Royal Assent – in the House of Commons at 10:30 am on 8th February 2018.

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Photo of John Mann John Mann Chair, Treasury Sub-Committee 10:30 am, 8th February 2018

(Urgent Question): To ask the Secretary of State for Work and Pensions if she will make a statement on executive pay and cash reserves held at Motability.

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

I am here today to address the concerns that have been raised about the structure of the Motability scheme. Let me first say that the scheme provides important support for more than 600,000 disabled people and has improved and extended its offer over the past few years. For example, in 2013, in my role as Minister for disabled people, I summoned the chief executive and chair to explain the excessive pay and bonuses of Motability scheme staff and the sums of money held in reserves. Despite being told that the charity needed such money for capital reserves, and the Charity Commission agreeing with that, I pursued the matter with the Department and ensured that the funds were used to benefit disabled people. The result was that £175 million was used for transitional support for claimants.

In April last year, after firm encouragement from the then Minister, my right hon. Friend the Member for Portsmouth North (Penny Mordaunt), Motability extended that transitional support. After direction from the Department, the charity is now piloting a Motability scheme to help children under the age of three who are not eligible for the mobility component of child disability living allowance but who rely on bulky medical equipment. The scheme has the potential to help up to 1,800 families.

I must emphasise that Motability is an independent charity that is wholly responsible for the strategic direction of the Motability scheme. It has oversight of Motability Operations, the commercial partner that operates the scheme under contract to the Motability charity. As a company, Motability Operations is an independent commercial business regulated by the Financial Conduct Authority. Although the remuneration of its directors and managers is a matter for Motability Operations to decide, from the outside one has to question whether it is really right. That view is endorsed by the Charity Commission, which said yesterday that the Motability trustees may wish to consider the reputational issues raised by the salaries being paid to its commercial partner’s executives.

Motability was set up 40 years ago, with cross-party support. It has done much good in that time, but today, anybody who looked at the size of the reserves and pay packages would question the direction that Motability has taken in allowing that to happen. Motability must listen to the criticisms it has faced, not only in the media this week but over the course of several years, and be receptive to change. As Secretary of State, I want to see a clearer commitment from Motability that it will maximise the use of funds to support disabled people’s mobility and independence.

As we have seen in so many instances, what was deemed correct in the 1970s is not necessarily correct by today’s standards. In the light of the current focus on corporate governance issues and the use of public money, I have today asked the National Audit Office to consider undertaking an investigation into this matter. I am keen for the NAO to look at how Motability is using taxpayers’ money.

Photo of John Mann John Mann Chair, Treasury Sub-Committee

I thank you, Mr Speaker, for granting this urgent question, and the Secretary of State for her initial response.

It is grotesque that this registered charity, which is funded by the taxpayer through a direct grant from Government, is carrying cash reserves of £2.4 billion and has been underspending its budget by £200 million a year, and it is grotesque that this charity is paying its chief executive £1.7 million a year. Will the Secretary of State commit to an urgent review of executive pay at Motability and to publishing its results? Will she commit to urgently examining the finances of Motability and the audit arrangements made by her Department in previous years, and again, will she publish that review?

The point is that there is no risk; this is a no-risk situation. It is a very good scheme for the disabled, but there is no risk. The reserves are only half the picture—the banks are also profiting, possibly to the tune of billions over the years, because they are bearing some of the risk. Will the Secretary of State commit to reviewing the lack of competition in the financing arrangements with the banks, which see the large four banks making huge amounts of profit out of this scheme? How can the banks be allegedly covering the risk, when Motability has £2.4 billion in reserves allegedly to cover that risk? It is the same risk, yet in fact there is no risk at all because the taxpayer is guaranteeing the scheme.

Will the Secretary of State also make it abundantly clear to the disabled people in receipt of Motability that they need fear nothing and that the scheme and the service that they get will continue as is? What we as Members of Parliament are interested in is the finances behind the scheme, the excessive profits and the scandal that a no-risk scheme has banks profiting so much and the charity itself quite unnecessarily holding £2.4 billion in reserves.

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

First, I thank the hon. Gentleman for his work and for his courage in pursuing the matter. I also thank the media for exposing the situation. Now that I am back in the House as Secretary of State for Work and Pensions, I can say that the situation needs to come under the spotlight. I would like to work with him on that, to bridge the divide of party politics and do what is right. We need to uncover what is happening in the Motability scheme and to ensure that the money held in the company’s reserves goes to the people that it should be supporting. He quite rightly says that having such an amount of money in reserves is grotesque, and that it should really be going to support disabled people.

As for where we go next, an urgent request has gone to the National Audit Office to ensure that if disabled people choose to spend money on the Motability package, that is a good use of the benefits that they get, and to check how taxpayers’ money is being used. Motability has been a lifeline for many disabled people who have chosen to take part in the scheme. As I have said, it is helping more than 600,000 people, and we must not throw the baby out with the bathwater. For those whom the scheme is helping, it is an essential lifeline, but if it could be helping many more disabled people then that is exactly where the money should be going.

Several hon. Members:


Photo of John Bercow John Bercow Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission, Chair, Speaker's Committee for the Independent Parliamentary Standards Authority, Chair, Commons Reference Group on Representation and Inclusion Committee

Order. I granted this urgent question because I thought that it was urgent, and it is, and it is an extremely important matter, but the House will be conscious that we have very, very heavy constraints on time today, so I am looking to those on the Opposition Front Bench to stick to their time, because after that they will be cut off. I appeal to colleagues for short questions, please, and I know that the Secretary of State will oblige us with short answers.

Photo of Philip Davies Philip Davies Conservative, Shipley

May I commend John Mann for his customary tenacity in pursuing this issue? Is it not the case that not only has the taxpayer been overpaying over the years, but disabled people have been overpaying from their benefits for this scheme? Surely those disabled people could be getting exactly the same benefits from it for a lower amount per week. The money saved could then be given back to them to help pay for their other living costs. Will my right hon. Friend consider allowing the scheme to progress, but at a lower cost to disabled people so that they can retain more of their benefits? Motability seems to be losing sight of what it was set up to do in the first place.

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

My hon. Friend raises a good point. This issue unites Members on both sides of the House. The first step is for the NAO to look into the matter, but my hon. Friend’s suggestions seem fair and right, and they are the kinds of points we should pursue.

Photo of Margaret Greenwood Margaret Greenwood Shadow Minister (Work and Pensions)

I congratulate my hon. Friend John Mann on securing this urgent question. I also thank you, Mr Speaker, for granting it.

The news that the chief executive of Motability Operations Group plc took home £1.7 million last year and that the group is sitting on reserves of £2.4 billion has shocked people around the country. Particularly shocked are disabled people, 51,000 of whom, according to Motability’s own figures, lost access to the scheme last year after being reassessed for their personal independence payment. More than 3,000 were reinstated on appeal, but many lost their car in the meantime.

From Carillion to Motability, excessive executive pay is completely out of hand. With Motability Operations Ltd paid about £2 billion a year directly by the Department for Work and Pensions on behalf of disabled people in receipt of social security support, there are serious questions for the Secretary of State to answer. When did she or her officials last meet with either Motability or Motability Operations Group? The National Council for Voluntary Organisations’ “Report of the Inquiry into Charity Senior Executive Pay and Guidance for Trustees on Setting Remuneration”, published in April 2014, says that charities should include highest earners in their accounts, regardless of whether they work for a subsidiary company. Does the Secretary of State agree?

Motability Operations Group is sitting on a surplus of £2.4 billion. That is a staggering amount given its VAT exemption from the Treasury, which means that it does not compete on a level playing field.

When the National Audit Office last examined Motability in detail in 1996, it found that the then £61 million reserves

“exceeded the necessary margin of safety”.

What assessment has the Secretary of State made of the current necessary margin of safety, and what assessment has she made of the £200 million annual underspend that has allowed such a large surplus to accumulate? Given that the funding of Motability effectively comes from the taxpayer via social security payments, what assessment has she made of value for money for disabled people who rely on their cars for independence? Finally, value for money for taxpayers is not currently one of the criteria for Motability’s remuneration committee. Does the Secretary of State believe it should be?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

The Department has worked closely with Motability to ensure that disabled people get good value for money for the cars that they choose to spend their money on. The Charity Commission, which recently undertook a detailed review of the charity’s financial accounts and its relationship with the non-charitable company Motability Operations, said:

“That review did not identify regulatory concerns about the charity’s governance or its relationship with the commercial company. It is not for the Commission to comment on the pay of the CEO of a large non charitable commercial company. However, we have made clear to the trustees of the charity Motability that the pay of the CEO of its commercial partner Motability Operations may be considered excessive and may raise reputational issues for the charity.”

It also found

“the level of operating capital held by the company in order to guarantee the scheme to be conservative”, but said that it should be “kept under continuous review.” I would say that that review needs to start again. The Charity Commission should again look into what has happened.

It is the Government who permit disabled people to have a benefit, but where that money is spent is always the choice of the people who receive it. When the scheme was originally set up in the 1970s, with cross-party support, that was deemed the best way forward, but as I said, the NAO must now look into the matter. When I personally looked into it in 2013, I ensured that Motability paid £175 million more to disabled people, and I will continue with that direct action from my new elevated position.

Photo of Bob Blackman Bob Blackman Conservative, Harrow East

Only a third of those who can get grants from this operation currently do, so will my right hon. Friend ensure that the eligibility criteria are reviewed? Will she also look into the marketing to those who are eligible, so that people who are disabled and who can get this service actually get it and use the money?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

That is exactly what we want to ensure. My hon. Friend is right that the people who could benefit from this scheme should be benefiting from it, but obviously it is their choice whether they want to do so. If we could widen the scheme by allowing the money held in reserves to go to those disabled people, surely that would be right.

Photo of Chris Stephens Chris Stephens Shadow SNP Spokesperson (Trade Unions and Workers' Rights)

These reports of taxpayers’ money being held unused in charity accounts are extremely concerning. It is not the first time that the accounts of Motability Operations have been questioned. Will the Secretary of State launch an urgent investigation into the status of this estimated £2 billion of taxpayers’ money? Will she lay out what discussions she has had with the Charity Commission to determine whether this matter requires further investigation? Will she report her findings back to the House as a matter of urgency?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

The hon. Gentleman again pursues the points that we are all trying to pursue. I will do each of those things and report back.

Photo of Michelle Donelan Michelle Donelan Conservative, Chippenham

Does my right hon. Friend agree that it is essential that private companies that indirectly receive taxpayers’ money to operate their services have a particular duty to limit executive pay and excessive reserves? What more can the Government do on that?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

My hon. Friend is directed by true compassionate Conservative beliefs. The Government are bringing forward a new review and new law on corporate governance to cover all these matters. We want transparency—that is what will drive correct behaviour. We want accountability, and we want people to do the right thing. If that takes shining a sharper spotlight on their actions, then that is what we should do.

Photo of Frank Field Frank Field Chair, Work and Pensions Committee

The Work and Pensions Committee will be undertaking an urgent inquiry into this issue. We will be seeking your support, Mr Speaker, so that we can co-opt my hon.—very honourable—Friend John Mann on to our Committee to pursue the issue. As we are drawing up our agenda over the next few days, will the Secretary of State say which questions she would find most helpful for us to seek answers on?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

I thank the right hon. Gentleman. I will meet him to decide between us, with John Mann, which questions would be best to focus on.

Photo of Jeremy Quin Jeremy Quin Conservative, Horsham

I am pleased to follow the Chairman of the Select Committee. In the recent past, with regard to BHS, his Committee and this House have raised grave concerns about corporate governance in private companies. Does my right hon. Friend agree that those concerns are particularly pertinent when private companies are so reliant on the public sector? If she shares those concerns, will she ensure that that is included in the remit of the NAO report?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

My hon. Friend pursues this matter with tenacity. I will be getting in touch with the Business Secretary to discuss what additional actions need to be taken in the forthcoming new law on corporate governance.

Photo of Liz McInnes Liz McInnes Shadow Minister (Foreign and Commonwealth Affairs)

Yesterday I raised the issue of my constituent, Natasha, who was in receipt of lifetime DLA. That was removed following a PIP assessment, and she was threatened with having her vehicle taken from her on Boxing day—I am sorry, Mr Speaker, but this is particularly pertinent for me. I am grateful that the Secretary of State is having an investigation. Will she pay particular attention to the conduct of the trustees?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

The hon. Lady is right to be emotional, because for many people this is an emotional matter, particularly just after Christmas. Again, these are matters that need to be pursued, and the trustees need to be held to account.

Photo of Nigel Huddleston Nigel Huddleston Conservative, Mid Worcestershire

Does the Secretary of State agree that while the Government Benches may be full of people who are instinctively pro-free market and respect commercial operations, we have no qualms whatsoever about interfering or raising questions when things have gone wrong? Does she believe that things have gone wrong in this case?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

We have to get the results from the NAO, from the Select Committee, and from the Charity Commission. However, my hon. Friend is right. This scheme, which was set up with the best intentions and good purposes, and has helped people, appears to have lost its way. It is only right that we help it to get right back on track to help the people it was set up to support.

Photo of Alan Brown Alan Brown Shadow SNP Spokesperson (Transport), Shadow SNP Spokesperson (Infrastructure and Energy)

The Secretary of State says that she got a concession five years ago, but nothing has changed in five years on executive pay and concerns about reserves. Why is the National Audit Office only now being asked to do this, five years late? Is it just because of newspaper publicity?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

It is because of the tenacity of certain Members, for sure, and the freedom of our press, which has aired the case. This has been looked at for quite a few years, and I got concessions from Motability, as did my right hon. Friend the Member for Portsmouth North, but now we need to take the matter further.

Photo of Nick Thomas-Symonds Nick Thomas-Symonds Shadow Solicitor General, Shadow Minister (Home Office) (Security)

Motability has been a lifeline, but it is obscene that this money has not been going to the neediest in our society. I appreciate the Secretary of State’s urgent request to the National Audit Office, but what steps will she take to monitor the level of reserves, to ensure that they are not hoarded in this way again?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

We have to bring in the correct people to do the oversight, whether that is the FCA or the NAO, and those are the parameters we will use in a cross-party way to make sure we check out what reserves are needed, what reserves are not needed and what reserves need to go back to disabled people.

Photo of Gavin Newlands Gavin Newlands Shadow SNP Spokesperson (Sport)

Given the shocking news of Motability’s £2.4 billion in reserves, does the Secretary of State agree that Motability’s policy of removing cars before constituents’ PIP appeals have taken place is even more reprehensible? Will she urge Motability to reverse that policy with immediate effect?

Photo of Esther McVey Esther McVey The Secretary of State for Work and Pensions

When we have got the money back from Motability that we believe we should to support disabled people, that is one of the first things it should be used for.