Motability: a Briefing Paper on value for money by the Mobility and Access Committee for Scotland (2022)
1. MACS wishes to see better value for money in the Motability scheme, in particular to ensure that excess profits are returned to customers, rather than donated to the charity or added to reserves.
2. Motability is the biggest fleet provider in Europe, and the largest purchaser of new vehicles in the UK, accounting for 1 in 10 of all new car sales. It benefits from unique tax exemptions (VAT and Insurance Premium Tax) enabling it to provide a competitive service to over 650,000 customers in the UK who use their disability benefits to lease a car or mobility aid (powered wheelchair, scooter).
3. The Motability Charity’s income has grown massively in recent years. The Charity Commission reports it is now the tenth biggest charity in the UK in terms of size of investments with funds of £1,368 billion at the end of 2021. Almost all these funds derive from the benefits of individual disabled people, having been donated by Motability Operations (the charity’s commercial partner) from surplus profits. A chart on the Charity Commission website shows the growth of Motability’s assets.
4. In the latest financial year, Motability Operations made a profit of £560 million and donated a further £170 million to the Motability Charity. Together, these sums equate to £1,150 for every Motability customer. The net assets of Motability Operations increased in the past year to £2.88 billion. The National Audit Office and Westminster Work and Pensions and Treasury Select Committees criticised Motability for acquiring excessive reserves and for excessive executive remuneration in 2018-19.
5. In addition to these profits, MACS believes that Motability Operations also has considerable scope to reduce costs (from premises, to remuneration, to printing), which would provide further opportunities to cut the cost of leases. We believe salaries at all levels are especially above benchmark levels, and are generally supplemented by generous benefits for pension, private healthcare, car allowances etc.
6. In July 2021, MACS wrote to Motability Operations, jointly with the Disabled Persons Transport Advisory Committee (DPTAC, UK) and the Inclusive Mobility Transport Advisory Committee (IMTAC, Northern Ireland), to ask that future profits beyond what is required to run the business should be returned to customers. Motability Operations rejected this request, saying that future profits would continue to be “invested in the business” or donated to the charity.
7. However, Motability Operations has begun to return excess funds to customers in a number of ways. The ‘Good Condition Bonus’ which customers receive on completion of a three year lease (if the vehicle is in good condition) has increased in the past few years from £250 to £600 currently. Insurance rebates (£50) were introduced in 2021, reflecting the lower insurance costs during the pandemic. Most significantly, in February 2022, Motability Operations introduced a new rebate for customers starting a new lease - the New Vehicle Payment (£250).
8. As MACS was at the forefront of advocating a return of excess funds to its customers, we welcome these measures; but MACS also believes that there is much more that Motability can and should do to ensure that customers do not pay more for their vehicles and equipment than they need to. Ultimately all the money in this system is derived from disabled people’s benefits.
9. We also note that some costs to customers have gone up which may negate the £250 New Car Payment (i.e. higher advanced payments, hand controls previously included in the lease now costing £125 for basics and boot hoists significantly increasing in costs). As such many customers will still pay more over the course of their lease period.
10. In addition to our concerns on value for money, MACS also wishes to see more accountability in Motability governance. Motability customers have no say in how excess profits are used, or if they wish to contribute donations to the charity, or in how the Charity spends its money. Motability Operations, the sole provider of services for the charity, is owned by financial institutions: Barclays, Lloyds TSB, HSBC and RBS.
11. There is little scope for customers, the public or indeed governments (which provide the customers’ disability benefits and Motability’s tax breaks) to influence either the commercial scheme or the charity’s policies. As a joint charity/commercial operation, it is not subject to normal public sector governance requirements such as the Public Sector Equality Duty of the 2010 Equality Act or Freedom of Information legislation.
12. MACS recognises the importance and value of the Motability scheme to thousands of customers but believes that more fundamental change is required in order to provide adequate value for money and accountability. As responsibility for Scottish disability benefits are transferred from Westminster to Holyrood, the Scottish Government has become a key stakeholder for Motability, which is currently the sole accredited provider of services under the Scottish Government’s new Accessible Vehicle and Equipment Scheme (AVES). MACS has informed Scottish ministers of our concerns, and of our hope to see fundamental change once the transfer of responsibility for disability benefits has been completed.