The move comes amid Treasury fears taxpayers are funding luxury cars for benefit claimants
Sickness benefits claimants will no longer be able to gain access to subsidised luxury cars under planned major changes to the Motability scheme.
Rachel Reeves is expected to announce sweeping reforms to the controversial car scheme, which will mean benefits claimants will no longer be able to gain access to high end models, such as BMWs, Mercedes and Audis.
The Chancellor will also cut back perks offered under the Motability programme, including overseas breakdown cover and top of the range insurance that covers up to three different drivers.
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The move comes amid growing concerns within the Treasury that the scheme has become unfair on the taxpayer, with those on disability benefits gaining access to cars that are beyond many working families.
A Treasury source said the move has come as the Chancellor has become anxious that the original purpose of the scheme has been lost.
The source told The i Paper that the Government remained “100 per cent committed to ensuring the scheme is there for those who need it most” but pointed out that just one in 10 of the cars offered under the Motability programme were adapted for disabled use.
“This goes far beyond providing essential mobility for disabled people and is instead offering a premium motoring experience subsidised by the taxpayer,” the source said.
“The Chancellor’s focus is tackling unfairness in the scheme, such as the availability of premium vehicles, while ensuring it continues to support disabled people.”
The Motability scheme has become a lightning rod for criticism of the overall welfare system, with critics claiming it shows benefits have become too generous in recent years.
Personal independence payment (PIP) claimants on the higher rate worth £187.45 per week can use their benefit – which is not related to whether or not they work – to lease a new vehicle if they need help getting around.
The cheapest models are available with no need for any down payment, but the most expensive models require an upfront payment of up to £7,999.
Those on the scheme receive an all-inclusive package which includes insurance for three drivers, domestic and foreign breakdown assistance, road tax and servicing.
Last week, disabilities minister Sir Stephen Timms told MPs the Government will hold off making changes to eligibility criteria for Motability until he has finished a review into PIP in autumn 2026.
Timms is leading the review into PIP assessments and how entitlement is calculated.
According to the Department for Work and Pensions, just over £3bn worth of welfare was transferred to the Motability scheme for the 2024/25 financial year.
The scheme is exempt from VAT – for both the hire of a car and the sale of a lease – which is something the Chancellor is reported to be looking at changing.
But reforms to who is eligible for the scheme, and how much funding they get, will be tied to the wider review into PIP payments, which was launched by the Government after efforts to cut eligibility were rejected by MPs.
The Treasury has been approached for comment.
