lord Mandelson.
Figures have just been released showing that new car sales slumped by 30.9% last month compared with January 2008 as drivers tightened their belts in a bid to combat rising car insurance prices and other motoring costs.
It is thought that a "scrappage" scheme similar to that operated in some continental countries could increase sales, as well as helping ministers meet targets for cutting greenhouse gases.
But officials at Lord Mandelson's Department for Business, Enterprise and Regulatory Reform said they had yet to be convinced that such a scheme would provide value for money and cautioned that no decision had yet been taken on whether to introduce scrappage in the UK.
Drivers in Germany receive 2,500 euros (£2,245) for trading in a car more than nine years old, while in France motorists can receive up to 1,000 euros (£900). Spanish motorists have recently begun to benefit from the scheme.
It is thought that thousands of drivers in Britain could be encouraged to buy a new car if a similar incentive is introduced.
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