Motability cuts BMW and Mercedes – this reform is just the tip of the iceberg ...Middle East

Disability benefits claimants will no longer be allowed to access luxury cars such as BMWs, Audis and Mercedes on the Motability scheme.

Motability Operations, the company which runs the scheme, has announced that it will stop leasing these high-end models “immediately”.

It follows pressure from the Labour Government to end the luxury options, with opposition parties calling the range of cars an “absolute scandal”.

Chancellor Rachel Reeves was concerned about the fairness of offering a “premium motoring experience” that most working families cannot afford.

Motability Operations has also agreed with the Government to commit to making 50 per cent of cars available through the scheme British-built by 2035.

The pre-Budget changes take the pressure off Motability – which leases cars to disabled people in exchange for monthly benefits money – at least for now.

It follows months of controversy over the types of cars available, the generosity of the scheme and huge growth in numbers signing up.

Motability spared tax crackdown – for now

Reeves was reportedly considering imposing VAT on Motability Operations for the very first time – a move that could have brought in £1bn a year.

But, it appears the Chancellor has decided against the most radical move for now, satisfied that the company has agreed to scale back the most expensive cars.

Ending the VAT relief enjoyed by the scheme remains an option in the future however, should the Government decide it is big enough to cope with a tax burden.

Around 860,000 personal independence payment (PIP) claimants use the scheme, the latest annual figures show.

Only those who get the enhanced PIP mobility payment qualify for Motability, and can choose to use their benefit on the car scheme.

Disabled drivers hand over most or all of their £300 PIP mobility money each month in order to lease a car, typically for three years.

There is usually an upfront payment required too, ranging from a few hundred pounds for the cheapest new models to several thousand pounds for the most expensive brands.

PIP review could still lead to Motability changes

There is still the possibility that the Government tightens up on access to the Motability scheme by changing the way mobility is defined for PIP.

Disability minister Sir Stephen Timms has suggested that eligibility changes to PIP’s mobility component could be made – but not until after the review that he is leading. It is expected to conclude in autumn 2026.

The Conservatives and Reform UK have promised to stop those with mental health issues and ADHD from accessing the Motability scheme by restricting PIP. Nigel Farage’s party had called access to luxury cars an “absolute scandal”.

Disabled people have previously told The i Paper they fear the Timms review could still lead to PIP cuts next year, despite Labour backbenchers forcing the Government to ditch planned reforms in the summer.

Scheme users also said that the type of car model should be a matter of choice, given the higher advance payments they pay for higher-end vehicles.

Motability Operations had argued that offering premium models had helped the company get better deals from manufacturers – because of the fierce competition to sell to the huge scheme.

But, there will be relief that the scheme has avoided the bigger tax crackdown for now. Passing on 20 per cent VAT to customers would have pushed up advance payments by at least £3,000 – forcing some benefit claimants to stop using the scheme.

A significant fall in Motability users would have hit manufacturing jobs and even pushed up car prices, The i Paper previously reported.

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Reeves said Motability Operations’ commitment to make 50 per cent of its available cars British-made would “support thousands of well-paid, skilled jobs”.

Nissan appears to be one of the biggest beneficiaries of the changes. The scheme will double the number of British-built vehicles from the manufacturer to around 40,000.

Andrew Miller, chief executive of Motability Operations, said “our ambitious commitment should put British car manufacturing into top gear”.

BMW said the move to end its participation in the scheme “disappointing” for many customers. Audi and Mercedes have been approached for comment.

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