The car scrappage scheme has protected about 4,000 jobs in the UK auto industry, Government estimates have claimed.
At a cost of £400 million.
As stimulus measures go this isn\’t all that effective. The number of jobs saved is of course at the high end of estimates: no, don\’t be silly about this, this is the people who spent that money defending the decision to have done so. Of course they\’ve put the best gloss on it.
So £100,000 per job saved. Given median incomes of around £25,000 saving a job for a year costs four times what that job pays for a year. So we have a multiplier of 0.25…..which really, really, isn\’t the sort of number which gives one confidence in the merits of Keynesian spending. For that we want a multiplier of over 1.
And as for the idea that such Keynesian spending pays for itself….well, the tax take on £25,000 is something like £8,000 (income tax plus NI) so we\’re spending £100,000 to get £8,000 back in tax……which again doesn\’t look like such spending pays for itself.
No, sounds like it was a very bad idea indeed actually.