Chancellor says she ‘can’t leave welfare untouched’ this parliament as budget looms
Rachel Reeves has said she “can’t leave welfare untouched” this parliament, with the Treasury understood to be considering axing up to £1bn in tax breaks for a scheme providing cars for disabled people.
The chancellor set out her thinking on welfare before next month’s budget in an interview, having previously said she would need to make cuts and raise taxes.
“We can’t leave welfare untouched,” she told Channel 4 News when asked about changes to the benefit system. “We can’t get to the end of this parliamentary session and I’ve basically done nothing … We have to do reform in the right way and take people with us.”
The government had to abandon billions of pounds in cuts to disability benefits earlier this year after a revolt by Labour backbenchers, but it is still pressing ahead with cuts for future claimants of the health element of universal credit from April 2026.
It is now understood to be considering removing tax breaks for the Motability scheme, under which disabled people are exempt from VAT and insurance premium tax on cars subsidised by the government.
Whitehall sources said the ending of tax exemptions was under consideration but that no decision had been taken. They downplayed the idea of reducing the eligibility criteria for Motability cars, but said the option of scrapping the VAT and insurance premium tax exemptions was “more likely”.
Another change under consideration is the idea of removing luxury brands such as BMW and Mercedes from the scheme, under which a minority of claimants top up with an advance to get a more premium car. These premium brands only make up 40,000, or about 5%, of the 800,000 Motability cars.