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£2,000 car-scrappage plan revived

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A plan to offer drivers £2,000 to scrap their old cars and buy new ones in a bid to kick start the UK motor industry appears poised to go ahead.

Reports that Chancellor Alistair Darling is "well disposed" toward the idea have also been welcomed by the car insurance sector, which is itself under pressure.

In Germany, a similar scheme has been hailed a success, and retailers and manufacturers hope that in Britain it could boost demand by up to 250,000 new cars.

Although it has not been confirmed that Mr Darling intends to feature such a scheme - or variations of it - in the Budget on April 22, it is nevertheless being strongly backed by business secretary Lord Mandelson.

It is also supported by Friends of the Earth, which claims it will encourage drivers to abandon their inefficient gas-guzzling cars for more fuel-efficient ones. The £160 million a year costs would likely be shared with the industry.

Meanwhile, some environmentalists say that it is better to keep running old cars because building new ones uses more energy than the scheme would save.

© Press Association 2009