Is the Motability scheme delivering value for money?

As part of the government’s £5bn axe to benefits, the focus has moved to the Motability scheme. Sean O’Grady looks at what is driving public concern

The proposed changes to social security announced by the secretary of state for work and pensions, Liz Kendall, have focused public attention both on the size of the welfare bill and its efficacy. One of the areas that has caught the attention of the public is the use of personal independence payments (PIP) being put towards the lease of a car on the Motability scheme...

What is the Motability scheme?

It’s for people with, in principle, more severe disabilities and limits to their mobility who qualify for the higher rate of PIP, or the higher rate of the old disability allowance, and their equivalents in the devolved administrations – some £75.75 per week.

It is public money and can be used as the claimant sees fit – taxis, buses or buying their own car. Or it can be channelled through a private company, Motability, to lease – not purchase/own – a new vehicle, or used to help buy a more costly model if the claimant has the additional funds, but there are limits on who can drive and what kind of cars qualify.

Mercedes-Benz limousines or Lamborghinis, for example, are excluded. There are also limitations on who can drive and where (via tracking devices). The number of insured drivers is limited to three, with only one under the age of 21.

What’s the problem?

The public perception of abuse or over-generosity, which can be exploited for political ends. For example, in the words of the deputy leader of Reform UK, Richard Tice: “Motability scheme never designed to give £50,000 Mercs to bed-wetting boy racers. Why should parents whose child cannot sit still in class qualify for free car? Govt waste of our cash out of control.”

This a fairly typical example of the current complaints about Motability.

Is the claim true?

Not really. It is possible to use the PIP money to help fund the purchase of a fairly expensive smaller Mercedes-Benz (a GLA, for example), but it requires a much larger payment up front – almost £7,000, and the car is only ever leased, ie rented – it is not the property of the user, they can’t sell it and the cars are therefore never “given” to them by taxpayers.

Only one younger person could drive it, and only for the purpose of helping the person with a disability. But if the scheme isn’t properly policed, it’s easy to see how it can be “gamed” by those cynically using someone’s status as a disabled person for the benefit of tax-free motoring for others.

Has the number of people making use of Motability ballooned?

On a long view – yes, and dramatically. Before Motability, the government lent people with physical disabilities (typically war veterans) a strange one-seat contraption called the Invacar (“invalid carriage”), which was unsafe and stigmatising. When the Invacars were phased out starting in 1976, there were 20,000 on the road. Today, there are more than 800,000 Motability cars, the UK’s biggest fleet and responsible for one in five new car sales.

The reasons are: more qualifying for disability living allowance (DLA)/PIP, especially with mental health issues; the wider car leasing revolution, which drastically reduces the cost of running a nice new car – ie leasing/renting rather than purchasing.

Why is Motability a private company?

It doesn’t need to be, and it certainly doesn’t need to have a monopoly, though it uses its muscle to drive a hard bargain with the manufacturers (or should). It’s owned by the big banks, which decline to draw a dividend, and has a turnover of £6.8bn, overwhelmingly direct from the Department for Work and Pensions. The total remuneration package in 2024 for its chief executive, Andrew Miller, was £748,000; the equivalent figure for Martin Hamilton-Jones, its chief financial officer was £691,000.

Motability Operations plc made a loss of £565m. This was down to an increase in investments to support customers in both electric vehicle and new vehicle payments, declines in the residual value of the fleet, and inflation.

So can the very rich use the Motability scheme?

Because the PIP isn’t means tested, and won’t be under the Kendall reforms, anyone can claim it because, for example, not having the use of one’s legs, imposes extra living costs irrespective of wealth or income.

How could the government take the heat out of the argument?

Aside from tightening the criteria for PIP, which is being done for new claimants, a relatively high threshold for means testing would assuage some public concerns, as would a further trimming of the type of vehicles in the scheme, and those allowed to drive them. More competition for the Motability company would also help. An increase in policing vehicle usage, too, though this is a role for which Motability, with its potential vested interest in boosting its customer base, is not suited.

What do the public want?

As ever, they would like to be reassured their money isn’t wasted, and at the moment more than half (54 per cent) think the welfare system does poorly at giving the taxpayer good value for money. There are no figures specifically on Motability but it’s reasonable to presume the voters would be generally in favour of reform here as well – means testing for PIP and/or Motability remains an option, as should reform of the way the company operates.