Chancellor Rachel Reeves is exploring significant changes to the Motability scheme that could save over £1 billion in her upcoming Budget announcement. The programme, which enables disabled individuals to lease vehicles using their mobility allowance benefits, currently serves 860,000 users and costs taxpayers £2.8 billion annually.
Proposed Changes
The Treasury is examining several potential reforms to the scheme:
Tax Relief Modifications: Officials are considering eliminating current tax exemptions that allow Motability users to avoid paying VAT and insurance premium tax on their leased vehicles.
Vehicle Selection Restrictions: Plans are being discussed to limit access to premium brands such as Mercedes and BMW, following public criticism about the types of vehicles available through the programme.
Eligibility Criteria: While Ms Reeves may modify financial aspects of the scheme, sources suggest she is unlikely to restrict who can access it, despite reports that individuals with conditions including constipation, tennis elbow, and anxiety currently qualify. Government officials are reportedly cautious about welfare changes after Labour MPs successfully opposed £5 billion in benefit reductions earlier this year.
Political Context
The potential reforms come shortly after Conservative leader Kemi Badenoch announced at her party conference that she would limit Motability to people with “serious disabilities” rather than those “with ADHD.”
Shadow Work and Pensions Secretary Helen Whately welcomed the Chancellor’s attention to the issue, stating that Motability should focus on supporting people with serious disabilities. She outlined Conservative proposals to exclude individuals with minor mental health conditions and neurodiversity from the scheme while eliminating luxury vehicle options.
Speaking to Channel 4 News, Ms Reeves emphasized the necessity of welfare reform, saying the government cannot complete its parliamentary term without taking action, though changes must be implemented carefully with public support.
Scheme Background
A recent investigation revealed that Motability maintains a £4 billion surplus, while its charitable division holds £1.7 billion in cash yet to be distributed. The organization operates with a £7 billion turnover, derived from government benefits and used car sales, with its user base expanding by 15 percent last year amid increased disability benefit claims.
Despite the £2.8 billion annual taxpayer cost, financial records show the scheme held £1.3 billion in cash reserves last year. Motability chief Andrew Miller has defended the programme against accusations that it has become a “racket.”
Competing Views
Supporting Reform: James Lawson from the Adam Smith Institute think-tank argued that with welfare expenses escalating and limited fiscal flexibility, the Chancellor should eliminate the £1.2 billion in tax exemptions and discontinue provision of new and luxury vehicles.
Opposing Cuts: Emma Vogelmann of Transport For All warned that reducing the scheme would isolate disabled people from everyday activities. James Taylor from Scope charity cautioned that limiting Motability eligibility could severely impact disabled people with lower incomes.
Additional Budget Measures
In related news, government ministers have confirmed they will not reverse controversial plans to impose inheritance tax on family farms and business assets exceeding £1 million in value. Liberal Democrat environment spokesperson Tim Farron criticized the policy as disappointing and harmful to farmers, food production, and environmental management.
