MPs have accused the Motability charity’s connected company of trying to hide a £2.2m bonus scheme for its chief executive.
The treasury and work and pensions select committees were critical at a joint-committee hearing yesterday morning of the policies of both Motability charity and Motability Operations, following a National Audit Office (NAO) report into the scheme published in December.
Motability Operations runs a scheme on behalf of the charity that enables disabled people to exchange mobility allowances for the lease of a new car, wheelchair or scooter.
Yesterday, the charity’s chair Lord Sterling of Plaistow and director Paul Atkinson said the organisation had accepted all the NAO’s recommendations however when asked on each point individually, they defended both Motability organisations’ behaviour.
The NAO report found the scheme had made more profit than intended every year since 2008, totalling £1.05bn of unplanned profit overall and was critical of Motability Operations for holding £2.6bn in reserves at 31 March 2018.
When questioned on this, Atkinson said: “There is quite a grey area between how much risk you take, how much money do you keep in reserve in Motability Operations and in order to ensure the bottom line of our raison deter which is the sustainability of the scheme to continue for the next ten years.”
Sterling said: “Motability Operations is a full-blooded commercially-run company in the best possible way and I spent my life in that field of endeavour to get the best possible results at best value and most importantly the highest service in the country.
“But there is one fundamental difference. After the auditors have struck and decided with the board what is the profit, unlike any other company, not 1p of those monies go to shareholders other than the interest bodies with the banks in a small way.
“Every single p[enny] goes to the interests of enhancing the lives of disabled people and what’s more it cannot move unless it is sanctioned by the charity, which is the guardian of the whole scheme.”
Sterling added that the charity was undertaking a review of reserves held in relation to the scheme.
Nicky Morgan, chair of the treasury committee, questioned Sterling about a letter he had sent in 2016 to the chair of Motability Operations Neil Johnson that raised concerns about executive pay at the company.
She asked: “Are you disappointed that action to reduce pay in line with your request has still not yet happened?”
In response, Sterling said: “No, it has happened. The approach they have made and what they are putting into place and the reductions with are coming through are of a nature that our board of governors and us feel comfortable with.
“We are comfortable that the current chairman [of the remuneration committee] Neil Thomas he is doing what the board feels comfortable with but we want to be more involved in those decisions.”
Morgan later said: “From everything I am hearing so far, there has been a long-term, cosy relationship between the charity and the company… You have forgotten that this is an arm’s length relationship.”
When asked for his perspective about Sterling’s 2016 letter at the hearing afterwards, Johnson said: “I had some very detailed discussions with Lord Sterling.
“As a result of those discussions, there was agreement that in fact the policy was in line with what they had previously been asking for.
“In 2014, I had initiated a review of executive pay and Neil Thomas came in to take the chair of the remuneration committee and to review the way that we should go forward.
“Those reviews have all been adopted and as a result of that has been a drop in senior executive pay of around 20 per cent. That has been masked by the fact that there was a rollout of three years on the previous system. The last year of that previous scheme has just passed.”
Following the hearing, Sir Amyas Morse, the head of the NAO, said: “Executive pay at Motability Operations has been very generous and the Motability charity has been unable to exert sufficient influence over pay.
“Motability Operations’ intentionally conservative financial model has led to high levels of reserves and unplanned profit, and Motability doesn’t have a long-term strategy to absorb the significant donations it is likely to continue to receive.”
The NAO report found that Motability Operations had not listed in its accounts an additional incentive scheme for chief executive Mike Betts, who announced his resignation when the NAO report was published, which ran between 2010 and 2015 and was designed to ensure his retention in post.
The full value of the scheme was £1.9m in September 2018, and is likely to be worth around £2.2m by 2022.
Thomas defended his organisation’s failure to list this scheme in its accounts, saying: “We checked with our auditors, PwC.
“I checked with them and asked them a very direct question and they confirmed to me that the disclosures in the accounts are consistent with the accounting principles for unquoted companies.”
Work and pensions select committee chair Frank Field asked to see the guidance from PwC in writing.