NAO finds Motability overcharged by £390 million

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Motability, the company which supplies cars to people with disabilities has been accused of overcharging customers by £390 million over the past 10 years. The head of Motability has been forced to resign after a previously unreported bonus scheme emerged.

People who receive in receipt of certain disability benefits can opt to forgo the benefit money and instead get a leased car, along with insurance, maintenance and breakdown cover.

The National Audit Office (NAO) looked at Motability’s own forecasts on the future value of the used cars they get back and found them out of line with the market average, resulting in customers being charged £390m “more than was required” to cover lease costs since 2008.

The chief executive Motability Operations, Mike Betts, has now resigned after the NAO inquiry found he was in line for a bonus worth £1.86m in September 2018 rising to approximately £2.2m by 2022.

This number had not previously been reported publicly and is embarrassing for the government given the number of benefit claimants losing their cars due to Welfare Reforms.

The Work and Pensions and Treasury Select Committees have previously labelled Betts £1.7m salary as “totally unacceptable”.

Chair of the Work and Pensions Select Committee, Frank Field MP had this to say on the NAO’s findings:

It is beyond appalling to learn that money that could have been used to improve the lives of disabled people will be lining his pockets instead

Motability is made up of the “operations” business and two charities. They account for a staggering 10% of all new cars bought in the UK.

Bonus Schemes

The NAO found that bonuses for executive directors has been “generous” and linked to performance targets set at levels that had been “easily exceeded” since 2008.

As a result, in the first 7 years of one particular bonus scheme, 5 executive directors received £15.3m in bonuses.

As of March 31 this year, the business also held a staggering £2.62 billion in reserves. This is a company that claims it puts money back into helping people with disabilities.

Not to mention that the business arm of the scheme also benefits from certain tax concessions which in 2017, were worth at least £888 million.

The Work and Pensions Committee said potential rival companies cannot compete with Motability because of the substantial tax breaks it gets from the government which no other firm is entitled to.

Due to this it does not face any competitive pressure when tendering for the contract to run the scheme.

The NAO also reported that there has been a “limited effort” to understand why only 36% (appoox 614,000) of eligible customers use the scheme. A rare piece of praise commended the firm for achieving a 99% satisfaction rate.

Sir Amyas Morse, head of the National Audit Office

Sir Amyas Morse who heads the National Audit Office said;

[there’s] much to be proud of at Motability”, but added “stakeholders including the government must give far-reaching consideration to the scheme…. in particular, whether its governance and accountability arrangements are robust enough”.

I think that it is perfectly clear that is not the case considering, its boss had a secret bonus scheme and that the company are setting targets that are intentionally easy to achieve so as to get their bonuses.

A spokesperson for the Department for Work and Pensions (DWP) told me;

” The report strengthens our concerns regarding Motability Operations’ financial model” adding “the department is committed to working with the charity to achieve improved outcomes for disabled people”.

A Motability Operations spokesman said; Mr Betts will resign “following the implementation of actions agreed as an outcome of the NAO review” and this will be “no later than May 2020”.

Responding to the report, the Motability charity said it will;

“seek improved mechanisms to better influence Motability Operations’ executive remuneration”

My thoughts on this damning report are; why are we paying a private company to do this? Surely it would be much more cost effective to have this run in house by the DWP? Motability appear to have been allowed to run themselves as they like with no government oversight.

While people with disabilities are facing cuts to their benefits and are being told they are no longer disabled by somebody with no medical training, the company have over £2 billion just sitting around. This would be much better in the public purse helping those who need it, not going to fat cat executives who don’t care.