Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss Clause 78 stand part.

Clause 77 will make changes to ensure that the Motability scheme and other qualifying schemes provide value for money for the taxpayer while continuing to support disabled people. It will remove the VAT relief for top-up payments made to lease more expensive vehicles. Clause 78 ensures that insurance premium tax will apply at the standard rate of 12% to insurance contracts on the scheme.

The Motability scheme is an important vehicle leasing scheme available to people receiving the enhanced Motability component of disability benefits such as the personal independence payment. The weekly Motability award covers the lease cost and a generous service package. If a chosen vehicle is more expensive, the customer pays a one-off top-up payment in advance of the three-year lease.

The Motability scheme supports the independence of disabled people, but it benefits from generous tax breaks that are supporting provision beyond the scheme’s core objectives, such as the lease of luxury cars. To limit tax support for the most premium vehicles on the scheme, the Government have removed VAT reliefs on the one-off voluntary—I stress that they are voluntary—payments made to lease higher-cost vehicles. VAT reliefs on weekly lease costs covered by eligible disability benefits, and the VAT relief on vehicle resale, will remain in place. Additionally, ending the IPT exemption for most vehicles will bring the IPT treatment for qualifying vehicles’ leasing schemes in line with other commercial leasing firms.

The tax changes will preserve the delivery of the core objective of the scheme, and Motability Operations Group has confirmed that, after the tax changes take effect, it will continue to offer a broad range of vehicles available without a top-up payment, meaning that customers will be able to lease a vehicle that meets their needs for the value of their eligible benefit. The changes made by clauses 77 and 78 will generate savings of more than £1 billion across the scorecard. I commend them to the Committee.

At present, when a disabled person uses their mobility benefits, such as the mobility component of the personal independence payment or Disability Living Allowance, to lease a vehicle under the Motability scheme, that lease is zero-rated for VAT. Let us remember why Motability was created: it was established to help those with serious, long-term physical disabilities to access independence and mobility, not to provide subsidised cars for people with minor or temporary conditions. However, the numbers show that the scheme has expanded far beyond its original purpose. Last year, 815,000 people were using Motability vehicles, an increase of 170,000 in a single year.

For many participants, their benefit covers the full cost of a three-year lease, so they pay nothing beyond their benefit entitlement. However, when someone chooses a more expensive model, such as a larger or higher-spec vehicle, they must make an up-front top-up payment. Until now, the entire lease, including that top-up, has been VAT-free, but Clause 77 changes that. Under the new rules, only the proportion of the lease funded by the qualifying Motability payment will remain zero-rated, and any additional amount paid voluntarily will be subject to the standard rate of 20%. That is a fair and balanced reform that we wholeheartedly support.

Clause 78 narrows the insurance premium tax relief for vehicle insurance linked to disability schemes. IPT is a 12% tax on most general insurance premiums. Many cars that are leased to disabled people currently benefit from that relief, even when the vehicles are standard, unadapted models. We welcome that the clause limits the relief to applying only to contracts for vehicles that are specifically adapted for wheelchair or stretcher users; for example, vehicles with ramps, lifts or structural changes supporting wheelchair access. If a vehicle has no such adaptation, premiums will rightly be subject to the 12% charge.

Conservative Members have long argued for tighter focus and accountability in the Motability scheme, and I welcome the Government’s decision to act— we have been pushing them to do so. Sadly, we read in The Times this morning that the Prime Minister has apparently ruled out any wider reforms to welfare in the King’s Speech. Some of the growth we have seen in the Motability scheme, which the clauses will hopefully address, reflects genuine need, but much of it does not. That expansion raises questions about the eligibility standards and on whether taxpayers’ money is being used as intended. Motability should not be a back-door subsidy for people who do not meet the scheme’s original intent, which was to help those with serious disabilities.

As the Minister said, over the scorecard this measure makes a significant saving that is a meaningful contribution to public finances, which we welcome and support. Taxpayer resources should be targeted more effectively to ensure fairness. However, the measures in the Budget overall raise people’s taxes to pay for more welfare spending. We consider that to be the wrong choice. We welcome the fact that the clause mitigates some of that additional welfare spending, but overall, this is a welfare spending Budget.

I will speak briefly to Clause 78, and then I will ask the Minister some questions, specifically on the definition of “substantially and permanently adapted”, which is slightly lacking in the Bill. Disability is not just about wheelchairs and stretchers; many individuals use and require adapted vehicles that may not be seen as substantially or permanently adapted.

The Liberal Democrats do not aim to change or amend the clauses, but some clarification would be helpful. Could the Minister clarify the definition of substantially adapted vehicles, and confirm what consultation has happened with disability groups about those definitions? Could he also confirm what impact assessment has been done on the additional costs for individuals who will no longer receive insurance premium tax relief?

I will somewhat disappoint the Liberal Democrat spokesperson, the hon. Member for Maidenhead: the words that Ministers say in Committee are sometimes powerful and I do not think it would be appropriate for me to be more expansive on the definition. I ask him and others to rely on the words in the existing legislation, which I think are relatively clear and strong.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clause 78 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mark Ferguson.)

Adjourned till this day at Two o’clock.