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.
Glos Guy,
Also knowing someone who works for Motability Operations, I would not say their package was excessive or ‘gold plated’. It is more in line with other ‘government contractor’ private companies of a similar size and turnover (which indirectly all taxpayers pay for). Thus, staff receive the remuneration package commensurate with working for such a large organisation If benefits such as private health insurance were not offered, staff (particularly senior staff) would leave very quickly to go to other companies that do offer it within the overall package.
Having recently taken early retirement from my ‘second career’ day job, I can say that defined benefit pensions are not the holy grail’ that they are often portrayed as. Albeit I had enough service and seniority to be on a ‘final salary’ basis, most now are based on a ‘career average’ salary base as operated by Motability Operations.
Interestingly you compared Motability Operations to charities – have you seen some charity’s senior execs salary and remuneration packages? Now they do make one’s eyes water.
Yes, Mike Betts (the former CEO of Motability Operations) was employed on a very very generous remuneration package which I doubt the new CEO is in receipt of after the spotlight was shone during the commons select committee inquiry. However, I do not recall the committee rebuking Motability for the t&c’s of lower grade employees.
Their contact centre advisors for example, are currently recruited on a starter salary of £26k, rising to £30k pa, with remuneration ‘perks’ (phi etc) worth roughly £2k pa, which isn’t an excessive salary in this day and age. Particularly as they are given resolution authority and management far in excess of most other contact centre employees.
Infact most quality graduates looking at career opportunities would not get out of bed for less than £30k to £35k, bearing in mind nowadays they have RPI based student loans and tuition fee debt to pay back as well as live a little. More senior and technical staff accordingly demand a much higher remuneration package commensurate with their knowledge and experience. A view put forward more than once when I was recently interviewing candidates to fill my own role once I had retired (I wish I had been a bit like Oliver Twist and had previously asked for more)!
It boils down to the simple fact that if you pay peanuts, you get monkeys. Motability Operations have to pay a remuneration package at least as good as other companies, else they will lose the calibre of staff they wish to recruit and retain. If they don’t, the quality and customer service will suffer accordingly.