Motability “badly needs a new roadmap” for its finances – Work & Pensions and Treasury Committees

• ·        Government must explain why state assistance in absence of competition is an appropriate use of public money
• ·        Motability Operations’ large reserves are out of proportion to the risks it faces
• ·        MPs brand Motability Operations’ CEO Mike Betts’ £1.7 million salary “totally unacceptable”
• ·        NAO should conduct a full value for money review into Motability Scheme

In a unanimously-agreed Report on the Motability Scheme published today, Monday 21 May 2018, the Work & Pensions and Treasury Committees brand senior pay at Motability Operations “unacceptable”, and say its large reserves are out of proportion to the risks it faces. The Motability Scheme operates as a monopoly in its remit to provide disabled people with access to a vehicle, in return for some of their Personal Independence Payment benefit.

The Committees say:

• Motability badly needs a new roadmap for how it manages the scheme’s finances. It is difficult to square the high levels of executive pay and significant financial reserves at Motability Operations with the scheme’s charitable objectives and the wider context of pressures on welfare expenditure.

• Motability Operations is the only private organisation entitled to receive welfare payments for the leasing of vehicles. It receives this privilege from Motability without a competitive tender. No other car leasing company is – or can be – so heavily dependent on public funding. Motability Operations also benefits from two types of tax relief: on Value Added Tax (VAT), providing a 20 per cent discount on the value of the car, and Insurance Premium Tax (IPT), providing a 12 per cent discount on the insurance element of leasing the vehicle. In practice, Motability Operations has a monopoly on these reliefs, which cost the Government around £700 million per year. The Government must explain why providing such state assistance in the absence of competition is an appropriate use of public money.

• Mobility Operations’ reserves are out of proportion to the risks it faces, in its privileged market position. Motability Operations’ reserves increased by 328 per cent from £568 million in 2008 to £2.4 billion in 2017. Motability Operations has justified such large reserves on the grounds of its inability to diversify out of its one product – leasing cars – and one customer base – those in receipt of mobility welfare payments. However, by its own admission, it could survive a similar-sized financial crisis to that which occurred in 2008. Motability could well afford to reduce its prices, or make higher charitable donations.

• The total remuneration package of Mike Betts, Chief Executive of Motability Operations, increased by 78 per cent from £954,000 in 2008 to £1.7 million in 2017. Its pay is based on a comparison with FTSE 250 companies, but Mobility Operations does not face the same fundamental risks and stresses that FTSE 250 companies face. Given its existence as a taxpayer-supported monopoly, the zero competition it faces for customers, and the context of restrained welfare spending in which it operates, the level of Motability Operations’ executives’ pay is totally unacceptable.

• The NAO should conduct a value for money investigation into the Motability Scheme, with full access to information and papers. The Committees assert that “given Motability’s “privileged position, the absence of competitive tendering, reliance on public funds, and question marks over its approach” it has a “clear responsibility to accept” such a ‘full access’ review.

Rt Hon. Frank Field MP, Chair of the Work and Pensions Committee, said:

“It is impossible to calculate the human happiness that has resulted from the freedom and independence that Motability scheme - the first and only scheme of its kind – offers disabled people.

“But the organisation operates as a monopoly that faces no competition in accessing disabled people’s often hard-won PIP benefits.

“The levels of pay pocketed by its executives and the cash reserves it is hoarding are totally out of whack with reality of its position in the market. That one member of staff is paid over ten times what the Prime Minister earns, is one example of where Motability needs to get a grip of itself and realise the privileged position in which it trades. 

“Its executives must co-operate with a full NAO investigation into the value it is offering the taxpayers who fund a significant chunk of its operations.”

Commenting on the Report, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said:

“The Motability Scheme is a valuable service that is helping over 600,000 disabled people live more independently. But such high levels of executive pay and significant financial reserves are difficult to square with the honourable objectives of the scheme.

“It seems that Motability may have lost its way. DWP should ask the NAO to carry out a full inquiry into the value for money of the Motability Scheme. This could help ensure that those who rely on the scheme are able to access it on the best value terms.”

--Ends--

Notes to Editors

• The Motability Scheme is designed to provide people entitled to mobility welfare payments with access to a vehicle. The scheme involves transferring an individual’s mobility welfare payments to Motability Operations, which provides the individual with a leased car, along with insurance, maintenance and road-side assistance. Motability Operations is the company which buys and leases the vehicles, and Motability is the charity responsible for oversight of the scheme and making grants in support of its objectives.