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 in the Budget by restricting the subsidized car scheme for disabled people.

The Chancellor is considering scrapping the tax breaks that free Motability’s 860,000 users from having to pay VAT or insurance premium tax on the cars they rent.

He is also said to be trying to stop benefit claimants from choosing luxury brands such as Mercedes and BMW following an outcry over the generosity of the system, which costs taxpayers £2.8bn a year.

But The Times has reported that Ms Reeves is unlikely to limit who can access the scheme in her major Budget announcement next month, even after people thought to suffer from constipation, tennis elbow and anxiety are found to be eligible.

There is said to be tension in the government over retargeting welfare after Labor supporters forced ministers to abandon £5bn of cuts to benefits over the summer.

It comes just a week after Kemi Badenoch told the Tory conference that she would restrict Motability, which allows disabled people to swap mobility allowance for a new car, to people with a ‘severe disability’ rather than ‘ADHD’.

Shadow Work and Pensions Secretary Helen Whately said: ‘The Chancellor followed our lead and said he would do something about Motability.

‘I’m glad you’re following our welfare announcements, but the Government must do much more to fix welfare and reform the Mobility Programme.

‘Mobility should be available for people with severe disabilities. The Conservatives would therefore prevent people with low levels of mental health problems, such as mild depression and ADHD, and neurodiversity from getting free cars.

‘We will also stop taxpayers funding luxury cars through Motability, instead ensuring every penny is spent supporting people with a genuine disability.’

In an interview with Channel 4 news, Ms Reeves vowed to push ahead with welfare reform. ‘We cannot leave prosperity untouched. We don’t get to the end of this Parliamentary session and I haven’t actually done anything. “We need to do the reform in the right way and take people with us,” he said.

Earlier this year, Motability boss Andrew Miller was forced to deny claims the scheme had become a ‘joke’ after a Daily Mail investigation revealed the charity arm was holding £1.7 billion in cash without yet being transferred to good causes.

This newspaper’s revelation revealed that it has a turnover of £7bn, accrued from the government benefits it receives plus income from selling used cars on the second-hand market, and that its customer base grew by 15 per cent last year due to a boom in the number of people on disability benefits.

Despite costing taxpayers around £2.8bn a year, the Mail also discovered Motability had £1.3bn of cash in the bank last year from its accounts.

James Lawson, of the Adam Smith Institute think tank, said: ‘The Chancellor must use this budget to rein in wasteful spending, with welfare costs already spiraling out of control and fiscal headroom so small. Removing [Motability’s] A £1.2bn tax cut and the cancellation of the provision of new and premium models would be a good first step.’

But Emma Vogelmann, of disability group Transport For All, said scaling back the plan would ‘separate disabled people from everyday life’.

Despite costing taxpayers around £2.8bn a year, the Mail also discovered Motability had £1.3bn of cash in the bank last year from its accounts.

James Taylor, of the charity Scope, also warned: ‘Restricting eligibility for Mobility could hit disabled people on low incomes hard.’

Meanwhile, ministers insisted there would be no U-turn on unpopular plans to introduce inheritance tax on family farms and business assets worth more than £1 million.

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

‘This tax will cause great harm to farmers, food production and environmental management.’