Reeves sets sights on Motability to save £1billion in Budget: Will Chancellor scrap tax breaks for disability car scheme users?

Rachel Reeves hopes to save more than a billion pounds at the Budget by restricting the subsidised car scheme for disabled people.

The Chancellor is considering scrapping tax breaks which spare Motability’s 860,000 users from having to pay VAT or insurance premium tax on their leased vehicles.

She is also said to be looking at preventing benefits claimants from choosing luxury marques such as Mercedes and BMW in the wake of an outcry at the generosity of the system, which now costs taxpayers £2.8 billion a year.

However, The Times reported that in her crucial Budget statement next month Ms Reeves is unlikely to limit who can access the scheme, even after it emerged that people deemed to be suffering from constipation, tennis elbow and anxiety qualify.

There is said to be nervousness in G0vernment about welfare being targeted again after Labour backbenchers forced ministers to abandon £5 billion in benefits cuts over the summer.

It comes just a week after Kemi Badenoch told the Tory conference she would restrict Motability, which allows disabled people to exchange their mobility allowance benefits for a new car, to people with ‘serious disabilities’ and not those ‘with ADHD’.

Shadow Work and Pensions Secretary Helen Whately said: ‘The Chancellor has followed our lead and said she’ll do something about Motability.

‘I’m glad she’s been keeping an eye on our welfare announcements, but the G0vernment should be doing much more to fix welfare and reform the Motability Scheme.

Chancellor Rachel Reeves (pictured) is considering scrapping tax breaks which spare Motability’s 860,000 users from having to pay VAT or insurance premium tax on their leased vehicles

‘Motability should be there for people with serious disabilities. That’s why the Conservatives would stop people with low-level mental-health problems and neurodiversity – like mild depression and ADHD – getting free cars.

‘We would also put an end to taxpayers funding luxury cars on Motability, instead ensuring every penny goes towards supporting genuinely disabled people.’

In an interview with Channel 4 news, Ms Reeves vowed to press ahead with welfare reform. ‘We can’t leave welfare untouched. We can’t get to the end of this Parliamentary session and I’ve basically done nothing. We have to do reform in the right way and take people with us,’ she said.

Earlier this year, Motability boss Andrew Miller was forced to deny claims the scheme had become a ‘racket’ after a Daily Mail investigation revealed it was sitting on a surplus of £4 billion while its charitable arm was holding £1.7 billion in cash yet to be handed to good causes.

This newspaper’s exposé revealed it enjoys a turnover of £7 billion – accrued from the state benefits it receives plus revenue from the sale of used cars on the second-hand market – with its customer base growing 15 per cent last year because of the boom in those claiming disability benefits.

Despite costing taxpayers around £2.8 billion a year, the Mail also discovered from Motability’s accounts that it held £1.3 billion cash in the bank last year.

James Lawson of the Adam Smith Institute think-tank said: ‘With welfare costs already spiralling out of control and little fiscal headroom, the Chancellor must use this budget to rein in wasteful spending. Abolishing [Motability’s] £1.2 billion in tax reliefs, and scrapping the provision of new and premium models would be a good first step.’

But Emma Vogelmann of the disability group Transport For All said scaling back the scheme ‘would lock disabled people away from daily life’.

Despite costing taxpayers around £2.8 billion a year, the Mail also discovered from Motability’s accounts that it held £1.3 billion cash in the bank last year

And Scope charity’s James Taylor warned: ‘Restricting eligibility to Motability could hit disabled people on lower incomes hard.’

Meanwhile ministers have insisted there will be no U-turn on unpopular plans to impose inheritance tax on family farm and business assets worth more than £1 million.

Tim Farron, environment spokesperson for the Liberal Democrats, said: ‘This is hugely disappointing and a kick in the teeth for British farmers.

‘This tax will do immense damage to farmers, food production and environmental stewardship.’