The boss of the business that leases cars to people with disabilities on behalf of the Motability charity is stepping down after it emerged he is set to receive a £2.2m bonus on top of his seven-figure salary.
Mike Betts, the chief executive of Motability Operations, came under fire earlier this year after MPs called his annual £1.7m pay package “totally unacceptable”.
A report by the government spending watchdog, the National Audit Office (NAO), published on Friday says as well as his “generous” remuneration, Betts is in line for a previously undisclosed performance bonus worth about £2.2m.
Following the report, Motability Operations announced that Betts would stand down from his position by May 2020, while the group’s chairman, Neil Johnson, would retire in April 2019.
In a statement, Motability Operations said: “After 16 years in the business, Motability Operations chief executive Mike Betts and the board of Motability Operations Group plc have agreed that, following the implementation of actions agreed as an outcome of the NAO review, and working to help the new chairman settle in, a suitable successor will be found, and Mike will step down from the board, no later than May 2020.
“The board is clear that recommendations made by the NAO will benefit from Mr Betts’ experience and skills to see them through.”
The Motability scheme enables disabled people to lease adapted cars using their enhanced mobility disability benefits – either disability living allowance or its successor, the personal independence payment. It currently helps about 614,000 people, many of whom would otherwise struggle to afford a vehicle.
The NAO is critical of the performance plan put in place for Betts and his fellow directors in 2008, saying that the targets meant to incentivise “excellent performance” were set at levels below what the company was achieving when the scheme was introduced.
The targets were “easily exceeded” and in the first seven years of the plan, five executive directors received “generous” remuneration of £15.3m in total, a near fourfold increase for what the NAO suggests was unexceptional performance.
“Motability Operations’ management has performed well since 2002. However, we do think there is a difference between turning an underperforming business around and carrying out a series of important but not necessarily exceptional tasks to keep it on a road to a successful operation,” it concludes.
Although the 2008 scheme ended in 2015 and a new scheme will cut directors’ remuneration – Betts’ package is likely to shrink from £1.7m to £1.4m in 2019-20 – the NAO says it will still be substantially more generous than those for comparable public sector organisations that compete with the private sector for executive talent, such as BBC Studios and Network Rail.
Although Motability does not directly receive public funding, critics point out that it receives about half of its annual £4bn income from disability benefits redirected to it by the Department for Work and Pensions (DWP) on behalf of claimants. It also receives £888m worth of tax breaks that no other firm is entitled to, and is in effect a monopoly.
While the company has performed well and deserves credit for providing an excellent service to customers, it has operated in a protected environment, the NAO says. It has made £1bn in unplanned profit since 2008 and holds nearly £2.6bn in reserves, significantly higher than other major car-leasing companies.
The scheme is overseen by a charity, Motability, and operated under a seven-year rolling contract by Motability Operations, which is a public limited company. The NAO found that the charity had little formal influence over Motability Operations’ executive pay arrangements.
The NAO notes that the company has donated £345m to the Motability charity since 2010. In September it announced a further £400m donation, an amount equivalent to 14 times the charity’s annual spending in 2017-18. It was not yet clear that Motability could absorb the scale of the donations it had received or spend them effectively.
Responding to the NAO report, the Motability charity said it would “seek improved mechanisms to better influence Motability Operations’ executive remuneration”. Its chair, Lord Sterling, said that the scheme accepted the watchdog’s recommendations but insisted there were “areas still open to further debate”.
A DWP spokeswoman said: “To ensure that the scheme is focused on delivering better value for money we are committed to working with the charity and key stakeholders so that current and future arrangements result in improved outcomes for disabled people.”