Uproar over end of bargain deals for car industry staff
ECOS requires owners to sell a car back after six months or 6000 miles
The government's plan to end what it has called 'contrived car ownership schemes' has rattled the UK's automotive industry, which forecasts devastating consequences for itself and its workers if this becomes law.
The Employee Car Ownership Scheme (ECOS), which the government intends to end from 6 April 2026, differs from traditional salary sacrifice schemes in that the car is owned by the employee, not the employer.
Operated mainly by car makers and their dealers, ECOS enables an employee to buy a brand new car at a hugely discounted price. Monthly repayment bills are very low, with little or no interest charged.
Under the terms of the arrangement, the employee is required to sell the car back, typically after six months or 6000 miles. It's then replaced by another.
Because the car is owned by the employee and so not deemed a company asset, the employee is not required to pay benefit-in-kind (BIK) tax or national insurance contributions.
As such, the government believes this arrangement is neither legitimate nor fair, despite ECOS users being subject to heavy limitations.
In her Autumn Budget, chancellor Rachel Reeves outlined measures to 'level the playing field' because 'this arrangement means those benefiting don't pay company car tax which other employees pay'.
Speaking to Autocar, manufacturers said they had been given few details on the proposed changes and were still considering the government's plans.
A spokesperson for Stellantis said the group was 'speaking directly to the UK government on the impacts and to understand further details and timings'.
The Society of Motor Manufacturers and Traders (SMMT) said the chancellor's announcement had come as a 'complete surprise' after decades of the industry operating ECOS unchallenged.
The SMMT questioned Treasury estimates that taxing ECOS cars as employee benefits would raise £275 million in the 2026-27 tax year and a further £590m over the following three years, because it believes this income would come at the expense of VAT and VED (road tax) on new cars no longer being sold.
Urging the government to reconsider its plans, SMMT CEO Mike Hawes said: 'These schemes are an integral part of the remuneration packages that attract people into the industry and allow employees affordable access to the products they make. They are an important part of the new car market and provide a key source of nearly new vehicles to the used market.
'Removing these schemes would challenge manufacturers' business models, restrict their ability to retain and recruit staff and constrain efforts to decarbonise road transport.
'These [ECOS cars] are new models, reflecting the latest technologies and, as such, are increasingly electric, so to cut off this new and used vehicle supply at exactly the time the industry must drive up EV adoption would be a perverse step.
'Not only would this undermine industry and government net-zero ambitions, it would also be counterproductive to economic growth, actually decreasing government revenues from lost VAT and VED, and hurt working people and their families financially.
'We would urge government to think again about this proposal and support the industry and its workforce at this critical time.'
The SMMT claims that each year, ECOS generates around 150,000 cars for the 'nearly new' market and are a valuable mix of popular vehicles and those, such as EVs, that customers would be wary of buying new.
However, used car valuation experts have disputed the magnitude of the impact that ending ECOS would have on used market supply.
A spokesperson for Cap HPI said: 'It won't have an impact on nearly new volumes. The numbers involved are tiny compared to daily rental. The [ECOS] vehicles are often on very strict mileage and there are strict rules on how long they can be kept.'
Meanwhile, Ed Steele, MD of leading automotive recruitment specialist Steele-Dixon, has predicted that employee recruitment won't be so badly affected by the banning of ECOS.
'Banning the schemes will hamper recruitment, but then if everyone is suffering, I suspect the impact will not be so great,' he said. 'At the moment, the prospect is a worry but not yet a problem, and I'm sure the accountants and lawyers will come up with a solution.
'If they don't, a ban might be a good thing, since 99% of the people I deal with haven't a clue what it costs to pay for your own car. They should know what it's like for those people who do.'
The prospect of a new car every six months on terms significantly better than anyone outside the car industry can enjoy sounds great, doesn't it? Not according to one manufacturer employee in receipt of the benefit.
The employee, who asked not to be identified, has a 1.0-litre hatchback on his firm's ECOS that costs him just £85 per month. He pays no benefit-in-kind tax or national insurance contributions on it and it's replaced every six months.
However, he says there are strict limits as to which model he can order and with which options, and even then, his order can be overruled by the factory and a different specification from the one he requested supplied. He must pay an excess mileage charge if he does more than 6000 miles in the car and any damage it suffers must be repaired by a manufacturer-approved garage whose prices, he says, tend to be higher than elsewhere.
If he puts the car through a car wash, any swirl marks must be polished out at a cost of £80, and a chipped windscreen must be replaced, not repaired.
'The scheme is great in the sense that the car is cheap, and unless I damage the car, I don't have to budget for new tyres or servicing,' the employee said.
'The downsides are that it's quite inflexible and the higher refurbishment and repair costs put many employees with families off the scheme, because of the damage their kids might do to the car's interior.
]]>
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
33 minutes ago
- Yahoo
Four ways the spending review could impact you
Rachel Reeves has said her spending review tomorrow will be about 'making working people better off', admitting that not enough Britons are feeling their lives improving under the Labour government. Sharing out some £113 billion freed up by looser borrowing rules, the chancellor is expected to announce funding increases for the NHS, schools and defence along with several infrastructure projects. However, other areas could face cuts as the Treasury tries to fulfil its self-imposed fiscal rule to match day-to-day spending with revenues. Some have suggested that the government will be unable to achieve this balance without imposing higher taxes, with tomorrow's spending review likely to set the tone for this year's autumn budget. Here, Yahoo News takes a look at what the spending review entails, and how it is likely to affect your lives. A spending review is the process the government uses to set all departments' budgets for future years, according to the website, including for public services. The current 2025 spending review takes place in two phases – the first of which concluded at the 2024 autumn budget when spending plans for 2024/25 and 2025/26 were confirmed. Phase two, will prioritise delivering the government's missions, and has seen departments holding negotiations with the Treasury over their spending plans for the coming years. Reeve's announcement tomorrow will set planned day-to-day spending totals for all government departments from 2026/27 to 2028/29, and investment spending plans for a further year (from 2026/27 to 2029/30). The government has said that its review will be 'zero-based', meaning it will set budgets from zero and assess all spending for value for money, rather than adjusting up or down from existing budgets, according to Parliamentary documents. Here are some ways this process could affect the lives of ordinary Britons. The NHS is expected to receive an additional £30bn in funding in tomorrow's spending review – most likely at the expense of other public services. A 2.8% increase to the Department of Health and Social Care's day-to-day budget is reportedly to be set over the three year spending review period, which according to The Times, amounts to a £17bn real-terms increase, although capital spending is only expected to rise in line with inflation. What does this mean for patients? Well, it could help the government achieve its target of 92% of patients in England waiting for planned treatment being seen within 18 weeks of referral by the next election, rather than the current 60%. The spending review will likely benefit the government's 10-year plan to modernise the NHS, including with more community-based care, better preventative treatment and digital technologies, with details on a revamp and additional funding of the NHS app expected to be announced in tomorrow's review. This, in theory at least, means you could have more freedom and flexibility in accessing scan and test results, booking appointments, and receiving information on treatments and trials, as well as the ability to choose which hospital to go to. Ahead of her review, Reeves announced that £15.6bn will go towards improving public transport projects in the North and Midlands – hopefully improving travel times and available routes. The spending settlement includes £2.5bn for Greater Manchester for projects including new tram stops in Bury, Manchester and Oldham and £2.4bn for an extension of the metro from Birmingham city centre to the new sports quarter. It also includes £2.1bn to start building West Yorkshire Mass Transit by 2028, £2bn for the East Midlands to design a new mass transit system between Derby and Nottingham and £1.8bn for a metro extension linking Newcastle and Sunderland via Washington. An additional £1.6bn is being given to Liverpool City Region for new bus routes, including to the airport and football stadiums, while £1.5bn will go to South Yorkshire, including £530m to renew the region's trams. The deal also includes £1bn for Tees Valley, including £60m for the Platform 3 extension at Middlesbrough station and £800m for the West of England, including £200m for mass transit links between Bristol, Bath, South Gloucestershire and north Somerset. The spending review looks to provide a big boost to public transport outside the capital, but Londoners will not fare as well, with Mayor Sadiq Khan decrying a lack of cash being allocated to London. Campaigners feared that the Department for Energy Security and Net Zero's Warm Homes Plan was in line for cuts, although a government source has told The Guardian that Reeves has decided against this. If this does prove true, then up to 300,000 households will likely have the same level of support in saving money on their bills and making their homes more energy efficient. The plan includes a boiler upgrade scheme supporting households switching to a heat pumps, while lower-income households and renters are entitled to energy efficiency upgrades such as insulation and low-carbon heating. Access to affordable housing may still prove challenging after tomorrow's review, however, with Inside Housing writing that the government's target of delivering 1.5 million new homes by the end of this Parliament is regarded by most as "unfulfillable". Council services such as tenant support and homelessness services could also take a hit, with councils currently making an unprecedented £1.2bn of savings and cuts to balance their books, with the County Councils Network warning tomorrow's review will be a "make or break" moment. It is rumoured that the government is considering introducing taxes on rental income for landlords in its Autumn budget to pay for the Department of Housing's spending. Schools are expected to receive an unexpected extra £4.5bn a year in the upcoming spending review in a move that will be welcomed by teachers and parents alike. This means day-to-day funding for schools will increase by more than £4.5bn a year by 2028-9 compared to this year, The Observer reports. This will help cover the expansion of free school meals for families who receive Universal Credit, and partly fund a pay rise for teachers agreed upon last month. However, school finances are still likely to feel squeezed, as the government puts £615m towards pay rises, with schools having to find £400m from their own budgets. More money is also expected for reforms to Special Educational Needs and Disabilities (SEND) provision, which will help more pupils stay in mainstream schools. Additional money is also set to be made available from the Treasury's £113bn capital investment fund to repair leaking roofs and crumbling classrooms. What is the spending review? Everything Rachel Reeves could announce to fix UK economy (The Independent) London bracing for cuts in Chancellor's Spending Review (The London Standard) Voices: Wes Streeting has won the spending review – but will he blow his winnings? (The Independent)
Yahoo
an hour ago
- Yahoo
Scottish Government refuses to rule out changes to pensioners' winter payment
The Scottish Government has not ruled out making changes to its equivalent on the winter fuel payment scheme, amid concerns some pensioners could be left worse off than their counterparts south of the border. A spokesperson for First Minister John Swinney said ministers at Holyrood were 'trying to understand the fiscal implications' of Monday's policy change by the UK Government. After cutting the winter fuel payment for all but the poorest pensioners last year, Chancellor Rachel Reeves has now confirmed some nine million pensioners in England and Wales will receive the benefit this winter. The payment, worth up to £300, will be restored to the vast majority of pensioners who previously received it, with those with an income of under £35,000 a year qualifying for the UK Government's payment. Today we are expanding Winter Fuel Payments to benefit nine million pensioners this winter. It is right that we continue to means-test this payment so that it is targeted and fair. That's why we have acted to expand eligibility so no pensioner on a lower income will miss out. — Rachel Reeves (@RachelReevesMP) June 9, 2025 In Scotland, ministers had already announced plans to ensure all pensioner households receive a payment. The Pension Age Winter Heating Payment will see all pensioner households get at least £100, with poorer pensioners getting either £200 or £300 depending on their age. Labour, however, challenged SNP ministers to ensure that 'no struggling Scottish pensioners will be left out of pocket under their plans'. Mr Swinney's spokesperson confirmed that, as it stands, the policy in Scotland has not been changed. But adding that ministers are 'trying to understand the fiscal implications' of what has been announced', the spokesperson refused to rule out future changes to the payments. 'We will always seek to support pensioners in Scotland the best we can, we are absolutely committed to that,' the spokesperson said. The change in policy from the UK Government will bring additional money for the Scottish Government – with the spokesperson stressing SNP ministers are 'still trying to understand' how much extra cash could be due. Here, the spokesperson stressed the Scottish Government's budget is 'set largely by Westminster', adding: 'We have to, frankly, read the tea leaves sometimes about what is going to happen to our block grant throughout the year.' The comments from the First Minister's spokesperson came as Scottish Social Justice Secretary Shirley-Anne Somerville described the UK Government's handling of of the benefit as 'shambolic'. Ms Somerville welcomed Labour's U-turn on the benefit cut, but said the decision should never have happened in the first place. She told BBC Radio Scotland it was 'very difficult to try and run a devolved social security system when you're actually finding out some of the details on social media before you can actually find out the details from the Government'. The Social Justice Secretary insisted that was 'no way for the Governments to work together,', adding she was 'deeply disappointed in the way that the UK Government have handled this once again with the Scottish Government'. Scottish Secretary Ian Murray stressed the benefit was devolved to Scotland, saying: 'This is a devolved payment. There's lots of social security that is devolved in Scotland. It is up to the Scottish Government to develop that and come up with their own policy.' The Labour MP also told BBC Radio Scotland the Scottish Government's winter fuel payments system meant that 'limited public money' will go towards helping millionaire pensioners with their heating bills. He insisted the initial decision by the UK Government to scrap the universal payments had been the 'right thing to do at the time', but added that changes could be made to this now the economy has been 'stabilised'.
Yahoo
an hour ago
- Yahoo
The winners and losers in Labour's first spending review
When Rachel Reeves publishes the government's spending review on Wednesday, the stories the Treasury will want to tell are the energy, transport and other infrastructure projects that will get a share of the big boost in capital funding – £113bn. They will argue that cash, freed up by the change to the fiscal rules in the budget, could only have happened under Labour and was opposed by the Tories and Reform. But the capital spending cannot stop expected cuts in day-to-day spending, meaning extremely tight settlements for departments, with savings expected from policing budgets, local government, civil service cuts, foreign aid, education and culture. Treasury sources said they would still spend £190bn more over the five-year parliament than the Conservatives' spending plans – meaning more than £300bn will be distributed among departments. Real-terms spending will grow at an average of 1.2% a year over the three years that the spending review period covers, a significant drop from the first two years when it will be 2.5%. Even that figure does not tell the full story because of the disproportionate boost being given to defence and the NHS – and has led the Institute for Fiscal Studies to warn that the spending commitments will require 'chunky tax rises' in the autumn, when coupled with other expected priorities such as restoring the winter fuel allowance to more pensioners and action on child poverty such as ending the two-child benefit limit. Here are some of the key offers from the spending review – and the rows over cuts. The biggest row of the spending review has been between Reeves and the home secretary, Yvette Cooper, over policing, which one source describes as being a 'huge headache'. Cooper has brought out the big guns to make her case, first with a letter from six police chiefs who warned that without more funding the government would not meet its manifesto promises on crime. Sir Mark Rowley, the head of the Metropolitan police, and other senior police officers have also written to the prime minister to warn him that investment was need to prevent some crimes being routinely ignored. It is understood the policing budget will not face real terms cuts but the level of spending is still under discussion. The Home Office is under strain as a major spending department that is key to some of the most ambitious manifesto pledges – including halving knife crime, police recruitment, reducing violence against women and girls as well as dealing with monitoring offenders who will be released earlier due to sentencing changes. The other major spending review row is over deep dissatisfaction from Angela Rayner – the deputy prime minister and housing secretary – with the level of funding for social homes in the spending review, making her one of the last remaining holdouts in negotiations with the Treasury over departmental spending settlements. The Ministry of Housing, Communities and Local Government has been battling for more funding for the affordable homes programme as well as trying to preserve cash for local councils, homelessness and regional growth initiatives. The Treasury had previously put £2bn into affordable housing, described as a 'down payment' on further funding to be announced at the spending review, which Reeves said would mark a generational shift in the building of council homes. However, the next phase of funding has caused a major rift with Rayner – and more so because capital spending on infrastructure such as housing is meant to be a priority. The environment secretary, Steve Reed, is said to have been holding out for a big capital injection to fund flood defences. The autumn budget said the government was facing significant funding pressures on flood defences and farm schemes of almost £600m in 2024-25, and that those schemes would have to be reviewed for their affordability. Sources at the Department for Environment, Food and Rural Affairs (Defra) confirmed a post-Brexit farming fund would be cut in the review. Labour promised a fund of £5bn over two years – from 2024 to 2026 – at the budget, which is being honoured, but in the years after that it will be slashed for all but a few farms. The energy secretary, Ed Miliband, had a long fight to keep cash for a major programme of insulation, which was a key part of the government's net zero strategy. However, there are reports suggesting other schemes could be scaled back to protect the insulation programme. At the October budget, Reeves announced £3.4bn over three years for household energy efficiency schemes, heat decarbonisation and fuel poverty schemes. The government responded to concerns expressed at the time calling the sum the 'bare minimum' and promising a spending uplift at the review. Miliband's department is expected to get significant capital investment in energy infrastructure including nuclear – with the government poised to give the go ahead to the Sizewell C nuclear plant. The chancellor has already announced £15bn in transport spending across the north of England, funds which she said fulfil promises made by the Conservatives to the country but which the party had no way to pay for them in its own plan. Wes Streeting's department is set to be one of the big winners of the spending review and it will lay the groundwork for the NHS 10-year plan, which will be published imminently after the spending review. The department will get one of the biggest boosts to funding as others face real-terms cuts. The funding for the plan prioritises three key areas, moving care from hospitals to communities, increasing the use of technology, and prioritising prevention. No 10 and Streeting hope that the 10-year plan will contain major commitments and a positive story that the government will finally be able to tell properly on improvements to the health service – though any good news could be scuppered by the ballot for strike action by resident doctors. Still, Streeting's department was one of the last to settle formally with the Treasury due to negotiations over drug prices, though departmental sources downplayed any specific row. Any child in England whose parents receive universal credit will be able to claim free school meals from September 2026, the government has said. Parents on the credit will be eligible regardless of their income. The government says the change will make 500,000 more pupils eligible. A Department for Education (DfE) source said it was the best measure outside welfare changes to address child poverty and that the education secretary, Bridget Phillipson, had consistently fought to protect school food programmes through each round of spending negotiations. But schools budgets will be squeezed. Teachers will get a 4% pay rise next year, with additional funding of £615m. But schools will still have to fund about a quarter of the rise themselves – a total of £400m from their current budgets. Phillipson has tasked the DfE with finding savings in schools budgets, such as energy bills. Savings will also come as the government is removing public funding for level 7 apprenticeships, which has drawn criticism from skills experts. The justice secretary, Shabana Mahmood, was one of the first to reach her settlement to allow her to announce a £4.7bn plan to build three new prisons starting this year, part of a 'record expansion' as the government attempts to get to grips with the prison crisis. The early announcement was essential because it came alongside an announcement that the government would put a limit on how long hundreds of repeat offenders can be recalled to prison amid Whitehall predictions that jails will be full again in November.