Rachel Reeves is reportedly planning a £1bn savings package through cuts to the Motability scheme offered to disabled people.
As part of a drive to plug a £30bn hole in the public purse, the Chancellor is considering reducing the number of BMWs and Mercedes some disability claimants can access through the Motability scheme, which is largely funded by the government.
Up to £1bn in savings are set to be made through eliminating VAT and insurance premium tax reliefs offered under the scheme, according to The Times.
Reeves could also restrict which benefits recipients are eligible for free cars but those reforms could take longer to be introduced.
Social security and disability minister Stephen Timms is still conducting a review of the welfare system that will end well after the next Budget, though disability campaigners have said plans for reforms have stalled.
After a succession of U-turns on welfare, meddling with payments made by the Department for Work and Pensions before the Budget could be difficult for Reeves to ride out.
The Office for Budget Responsibility (OBR) was informed of welfare changes at late notice before the Spring Statement in March, preventing the fiscal watchdog from “scoring” the effects of changes and only allowing it to calculate Reeves’ £5bn cuts.
The upcoming Budget is already proving tricky to navigate, with tax hikes expected to be the main way Reeves looks to restore her headroom.
Motability scheme under fire
The Motability scheme has been engulfed by a political row over alleged abuse of the system and accusations that administrators have spent billions on buying new vehicles for claimants.
A report by the Adam Smith Institute said the scheme cost £3.4bn more last year as taxpayers’ cash went towards the purchase of new vehicles.
ASI researchers said the overspend came due to an “insistence” by Motability that brand-new vehicles were supplied.
Reform UK’s Zia Yusuf has lashed out at the high cost of the scheme while opposition leader Kemi Badenoch has called for it to be restricted for people with “serious disabilities”.
Responding to the ASI’s report last month, a spokesman for Motability said calculations were based on a “misunderstanding of how car leasing works, leading to higher costs for disabled and non-disabled drivers, reduced access to jobs and they do nothing to cut costs for the government”.
A spokesperson for the Motability Scheme said: “We can’t comment on budget speculation, and any tax changes would be a matter for the government.”