Disabled car supplier boss set for £2.2m bonus
THE boss of a taxpayer-supported business that supplies cars to people with disabilities is in line for a £2.2 million bonus, the Government spending watchdog said.
An inquiry into Motability by the National Audit Office (NAO) also found that customers were charged £390 million more than was required in their lease agreements to cover the costs of depreciation.
The scheme, made up of an operations business and two charities, accounts for about 10% of all new cars bought in the UK.
Motability Operations chief executive Mike Betts’ annual pay package of £1.7 million was recently described as “totally unacceptable” by the Work and Pensions and Treasury committees.
The NAO revealed that he is in line for a bonus which was worth £1.86 million in September and is likely to reach about £2.2 million by 2022. This can be “released at any time” and “may be of interest” to the Commons committees, the watchdog noted. Only the initial allocations of £258,000 have previously been disclosed.
Under the Motability scheme, an individual’s mobility welfare payments are transferred to Motability Operations in return for a leased car, along with insurance, maintenance and roadside assistance.
The Commons committees said potential rivals cannot compete with the company because it receives substantial tax breaks from the Government that no other firm is entitled to, and does not face any competitive pressure when tendering for the contract to run the scheme.
The NAO found that remuneration for Motability Operations’ executive directors has been “generous” and linked to performance targets set at levels “easily exceeded” since 2008. As a result, in the first seven years of a bonus scheme, five executive directors received £15.3 million in total.
In letter published by the NAO, Motability chairman Lord Sterling wrote to Neil Johnson, chairman of the operations business, warning that the remuneration of executives is “too high”. He said that the scheme is “vulnerable to attack” over pay levels, given that the business is “free of competition” and “enjoys a captive customer base in a relatively stable environment”.
The scheme has generated more than £1 billion of unplanned profit since 2008.
The NAO said Motability Operations’ own forecasts on the future value of used cars have been out of line with the market average, resulting in customers being charged £390 million “more than was required” to cover lease costs.
As of March 31, the business held £2.62 billion in reserves, which is significantly higher than major car leasing companies.
Motability exclusively benefits from certain tax concessions worth up to £888 million in 2017, the report said.