HOW SCHEME IS FUNDED BY TAXPAYER

MOTABILITY Operations is the public, albeit indirectly through disability payments.

The company borrows from banks to buy new cars to add to its fleet, but these investors get their money back – plus interest.

Motability buys the cars and rents them to disabled people. Then, after three years, it sells them on the second-hand car market.

This means its two sources of income are its customers’ mobility allowances and proceeds from used cars.

Added together these are enough to pay back the investors, plus interest – while leaving cash to cover running costs, directors’ salaries and the contingency fund.

Motability’s chief executive Mike Betts said all its income was used ‘to fund the best possible service to customers’, with all profits being reinvested for their benefit.

Motability Operations Plc is owned by four major banks – Lloyds, Barclays, HSBC and RBS. Their profit margin – from interest charges – is not divulged in annual reports.

But critics say any spare money should find its way back to taxpayers. In 1996, the National Audit Office suggested Motability should donate its reserves to the disabled, perhaps by giving rebates.

The firm argues that it is not a monopoly because it is up to disabled people how they spend their benefits, and only one in three choose Motability. But the firm’s VAT exemption from the Treasury means other firms would struggle to compete.