A scheme that has provided a welcome boost to sales of new cars in the UK is to be extended, Business Secretary Lord Mandelson has said.

In a speech to delegates at the Labour Party conference in Brighton, he said the scheme, which started in May and gives consumers £2,000 off a new car if they trade in one at least 10 years old, was running out of money.

He said the Government cannot do everything but that does not mean doing nothing and said the scrappage scheme would be extended to cover 100,000 more cars and vans.

The £300m initiative had been due to end in February, or when the limit of 300,000 vehicles being scrapped was reached. So far 227,750 orders have been placed through the scheme at a cost to the Government of around £227 million.

The extension will see the Government commit an additional £100 million to the scrappage scheme, which will still end when the money runs out.

Carmakers, who match the governments commitment of £1000 per car, have welcomed the news.

Paul Everitt, Chief Executive of The Society of Motor Manufacturers and Traders said it was an extremely important decision that will inspire consumer and business confidence.