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MPs ask whether Motability monopoly should face more competition

21 May 2018

The Motability Scheme – Treasury and Work & Pensions Committees.

View report

This report recognises the importance of the Motability scheme in enabling disabled people to become more independent through the purchase of lease of a vehicle but raises important questions about the finance and governance of the scheme.

Motability is composed of three parts - Motability, the charity which oversees the scheme, Motability Operations, and the Motability Tenth Anniversary Trust.

The committee highlighted the following issues:

  1. Questions as to whether Motability Operations, and the Motability Tenth Anniversary Trust are or need to be separate charities.

  2. Motability as a monopoly with no one else able to compete – Money comes from DWP mobility payments and extensive tax breaks (Value Added Tax and Insurance Premium Tax relief of £700 million per year). It is impossible to know whether disabled drivers would be able to access better loans elsewhere and raises the question as to whether Motability’s financial support is an appropriate use of public money.

  3. Although Motability proactively engaged with the Department for Work and Pension (DWP) on transitional support it was the DWP who pressured Motability to increase its initial package of support to claimants.

  4. High reserves, which may allow the company to raise finance at a cheaper rate, are out of proportion to the risks it faces. Motability Operations could well afford to reduce its prices or make higher charitable donations.

  5. Four retail banks own Motability Operations and receive a return on their investment each year of almost £700,000, plus management fees and interest. It does not sit comfortably with the Committees that the big four banks have made such significant profits from a virtually risk-free investment in a charitable scheme.

  6. Motability Operations bases its pay on a comparison with FTSE 250 companies. Motability Operations does not, however, face a number of fundamental risks and stresses that FTSE 250 companies face.

The Committees, the Department for Work and Pensions, and Motability are all in agreement that a National Audit Office-led value for money inquiry into the Motability Scheme and the organisations running it should be carried out to:

  • assess whether better value for the public purse and the scheme’s customers would be achieved if the scheme was opened to greater competition.

  • consider whether boardroom pay and the exponential increase in reserves over recent years are justifiable.