Motability scheme under scrutiny as calls grow to stop luxury cars for claimants and cut tax breaks

Taxpayers could save billions each year if the Motability scheme limits access to luxury vehicles and prioritises second-hand cars for claimants, new analysis suggests. Concerns are mounting over the rapidly rising cost of the car-leasing initiative, which supports those claiming disability benefits by letting them exchange mobility allowance for a vehicle.

Motability currently accounts for one in five new cars sold in Britain, with the scheme receiving £2.8 billion in public funds each year. Since 2017, participation has surged by over a third, prompted partly by a rise in mental health claims. Critics argue that the scheme now suffers from a lack of robust oversight and has drifted away from its core purpose.

Matt Ryder, a former civil servant who oversaw Motability policy at the Department for Work and Pensions, has recommended ending public subsidies for luxury vehicles and restricting tax breaks to wheelchair-adapted cars. Ryder’s report, published by the Adam Smith Institute, claims that removing the £1.2 billion in annual tax exemptions and requiring the purchase of used cars could generate savings of more than £3 billion every year.

Currently, Motability vehicles are exempt from VAT and insurance premium tax. According to Ryder, this preferential treatment is unnecessary given that 85 per cent of claimants pay extra to obtain higher-specification cars, including prestige brands like BMW, Mercedes and Lexus. Tax relief, Ryder says, should be reserved for truly essential adaptations enabling independent living.

Some politicians have called these revelations “shocking and disturbing”, pointing to instances where relatively minor conditions lead to access to expensive new vehicles. Critics claim this undermines public confidence and places an unfair burden on taxpayers. Zia Yusuf, government efficiency lead for Reform UK, stated that scheme expenditure has “spiralled out of control” as the number of non-physically disabled recipients rises.

Motability has responded by highlighting the unique mobility challenges facing disabled people and the crucial independence the scheme provides. The organisation argues that shifting to second-hand cars could reduce access, increase costs, and create inconsistencies for beneficiaries. The Department for Work and Pensions has also emphasised that Motability operates independently, with most costs covered from the benefits allocated to claimants rather than additional taxpayer funding.