Fresh Motability criticism after watchdog’s report

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The company that runs the Motability car scheme and the charity that oversees its work are facing fresh criticism from disabled campaigners, following a watchdog’s report that criticises the company’s huge financial reserves and excessive profits and executive pay.

The National Audit Office (NAO) report concludes that the Motability scheme has delivered “excellent service” and “remarkable satisfaction levels” (99 per cent in 2017-18) among its more than 600,000 customers.

But it also says that the scheme has generated “substantial cash surpluses”, while Motability Operations – the company that runs the scheme – has failed to disclose more than £1.5 million in bonuses that were due to be paid to its chief executive, Mike Betts.

It also reports that five Motability Operations executive directors received more than £15 million in bonuses between them in just seven years. In 2016-17, Betts himself received a total financial package of £1.7 million, including his salary and bonuses.

NAO found that Motability Operations had £2.62 billion in its reserves in March 2018 and that it had made £2.19 billion in profits between 2007-08 and 2016-17, more than £1 billion higher than it had forecasted.

And it says that underestimating the value of used cars meant that disabled customers have been charged £390 million more than was required in their lease agreements to cover the costs of depreciation.

But NAO also warns that it is not clear if the Motability charity*, which oversees the work of Motability Operations, could absorb the scale of the extra donations it has received from the company – including an extra £400 million donation in September – as a result of its unplanned profits “in a way that can maximise its effectiveness”.

Motability Operations had previously donated £345 million to the charity between 2010 and 2017.

NAO’s recommendations include a series of reviews to be carried out by Motability, Motability Operations and the Department for Work and Pensions (DWP).

The report also raises concerns about the diversity of Motability’s board of governors, and how long some of them have been in post, with four current governors who have each served for more than 16 years.

There is also not a single black and minority ethnic governor, and just one woman among the charity’s 11 governors.

Linda Burnip, co-founder of Disabled People Against Cuts (DPAC), said DPAC had started raising concerns about the bonuses paid to Betts several years ago, as well as about the level of reserves held in the charity’s Motability Tenth Anniversary Trust.

In 2014, the charity introduced new rules which restricted the grants made from its Specialised Vehicle Fund (SVF) to disabled people with high support needs, which mean that only disabled people who spend more than 12 hours-a-week in education, work, volunteering or caring can qualify for grants that enable them to lease a drive-from-wheelchair vehicle.

Burnip said: “There can be no reason, given the billions in [Motability Operations] reserves, for any disabled person to be refused a grant for a drive-from wheelchair or internal transfer vehicle.

“It is blatant discrimination to restrict access to such vehicles which disabled people with the highest support needs require to enhance their independence.”

Ian Jones, co-founder of the WOWcampaign but speaking personally as a Motability customer, said: “Motability Operations has collected and hoarded £2.62 billion (March 2018) of disabled people’s money, which was paid on the understanding it was to cover costs.

“Motability Operations has paid its directors millions of pounds of money collected from disabled people in bonuses, for hitting performance targets described by the National Audit Office as ‘easily exceeded since 2008’.”

He said that Motability Operations, which states that all its profits are reinvested into the scheme, had instead effectively paid “dividends” of £745 million to the charity over the last eight years, payments which “grossly exceed the charity’s annual running costs”.

He said: “I am very worried that the above items may tend to bring the Motability charity into disrepute and call on the Charity Commission to immediately launch an investigation to reassure disabled people and the public at large that disabled people’s money is being spent responsibly and not misappropriated by ‘fat cats’ working for and controlling Motability Operations.”

Graham Footer, chief executive of Disabled Motoring UK, said: “Many of our charity’s members are on the Motability scheme and have been for a number of years.

“While the scheme provides an essential lifeline to these individuals, we believe that Motability could make better use of its surpluses to not only improve the scheme for its customers but alleviate many of the problems they face on a daily basis as disabled motorists.

“We look forward to working with Motability in the future to fully implement the recommendations of the National Audit Office.” 

Lord Sterling, who co-founded the Motability scheme in 1977 and now chairs the charity, said it had accepted all NAO’s recommendations, including the need for a review of the level of reserves held by Motability Operations.

But he said the suggestion that customers were charged more than was required to cover the leasing costs was “open to further debate” because its customers pay “45 per cent less than the market rate for their vehicles, in addition to the support, insurance and vehicle enhancements that we offer”.

He said that “every penny, surplus to sustainability and to this excellent price and service, goes to help enhance the lives of our disabled customers and their families”.

He added: “The scheme has cumulatively delivered five million vehicles, many heavily adapted, putting millions of disabled people and their families on ‘the road to freedom’.

“I am very glad that Sir Amyas Morse, the comptroller and auditor general at the National Audit Office, has personally commended the excellence of our service and quality of our management.

“That praise, of course, is due to the wonderful dedication of all those employed at both Motability and Motability Operations.”

Motability declined to comment on or answer any further concerns or questions this week, including what impact the NAO report might have on how much disabled customers pay for their Motability vehicles and the service they receive, although it said there were exceptions to the SVF rules.

A spokeswoman said the charity would not be issuing further comments ahead of a new inquiry to be held by MPs in the new year.

Motability Operations welcomed the NAO report and said it was “proud that it has acknowledged the impressive performance of the company, and the excellent service it offers to 625,000 disabled people and their families”.

In response to the report, it said it would improve its reporting of executive pay and bonuses and review its approach to forecasting.

It will also develop, with the charity, a 10-year plan for how profits are re-invested or donated and will work with the charity to support an independent review of reserves.

Motability Operations also announced that Betts would step down as chief executive by May 2020.

The Commons work and pensions and Treasury committees will be holding a fresh inquiry into the Motability scheme in the new year.

Frank Field, the Labour MP who chairs the work and pensions committee, said – in a letter to work and pensions secretary Amber Rudd – that the NAO report made for “grim reading”.

He said the “value of the scheme cannot be allowed to blind us to serious concerns about its governance – not least the unjustifiably high levels of executive pay and the colossal financial reserves built up by Motability Operations”.

A DWP spokeswoman said: “We asked the NAO to investigate and are grateful for the valuable insight provided, which strengthens our concerns regarding Motability Operation’s financial model.

“We agree with the NAO’s finding that the Motability scheme provides an excellent service.

“To ensure that the scheme is focused on delivering better value for money we are committed to working with the charity and key stakeholders so that current and future arrangements result in improved outcomes for disabled people.” 

*The Motability charity is a Disability News Service subscriber

 

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