MPs attack Motability car buying scheme’s £2.4 billion cash ‘shock absorber’

MPs have called for the return Motability scheme funds to the Treasury after it emerged that the charity was holding on to £2.4 billion after “decades” of underspending to the tune of more than £200 million-per-year.

The charity, which funded the purchase of 230,000 new cars with cash diverted from disabled motorists’ State disability allowance in 2017, described the cash reserves as a ‘financial shock absorber’ in its annual reports.

But The Daily Mail has reported that MPs have rounded on the scheme’s operators after hearing of the unused resources which Motability Operations Plc claimed was needed to protect it against business risks such as fluctuations in inflation, interest rates and car prices.

The National Audit Office deemed that reserves of only £61million “exceeded the necessary margin of safety” when it examined the organisation back in 1996, however, and has not revisited its operations since.

Declan O’Mahony, director of the charity that oversees the Motability scheme, told the Daily Mail: “Holding reserves of £2.4billion is appropriate and proportionate. The reserves have been built up from surpluses generated by the scheme in good times and will protect us from whatever bad times we may encounter.”

While many franchised car dealers may have liked to have seen the excess £200 million-a-year invested in new cars for more Motability users, MPs this week demanded that the cash be clawed back by the Treasury.

Around £2 billion a year is paid directly from the Department for Work and Pensions to Motability Operations Ltd and John Mann, a Labour member of the Commons Treasury committee, described the stockpiling of Motability scheme cash as scandalous while Nigel Mills, from the Commons public accounts committee called for an inquiry.

Mann said that the £2.4 billion of idle funds as “outrageous”, while Mills said: “No charity arm should be hoarding that kind of money.

“It is effectively public money, and it is completely unjustified that a charitable service for the disabled – with a guaranteed income from benefits claimants – has got so much surplus.”

Tory MP Mills said that Motability Operations Plc, which is owned by banks Lloyds, Barclays, HSBC and RBS, should charge disabled motorists less for their cars, adding that: “Paying the directors hefty wages 11 times what the Prime Minister gets is outrageous.”

The Daily Mail reported that, including bonuses, incentives and pension payments, Motability chief executive Mike Betts received up to £1.7 million-a-year.

Set up in 1977, Motability sees a £58-a-week disability allowance payment of participating people paid directly into the scheme to fund the purchase of a new car, wheelchair or mobility scooter.

In the case of a car being bought, the fund pays for the vehicle as well as insurance, tax, servicing, breakdown cover and replacement windscreens and tyres.

Motability Operations Plc buys the cars, with funds borrowed from banks, and remarkets them after three years, making money from the vehicles’ resale.

In 2017 the charitable organisation sold 232,500 vehicles, contributing to a revenue of £4.2 billion and profit after tax of £212.7 million.

AM asked the NFDA to comment on Motability Operations Ltd’s stockpiling of funds. Sue Robinson, NFDA director, said: “Franchised dealers’ only involvement in the scheme is to provide and service vehicles on behalf of Motability.”

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