But the car you are trading in his value so it's hardly free money is it?
Well of course, but if the value of the car is £100 then it's free money. It's not really an incentive for people who have decent amount of equity in their cars. It's more for people who perhaps hadn't considered a brand new car and have a fairly old/worthless car.
It's entirely a marketing thing, rather than the previous government scrappage scheme.