Martin Lewis’s Top Six Budget Recommendations

As the first Labour budget in 14 years approaches, speculation is rife about how Chancellor Rachel Reeves will address the reported £40 billion shortfall in public finances.

Among the voices in the discussion is Martin Lewis, a prominent personal finance advocate and founder of MoneySavingExpert. Lewis has had direct conversations with the chancellor and penned an open letter outlining suggestions that could help improve the financial landscape for the public.

«We are facing one of the strictest budgets in years, but my suggestions are practical and achievable, requiring minimal expenditure,» Lewis stated. «Many areas in consumer finance are poorly designed; we need an equitable system that functions efficiently.

In light of the challenging economic situation, many taxpayers are preparing for difficult decisions. Nevertheless, Lewis expresses hope that Reeves will articulate a vision of recovery post-budget: «People can endure short-term hardships if they know what to expect in the long term.»

When asked whether the average individual would feel better or worse post-budget, Lewis replied, «Check back with me on October 30.» Below are the six key changes he advocates.

1. Adjustments to Winter Fuel Payment

The government recently implemented means-testing for the winter fuel payment, which previously benefitted all pensioners. Now, the annual payments, capped at £300, are limited to individuals receiving pension credit—an income boost designed for those with a weekly income of £218.15 if single or £332.95 as a couple. The current full state pension stands at £221.20 weekly.

Lewis highlighted, «This was an unexpected approach from the new government, seemingly unaware of its potential effects. While I support means-testing to prevent millionaires from receiving these funds, I believe the current income threshold of £11,300 is too low and linking it to an underclaimed benefit was unwise.»

Approximately 800,000 eligible individuals do not claim pension credit, thereby missing out on winter fuel payments. Lewis emphasized, «This means vulnerable and low-income individuals are unjustly left out due to the complex application process, which is both concerning and potentially life-threatening.» He proposed expanding eligibility to include pensioners with pension credit or those in lower council tax bands.

2. Revisions to Child Benefit

In his last budget in March, former Chancellor Jeremy Hunt made some adjustments to child benefit, but further improvements are necessary.

Child benefit rates are £25.60 weekly for the first child and £16.95 for subsequent children. Parents earning below £60,000 are eligible for full benefits, though those earning more than £80,000 lose the benefit entirely. Lewis criticizes the individual rather than household income basis for the benefit, which creates inequity.

Lewis remarked, «A household with two earners both making £59,999 receives full benefits, while a household with one earner at £80,000 receives nothing. Changing to a household income basis is essential, and I urge this chancellor to continue Hunt’s commitment to this shift by April 2026.»

3. Improve Tax-Free Childcare

Lewis expressed concerns about the low uptake of the tax-free childcare scheme, which replaced old childcare vouchers. This scheme permits eligible parents to receive up to £2,000 annually for childcare expenses, with the government matching savings in an 80p to 20p ratio.

With an estimated 800,000 eligible families not taking advantage of the scheme, Lewis emphasized the need for clearer communication, stating that renaming the scheme could significantly increase participation. «We found that a clearer name, such as ‘working parents childcare top-up’, would attract more claims and would be easy to implement,» he said.

4. Reconsidering the Lifetime ISA

Initially launched to assist first-time homebuyers, the Lifetime ISA allows users aged 18 to 39 to save up to £4,000 annually, with a 25% government bonus. However, the rules are restrictive: users face penalties if funds are used before age 60 for anything other than purchasing a first home.

Lewis points out that the property value cap of £450,000 hasn’t adjusted since 2017, despite rising house prices, making it harder for young homeowners. «It would be beneficial to eliminate penalties for those who exceed the threshold, effectively lowering the penalty and adjusting the limit to align with housing market changes,» he suggested.

5. Addressing Energy Bills

The costs associated with heating and electricity have risen dramatically since 2021. Households continue to bear significant financial burdens due to daily standing charges, which are capped at around 31p for gas and 61p for electricity—totaling over £300 annually.

Lewis noted that low-usage households gain no advantage from reducing their energy use, especially if they have gas heating that remains off for half the year. Additionally, he pointed to the malfunctioning smart meters affecting over 20% of users, complicating accurate billing. «We should focus on ensuring a high percentage of working smart meters to enhance efficiency,» he stated.

6. Reforming Carer’s Allowance

The carer’s allowance is available to individuals caring for someone for at least 35 hours weekly and earning under £151 a week after tax, currently set at £81.90 weekly. However, a slight increase in earnings results in an immediate loss of benefits, creating undue hardship.

Lewis explained that the system often fails to catch slight income increases, resulting in unexpected repayment demands from low-earning caregivers. He advocates for a tapering approach, where individuals gradually lose their benefit instead of facing a sudden cutoff.