Chancellor Rachel Reeves Signals Welfare Reforms, Eyes £1bn Cut to Motability Tax Breaks

Chancellor Rachel Reeves has warned that the UK’s welfare system “can’t be left untouched” this parliament, as she considers significant reforms ahead of the upcoming November budget. Among the options reportedly on the table is the removal of tax exemptions for the Motability scheme, which could generate up to £1bn in additional revenue for the Treasury.
The Motability scheme currently allows disabled people to lease vehicles without paying VAT or insurance premium tax. Sources suggest the government may end these exemptions or exclude luxury car brands such as BMW and Mercedes from the program, affecting about 5% of claimants. While the move is not a direct benefit cut, it could increase costs for disabled individuals relying on adapted vehicles for mobility and independence.
Disability advocates have strongly criticized the potential changes. James Taylor of Scope said the cuts could “heap extra costs on disabled people” who already face higher living expenses. Emma Vogelmann from Transport for All added that restricting access to Motability cars would “lock disabled people away from daily life,” limiting their ability to work or engage in their communities.
Reeves’s comments come as she faces a widening fiscal gap, with downgraded growth forecasts from the Office for Budget Responsibility. Her November 26 budget is expected to include tax hikes and spending reductions to stabilize public finances. Economists at the Institute for Fiscal Studies have also suggested that the chancellor may need to revisit welfare savings as part of broader fiscal tightening.