Rachel Reeves is exploring potential changes to the Motability program, which enables individuals with disabilities to acquire cars through the benefits system.
The Chancellor is contemplating eliminating tax incentives valued at approximately £1 billion annually, including a provision that currently exempts cars leased under the scheme from VAT or insurance premium tax. It has been reported by The Times that high-end vehicles such as BMWs and Mercedes could also be excluded from the scheme.
Approximately 860,000 disabled individuals utilize the program, which is accessible to those receiving a qualifying mobility allowance, typically through the Personal Independence Payment (PIP).
If the tax incentives are removed, more beneficiaries may be required to provide an upfront payment for their vehicles. Participants in the program can exchange all or a portion of their mobility allowance for a vehicle, but they must pay in advance if the cost of a larger or more expensive vehicle exceeds the allowance.
James Taylor from the charity Scope cautioned that eliminating tax breaks “could result in increased expenses for disabled individuals across the UK.” He also highlighted that restricting eligibility for Motability could disproportionately impact disabled individuals with lower incomes.
It is understood that no final decision has been made as Rachel Reeves evaluates her options leading up to the upcoming Budget announcement.
Recently, the Chancellor emphasized the necessity of making changes to the welfare system to avoid increased taxes and reduced funding for essential services like schools and hospitals.
Despite facing criticism earlier this year over disability benefit cuts, the Government is considering further attempts to reduce the welfare budget, as indicated by Work and Pensions Secretary Pat McFadden.
Rachel Reeves pointed out that MPs who previously opposed welfare changes now acknowledge the system’s shortcomings. She stressed the importance of reforming welfare while ensuring that essential services receive adequate funding.
Rachel Reeves has hinted at potential tax increases in the upcoming Budget to address a significant deficit in public finances, estimated at around £22 billion by the Institute for Fiscal Studies.
A spokesperson from HM Treasury declined to comment on speculations regarding tax changes outside of official fiscal events.