Labour has been urged to push further with a tax crackdown on the Motability car scheme used by disabled benefit claimants.
The Government is said to be discussing whether to make further cuts to the car leasing scheme’s benefits, after previously scrapping tax reliefs worth £300m a year.
Matt Ryder – former head of the Government’s Motability policy – told The i Paper it would be a “good idea” to go further and get more money back from the “generous” scheme.
But disabled motorists who depend on it warned that it would be “cruel attack” to make more changes that could add to their costs.
Motability facing more cuts
Former chancellor Rachel Reeves ended some tax reliefs enjoyed by Motability Operations, the private company running the scheme, at last year’s Budget.
Government officials are considering the idea of further cuts to the Motability scheme at a future budget, according to The Guardian.
But ending some of the tax relief on VAT and insurance premium tax at the November Budget last year has already pushed up costs for disabled drivers.
Currently, disabled people who receive the £300 mobility part of the personal independence payment (PIP) can hand it over to Motability Operations each month in exchange for a leased car.
There is usually an upfront payment required too, ranging from a few hundred pounds to a few thousands for the most expensive cars. The very cheapest cars have no upfront payment.
Motability Operations has begun passing on some of the costs of Reeves’ tax changes to disabled customers this summer. Motorists’ average upfront payment will have to rise by £400 for a standard three-year lease, the company has said.
‘Good idea to go further’
Ryder, the former head of Motability scheme policy at the Department for Work and Pensions (DWP), said it was worth pushing further to end more of the tax relief.
Prior to last year’s Budget, Ryder co-wrote a 2025 report for the right-leaning Adam Smith Institute think tank outlining ways to reform Motability.
It estimated that VAT and insurance premium tax reliefs were worth £1.2bn a year in total, based on HMRC figures.
“I think it would be a good idea to go further,” he told The i Paper. “The Motability scheme is still quite generous. Motability seem to have absorbed much of last year’s changes relatively easily.”
Matt Ryder, who was in charge of Motability policy for the DWP (Photo: Max Grizaard)Reeves’ changes imposed VAT on only the more expensive cars which require upfront payments – but not on the cheapest range of vehicles. Cars adapted for wheelchairs were exempt from VAT.
Ryder, who left Government in 2022, thinks the Treasury should now extend VAT to all Motability cars, except for adapted vehicles.
Second-hand cars
Motability currently sells cars to the wider second-hand market at the end of each disabled motorist’s lease. Ryder suggested that the Treasury could also impose VAT on those sales for the first time. “There’s no good reason not to tax that,” he said.
Motability also agreed last year to stop offering luxury models such as BMWs, Audis and Mercedes. The Government had said it was unfair to offer a “premium” cars that working people can’t afford.
Ryder said the Government could encourage Motability to offer second-hand cars to disabled users at the start of their lease to reduce some of the company’s costs.
“It’s reasonable to offer second-hand cars instead,” he said. “It’s what a lot of people who don’t get PIP in the general population have to do.”
‘It would be another attack’
Gail Ward, 68-year-old Motability user from Northumberland, urged Labour not to go any further with the tax crackdown.
Ward gets the highest rates of PIP for her osteoarthritis, hip dysplasia and Prinzmetal’s angina. She made an upfront payment of £499 for her Nissan Qashqai two years ago for a three-year lease.
Gail Ward, 67, relies on her Motability car to get to hospital appointments (Photo: Supplied)“It was cruel to go after the Motability scheme in the first place. Going after it again would be even more cruel,” Ward said. “It would be another attack on disabled people.”
Ward said the changes already made meant that some people will “struggle to find extra money” for higher upfront costs. “A lot of people would have to drop out of the scheme if costs were made even higher,” she said.
“How do you expect disable people to get around? How do expect disabled people to get to work, if that’s what the Government is so keen for people to do?”
Imali Chislett, a 25-year-old Motability user from Southampton, urged the Government against any further changes that could push people away from the car scheme.
“It doesn’t seem fair, that yet again disabled people are at the centre of the conversation the second that budget cuts are mentioned,” said Chislett, who has a range of disabilities, including hypermobile Ehlers-Danlos.
Chislett said that if the Government wants to encourage disabled people to stay in work or find jobs, strong support for the transport scheme was vital.
Deborah Persaud, co-chair of Trustees at Transport for All campaign group, said: “If ministers are considering deeper cuts to Motability, they need to listen to the damage they are already doing to disabled people’s lives and think again.”
The Government was approached for comment.
More widely on disability benefits reforms, a DWP spokesperson said: “The Milburn and Timms reviews, due in the autumn, will lay the foundation for sustainable reform, and we will not pre-empt their findings.
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