The head of a company which provides cars and scooters to disabled people is to resign after the UK’s public spending watchdog issued a scathing report about its executives’ bonuses and an “unplanned” £1bn profit.
Mike Betts, chief executive of Motability Operations, will step down by May 2020 following the National Audit Office’s analysis, which said executive pay had been “generous and linked to performance targets set at levels that have been easily exceeded since 2008”. Five executive directors shared £15m in bonuses between 2008 and 2015.
The NAO noted that the company had not disclosed the full value of a separate incentive scheme for Mr Betts — worth £1.86m in September 2018 — and needed to provide “greater ongoing transparency” about performance bonuses.
The watchdog also criticised Motability Operations for generating £1bn of “unplanned” profit because of an “inaccuracy” in its forecasts after “customers were charged £390m more than was required in their lease agreements”. In March 2018, Motability Operations had £2.6bn in reserves.
Disabled people can exchange their mobility allowances, paid by the Department for Work & Pensions and the Ministry of Defence, for the lease on a car, scooter or powered wheelchair. Motability Operations is a public limited company which provides the vehicles on behalf of Motability, a charity.
Amyas Morse, the head of the NAO, said: “Motability Operations has taken an unnecessarily conservative view of risk, holds more in reserves than arguably it needs and has also made large unplanned profits. On top of which, there has been an internal view of executive performance as being ‘consistently extraordinary’, with the reward to match, despite pressures from the charity.”
Neil Johnson, who will retire next year as chairman of Motability Operations, said: “Our business model has allowed the company to return more than £500m in payments directly back to customers over the past 10 years. Moreover, efficient running of the scheme has ensured that prices are consistently 44 per cent cheaper than any alternative.”
Motability Operations has given almost £750m to the charity since 2010, including £400m in September 2018, and has told it to expect further donations of at least £100m a year. However, the NAO said the charity “does not have a long-term strategy” for the money and could fail to use it effectively.
The NAO also criticised the charity’s governance, saying that until September this year the average tenure of Motability’s governors had been 18 years and that the board lacked ethnic diversity and had only one female member.
Motability Operations was leasing 614,000 cars to customers in September 2017, out of a potential 1.72m eligible people, and the scheme benefited from up to £888m in tax concessions in 2017.