Ending disabled benefits claimants’ access to luxury cars is a “missed opportunity” for a more radical shake-up of the Motability scheme, Rachel Reeves has been warned.
Matt Ryder, the former head of Motability policy at the Department for Work and Pensions, told The i Paper that the changes announced prior the Budget do not go far enough.
Motability Operations has announced that it will stop leasing high-end models such as BMWs, Audis and Mercedes “immediately”.
The company running the scheme has also agreed with the Government to make sure 50 per cent of its car fleet is British-built by 2035.
However, Ryder, who was in charge of Motability policy at the DWP between 2015 and 2017, said the reforms do not amount to much.
“I don’t think these changes will make much difference. It doesn’t go far enough. It will not save taxpayers any money at all.
“Motability are still offering high-spec models with some [car] brands,” he added. “There’s no guarantee this will be a permanent change. There’s nothing to stop them reintroducing luxury vehicles in future.”
Missed opportunity to end ‘hidden subsidy’
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Reeves was reportedly considering imposing VAT on Motability Operations for the very first time – a move that could have brought in £1bn a year for the Treasury.
But it appears the Chancellor has decided against the more radical move – at least for now – satisfied that the company has agreed to scale back the controversial use of the most expensive cars.
“If tax relief isn’t ended, it’s a missed opportunity,” said Ryder. “Ending the tax relief would have brought in money. It would have ended a hidden subsidy in the benefits system.”
Ryder – who has written a report on Motability for the right-leaning Adam Smith Institute – has urged Labour ministers to look at wider reforms in future.
DWP urged to look again at PIP eligibility
Ryder suggested the DWP looks at how to reduce how many personal independence payment (PIP) claimants can access the scheme, claiming the numbers had spun “out of control”.
Around 860,000 people who receive the PIP enhanced mobility payment use Motability. The overall costs of PIP will rise from £18bn to £34bn by 2030, according to the Office for Budget Responsibility.
“If the Government wants to restrain the spending on PIP, it has to make some clear choices,” said Ryder. “The rise in mental health cases in mobility [awards] is worth looking at as part of the PIP review.”
People who rely on Motability have said changes to the scheme would be “cruel” and could leave them stuck at home. They describe their cars as a lifeline that give them independence.
Campaigners have warned against any fresh attempt to restrict PIP benefit payments (Photo: Wiktor Szymanowicz/Getty)Ryder also thinks Motability Operations should cut costs by offering disabled people second-hand cars rather than new ones every three years when their lease ends.
“The average age of cars on UK roads is 10 years,” he said. “A move to second-hand cars would be fair and reasonable.”
On the idea of second-hand vehicles, a Motability Operations spokesperson said: “We’d lease used cars if it saved disabled people money but it doesn’t.
“Older vehicles cost more to maintain and are worth less when sold,” they added.
Relief in the car industry at limited changes
Motability Operations had argued that offering a wide range of models – including luxury brands – had helped it get better deals from manufacturers because of increased competition.
But there will be relief from the company – and the wider auto industry – that the scheme has avoided the bigger tax crackdown for now.
Passing on a VAT bill to customers would have pushed up advance payments by at least £3,000 per car, which could have forced some people to stop using the scheme.
A significant fall in Motability users would have hit manufacturing jobs and even pushed up car prices, industry experts previously told The i Paper.
The Conservatives welcomed the removal of luxury vehicles – but said the change “won’t save taxpayers a penny”.
Shadow Work and Pensions Secretary Helen Whately said it amounts to “window dressing”, and called for more “serious reform” to restrict PIP.
Lee Anderson, Reform UK’s welfare spokesperson, said the changes “do not go far enough” – pledging a crackdown on mental health claims for mobility payments.
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There is still the possibility that the Government tightens up on access to the Motability scheme in the future by changing the way mobility is defined in the PIP qualifying process.
Disability minister Sir Stephen Timms has suggested that eligibility changes to PIP could still be made – but not until after the review that he is leading ends in autumn 2026.
Reeves said the target to make 50 per cent of Motability’s cars British-made would “support thousands of well-paid, skilled jobs”. Andrew Miller, chief executive of Motability Operations, said the commitment “should put British car manufacturing into top gear”.
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