The six things that Martin Lewis wants to see in the budget

With days to go until the first Labour budget in 14 years, the rumour mill has gone into overdrive.
There has been widespread speculation about exactly how the chancellor, Rachel Reeves, will plug what the government says is a £40 billion hole in the public finances.
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One man who perhaps has a better idea than most is Martin Lewis, the personal finance campaigner and founder of the website MoneySavingExpert. Lewis has met the chancellor and written her an open letter laying out the changes he thinks are needed.
“We are looking at perhaps one of the tightest budgets we have seen in a long time, but none of the things I am suggesting are pipe dreams. They are realistic asks and many do not require much expenditure,” Lewis said. “A large number of things within the consumer finance world are simply poorly designed. We need a fair system that works well.”
After months of doom and gloom, many taxpayers are braced for some tough decisions. But Lewis hopes that the chancellor will also lay out her path to better days once the books have been balanced: “People don’t mind short-term pain if they can see what the end game is.”
Does he think the average person will feel better or worse off after this budget? “Ask me on October 30,” he said.
Here are the six changes he wants to see.
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The government has already introduced means-testing for the winter fuel payment. These annual handouts of up to £300 were paid to all pensioners but now go only to those who get pension credit — a benefit that tops up your weekly income to £218.15 if you are single or £332.95 for a couple. The full state pension is now worth £221.20 a week.
“This was a strange way for a new government to plant its flag and I’m not sure they quite realised the impact it would have,” Lewis said. “I have no objection to the principle of means-testing the payments — there is no need for millionaires and billionaires to get them. But I do have a problem with both the level of the means test, because £11,300 a year is too low, and the mechanism, because basing it on a critically underclaimed benefit was a poor choice.”
About 800,000 of those who are eligible for pension credit do not claim it, and so will not get the winter fuel payment. “It means that people the government believes should get the payment, including many of the poorest and most vulnerable, are missing out because they haven’t completed the complex claim form. That is wrong, worrying and potentially life-threatening,” Lewis said.
“One solution, which is imperfect but workable, would be to broaden the eligibility criteria so that pensioners who get pension credit or are in council tax bands A to C qualify. This has precedence from prior energy crisis payments, so is easy to implement and would cover the vast majority of the most vulnerable pensioner households.”
In his final budget as chancellor in March, Jeremy Hunt addressed some of the problems with the child benefit system, but there is still work to do.
Child benefit is £25.60 a week for the first child and £16.95 a week for additional children. Since April parents earning below £60,000 have been eligible for the full benefit (up from a previous limit of £50,000) but have to pay back 1 per cent of the benefit for every £200 earned above that limit. Once one parent earns £80,000, the family are entitled to nothing.
“The benefit is still based on individual rather than household income, which makes it incredibly unfair,” Lewis said. A household where two parents each earn £59,999 — a combined £119,998 — would get the full benefit, but a household where one parent earns £80,000 would get nothing.“Raising the threshold means that fewer people are affected by the means test, but the core unfairness remains and it needs to be addressed. There are real problems in changing the way this works because our tax system is based on individual not household earnings. Hunt promised to shift to a system based on household rather than individual income by April 2026, and I want a commitment from this chancellor to continue with that.”
“This perk for parents is critically underclaimed and that is because it is badly named — it is instantly confusing and off-putting,” said Lewis.
The tax-free childcare scheme replaced the old childcare vouchers and offers parents up to £2,000 a year towards childcare costs. You set up an account through the Government Gateway system and for every 80p you put in, the government will add 20p. Parents who earn up to £100,000 can claim up to £500 every three months.
It is a very strong boost for working families paying for childcare, yet while 1.3 million families are eligible, some 800,000 of these are not claiming their free money. Lewis thinks a big reason is that the scheme is poorly named (it sounds like something to do with your tax return) and communicated.
“Our research showed that if we changed the name to something like ‘the working parents childcare top-up’, which actually describes what the payment is, then you would massively increase the number of people claiming it,” he said.
“This would be very cheap and easy for the government to rename so that more people can benefit.”
The Lifetime Isa was launched in 2017 as a way to help first-time buyers get on the property ladder. Those aged between 18 and 39 can save up to £4,000 a year until they are 50 and get a 25 per cent top-up on their savings. If the money is used before age 60 for anything other than to buy a first home, you pay a 25 per cent penalty, which effectively forfeits the bonus, and some of your own money on top. If you had £10,000 and earned a £2,500 bonus, you would pay a penalty of £3,125, losing £625 from your savings.
Other rules are strict, too. You can only use a Lifetime Isa to buy properties worth up to £450,000 and that cap has not changed since 2017, even though house prices have gone up significantly. “As a result more young people are finding they are priced out of using this account to buy a home,” Lewis said.
• The £75m Lifetime Isa penalty
“This is very easy to fix. All you have to do is make it so that if you buy a property above the threshold, you don’t get the bonus, but you also do not pay a fine,” he said. “That effectively reduces the penalty to 20 per cent. It would be good to see the £450,000 threshold rise with average house prices too.
“It is completely unjust that many of our youngest people have done exactly what the state wanted them to do — use a Lifetime Isa to save for their first property — and they are having to pay the state a fine when they come to do that. It needs to stop.”
The amount we are all paying to heat and light our homes has soared since 2021, and it’s not just the rate for each unit of gas or electricity that has gone up. The standing charge — the daily amount you pay for being connected, even if you use no energy at all — is limited by the energy regulator’s price cap to about 31p a day for gas and 61p for electricity. This is equivalent to more than £300 a year.
Three years ago it was £86.
“This means that low-usage households who reduce their usage do not see a benefit. It is particularly unfair to many people who have gas central heating that they turn off for six months of the year,” Lewis said.
“The problem is that if we reduce standing charges, then unit rates will need to go up to compensate. That means that to make this change we need to simultaneously bring in tariffs that protect vulnerable higher users, such as families with a child who has a disability who perhaps needs a huge amount of energy for a ventilator or to charge an electric wheelchair.
“It’s a fine balance and we need the government and the energy regulator Ofgem to work together on this.”
Smart meters are another problem. Lewis said: “These are good in principle; the idea is that you do not have to submit a reading to your energy supplier, that your bills are more accurate and you can instantly see how much energy you are using at home.
“The problem is that more than 20 per cent of people tell us theirs don’t work, meaning that they don’t feed through readings to the firm. Other things that go wrong include using incorrect tariffs, broken energy monitors and more. Firms simply don’t allocate enough resources to repairs.”
“Suppliers are fined if they do not meet new installation targets, but we should be targeting based on the number of working smart meters — covering both installations and repairs — and that would help to fix the problem.”
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This benefit is paid to those who care for one person for at least 35 hours a week and earn less than £151 a week after tax. It is paid at £81.90 a week — about £4,258 a year.
But if you earn a penny over the weekly earnings limit, you lose the full allowance and must pay back anything you have received in error.
“Often the system does not pick up that people have earned too much, due to a change in minimum wage for example, and they only find out when they are asked to repay,” Lewis said. “How is someone earning so little expected to pay back a year’s worth of carer’s allowance? The system is devastating the lives of some of our most vulnerable people.
“We need a change so that if you earn above the threshold, you gradually lose your allowance in a tapered way, rather than it being a cliff edge. Any clawback should only be based on the amount that you earned over the threshold, not the whole payment.”