RPI vs CPI inflation the gap only gets bigger and bigger 1/4 by 1/4 and the tiny rise the pip allowance will get in 2021 is not keeping up with Ap’s also and there’s not much Mb can do about that at all..
Yes, this is mainly thanks to the decision of then Chancellor, Gideon Osborne, back in the ’emergency budget’ of 2010 to change benefit increases from RPI to CPI. In the very early years there wasn’t much difference between the two (CPI and RPI), but as time has gone on, the difference between the two has widened markedly and will continue to widen year on year given RPI is much closer to ‘real’ inflation. So, when you take Motability’s more or less set formula when working out the advance payments: Vehicle plus other costs over 3 years including real inflation – (minus) allowance received over 3 years including CPI rises + (plus) expected return on sale of vehicle = Advance Payment. The advance payment is the only variable which Motability can use to price in real inflation. Thus, there will always upwards pressure on the advance payments so long as CPI trails behind real inflation, compounded year on year. I sometimes think Motability get a lot of stick when the real villain of the piece was the then Chancellor changing benefit/allowance rises from RPi to CPI over 10 years ago. Its effects are now beginning to bite very hard indeed.
BigDave – You forgot two critical components in your calculation of AP’s and those are the net profit that Motability Operations makes on each and every lease, which is substantial (it was exposed in the review of them a few years ago and discussed at length on here) and the cost to provide their gold plated salaries and benefits packages to their staff, which are completely out of kilter with any other commercial organisation that I know. They still provide a defined benefit pension scheme and several other perks and benefits that the vast and overwhelming majority of organisations were forced to ditch many years ago. I know someone who works for them, is not in a senior position yet has just received a bonus of several thousand pounds. ALL of this is paid for by disabled customers through their surrendered PIP and AP’s. I think it’s morally wrong. They should be a ‘not for profit’ organisation, with pay and benefits that are comparable with charities. That way all AP’s could probably be at least £1k lower.