Martin Lewis 'reminds' Jeremy Hunt of four key issues to fix in Wednesday's budget

Martin Lewis has issued a last-minute "reminder" for Jeremy Hunt to address a series of ways to help people with their finances in a letter to the chancellor ahead of Wednesday's spring budget.

The Money Saving Expert founder wrote to Hunt in January suggesting a number of fixes for problems including unfair child benefit rules penalising single-income families and a potential penalty facing first-time homebuyers.

Sharing the letter again this week on X, formerly Twitter, the personal finance journalist wrote: "Just a reminder of the letter Jeremy Hunt asked me to write to him on Child Benefit, Lifetimes ISAs, Student Living loans and mid-contract prices hikes. Let's see what happens."

The chancellor has hinted he will unveil some personal tax cuts when he steps up to the dispatch box at Wednesday lunchtime, including a potential 2% cut to National Insurance. But how many of the issues that Lewis wants "fixed" will be addressed by Hunt remains to be seen.

Sharing his letter, dated 22 January, six weeks ago, Lewis initial said: "I hope he listens and we see change in the budget. He can't now say he wasn't told."

Here are the key issues outlined by Lewis:

Cancel Lifetime ISA withdrawal penalty for first-time buyers

Lewis argues this product, designed to encourage 18- to 39-year-olds to save up for their first home, has failed to "keep up with the times".

A Lifetime ISA, or LISA, includes a 25% bonus paid by the government to help people build up a deposit, but there are some penalties under the scheme that are catching many young people out, particularly in the South East, Lewis warns.

As you can only use a LISA on a property worth up to £450,000 – a limit that has remained frozen since the scheme launched in 2017. Since that time, Lewis says house prices have risen by more than 30%.

This has left many first-time buyers priced-out by the market and facing a 25% penalty for withdrawing for any purpose other than buying a qualifying home.

"On £20,000 saved, the 25% bonus added is £5,000, but the withdrawal penalty is £6,250, so they end up with £1,250 LESS than what they put in," Martin says. He calls for the limit to be index-linked (tied to inflation) and to reduce the withdrawal penalty to 20%, which would at least mean savers get back what they put in.

No more mid-contract surges for mobile and broadband

Lewis warns of the "inflationary and anti-competitive" practice of broadband and mobile providers, who "bake into their contracts" 3% or 4% above-inflation price hikes each year.

"Last April, the rise was 17% – now we’ve just learnt December’s inflation figures, which most base their rises on, meaning BT, EE, TalkTalk, Three and Vodafone have all just confirmed huge rises of around 8% for April 2024," he told the chancellor.

He added that these price rises happen while customers are locked in the middle of their contracts, making it hard for them to shop around for a better deal. Lewis suggests that if rises are allowed, there should be a safeguard to stop them from exceeding inflation.

Stop child benefit charge penalising single-income families

In his letter, Lewis recalls a story shared by a viewer, named Alan, whose son was penalised by the child benefits system after his partner died, 34 days after giving birth to twins.

After his bereavement, the son started a new job paying him £60,000, but he was still struggling with mortgage repayments and the cost of living crisis after losing his partner.

To make matters worse, HMRC wrote to him asking him to pay back the child benefit he received due to his new salary falling short of the rules.

Child benefit starts being withdrawn if one parent or guardian's income hits £50,000, and cancelled completely at £60,000, regardless of whether the household is single-income or not.

"This seems grossly unfair that a couple can bring in nearly £100,000 but a single breadwinner loses out once they earn more than half of this. Are there any plans to change this?", Alan asked.

Lewis adds that the current thresholds have been frozen in place since 2013, dragging hundreds of thousands more families into this situation each year due to pay inflation.

Make student living loans enough to live on

Lewis argues that the basic principle of students not having to pay for university at the point of entry – only afterwards once they are earning – is "under threat" as the living loan for students in England has faced substantial real-terms cuts.

He says this is "especially detrimental" to those from low-income families. Lewis questions why the government only uprated maintenance loans in England by 2.8%, while inflation had reached double figures.

"There is an inconsistency here: the student maintenance loan is a seemingly arbitrary figure, yet the interest on student loans is pegged to inflation," he says.

Tougher rules on buy now pay later offers

Lewis took the opportunity to squeeze in two additional issues, including the regulation of buy now pay later products.

The Financial Conduct Authority (FCA) has been making some progress in this field, securing some changes to potentially "unfair and unclear" contract terms and moving to ensure more firms in this sector are properly regulated.

Calling for further progress, Lewis says: "I accept the proposed regulation may not be perfect, but it is the fastest growing form of debt."

Free the mortgage prisoners

Lewis added fifth concern in his letter - demanding more help for people known as "mortgage prisoners".

By this, he means homeowners who took out mortgages many years ago, when terms were more favourable, who are now facing significantly higher rates.

This particularly applies to people who bought their homes before the 2008 financial crash, before mortgage rules were tightened up. Many of them found that when they tried to switch to cheaper deals, they didn't pass the new affordability checks, leaving them stuck trapped on their higher rates.

In January, Yahoo News reported that the UK Mortgage Prisoners met with the Treasury's economic secretary, Bim Afolami, to discuss some possible solutions to this problem.

One potential way out of this bind could be a "grandfather policy", which would mean modified affordability criteria for pre-2008 homebuyers who have evidence of paying their mortgages over a number of years on higher rates than today.

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