Chancellor Rachel Reeves is facing a fierce backlash from disability campaigners over reported plans to impose VAT on vehicles leased through the Motability scheme, a move that could add up to £3,000 to the upfront cost for disabled users.
What Changes Are Being Considered?
The concerns centre on the upcoming Budget, where the Chancellor is understood to be examining potential modifications to the Motability programme. The scheme allows recipients of the higher mobility rate of Personal Independence Payment (PIP) to lease a new car, scooter, or powered wheelchair.
Reports suggest the government is considering two main changes: removing the VAT exemption on Motability vehicles and potentially ending access to high-end cars like Mercedes and BMWs. The Motability scheme itself has stated that introducing VAT would “raise costs sharply and exclude many from the freedom and independence the scheme provides.”
Campaigners Issue Stern Warning
A new coalition, the Motability Campaign Collective led by Transport For All and including Disability Rights UK, has sent a formal letter to the Chancellor. The letter highlights that the VAT Act 1994 currently exempts vehicles used by disabled people from this tax.
It states that removing this exemption would force disabled people to pay thousands of pounds extra in advance payments for essential vehicles. The collective warned that such cuts would “increase concerns around widening inequality and harm to the Disabled community.”
The letter also condemned the hostile rhetoric surrounding the debate, stating it “fuels hostility towards disabled people and risks making our lives less safe,” and normalises the conditions for hate crime.
The Wider Context and Government Response
This scrutiny of the Motability scheme comes as the Chancellor has been warned by the Institute for Fiscal Studies that she needs to find at least £22 billion in tax rises or spending cuts. Reforming Motability is reportedly seen as a way to save up to £1 billion and boost public confidence in the welfare system.
The scheme currently provides cars to around 815,000 users, including approximately 40,000 luxury vehicles. Emma Vogelmann, co-chief executive of Transport for All, emphasised the scheme's critical role, stating public transport is “often unusable” for disabled people. “A Motability car changes that – it allows us to work, shop, and do the school run. Scaling back the scheme would lock disabled people away from daily life,” she said.
A Treasury spokesperson declined to comment on the speculation, stating: “We do not comment on speculation around changes to tax outside of fiscal events.”
