The car scrappage scheme will finish at the end of the year, the Minister of Finance, Mr McCreevy has announced. Since the scheme was introduced more than 42,000 cars, aged 10 years or more, have been scrapped, with the owners availing of a £1,000 vehicle registration tax refund on the purchase of a new vehicle.

There had been speculation in the motor industry that Mr McCreevy would extend the scheme but yesterday he said all those who wanted to avail of the scheme had sufficient time to do so.

Reacting to the announcement, the Society of the Irish Motor Industry (SIMI) said such schemes were of limited duration.

"We must accept that with over 20 per cent of all cars over 10 years of age having been scrapped, this scheme has probably run its course." However, the chief executive of the SIMI, Mr Cyril McHugh said it was important the Minister for Finance now protect the 4,000 jobs partly created by the scheme, by reducing the vehicle registration tax to 20 per cent in the December Budget.

The scrappage scheme was introduced in the 1995 budget and was originally to run until the end of 1996, but it was extended for a year by the previous finance minister, Mr Ruairi Quinn.

It is expected there may be a rush towards the end of the year to have older cars scrapped, giving a small boost to car sales.

The scrappage scheme was introduced for two main reasons:

to remove older and potentially dangerous cars from the road and;

to protect the environment by lowering exhaust emissions.

Older cars tend to emit more harmful emissions because they generally don't use unleaded fuel.

It is understood the Government decided not to extend the scheme, when it discovered that many in the motor industry believed it had run its course. However, it remains possible that the scheme will be introduced again in a few years.

In previous Government statements about the scrappage scheme, the importance of a programme of compulsory car testing was also emphasised.

Under an EU directive, all member-states must have a compulsory testing programme in place by January 1st, 1998.

According to sources in the motoring industry, it is highly unlikely the Department of the Environment will have the scheme in place by then.

The Government has yet to appoint consultants to oversee a tendering procedure to choose the company which will operate the testing scheme. It is expected compulsory testing will not be in place until July of 1998.