Spring Budget 2023: What are we asking the Chancellor to do?

On energy bills and cost of living support…

Introduce energy social tariffs to help the most vulnerable 

The Government has made clear that energy support will soon fall away for most, but it does say it will try to protect the most vulnerable longer-term. In November, it even said it would consider the option of energy social tariffs – which would further protect those not able to engage in a competitive market.

There is widespread support among campaigners (no less than 95 charities for starters), and even the energy regulator, to investigate this. Our founder, Martin Lewis, has publicly announced his support for this move on several occasions.

We have highlighted our support and asked the Government to make clear whether it will look to introduce social energy tariffs in its spring budget. 

Reform the rules and outdated thresholds linked to Lifetime ISAs (LISAs), which are no longer fit for purpose

In January, we submitted our report, “Locked out by the LISA”, to the Treasury, urging it to reform LISA rules that are costing some would-be first-time buyers.  

LISAs are a savings vehicle, where you can save up to £4,000 a year, which the Government will top up by 25%, to a maximum of £1,000 a year. To keep the bonus from the Government, these savings must be used for a first home costing under £450,000, or for retirement. 

But average house prices have rocketed since the LISA was launched in 2017 – up 35% – yet the threshold of £450,000 has not changed. This means that more people are likely to be considering first homes over this price now and in the future – most acutely in London but sharp rises mean this could be an issue elsewhere – and will have to withdraw their money and lose the bonus. 

Doing so sees you hit with a 25% penalty, which not only takes away the bonus and any interest you’ve earned, but also takes an effective 6.25% dent to the money you originally put in. This means those who have saved in good faith can end up with a hole in their hard-saved deposits. Lots of people have contacted us about this – and we included these stories in our report. 

We are calling on the Treasury to make one or both of these changes:

• Reduce the early withdrawal fee from 25% to 20% for those purchasing homes above £450,000. This relaxing of fees was implemented on a temporary basis by the Government to help savers during the Covid-19 pandemic, which proves it can be done. It means savers lose out on the Government bonus, but do not forfeit their own cash.  

• Uprate the LISA property price threshold in line with average property prices, and continue to do so automatically on an annual basis going forward. This would see it raised to £607,500 initially, to match house price growth since LISA launch in 2017, and then uprated (or downrated) in line with house prices thereafter.  

Read our blog for more information on our findings and campaign.

Act with urgency to free mortgage prisoners from their plight

Mortgage prisoners are homeowners who have been trapped on pricey mortgage rates, most often since the 2008 financial crash, paying more than other borrowers and unable to switch to cheaper deals mainly because they don’t pass current, strict affordability tests. At MSE we estimate that there could be up to 200,000 mortgage prisoners in the UK, who are ‘closed book’ customers whose mortgages were sold by the Government to inactive firms – largely with investment companies who are not regulated to lend new mortgages. We estimate that the Government made £2.4bn doing this.

We have been campaigning to release these mortgage prisoners since 2015 – their situations were already terrible, now because of the pandemic and the cost of living crisis, they are even more dire. 

We commissioned the London School of Economics and Political Science (LSE) to produce research on the scale of the issues facing the people in this position, the wellbeing impacts of being a prisoner and potential solutions to help them. The final report has now been published, handing the Government a set of potential approaches and costings to free mortgage prisoners.

This is a problem that was largely caused by – and can only be solved by – Government. It has promised to "carefully consider" our proposals and we hope it commits to doing so in the Budget.

If you think you might be a mortgage prisoner, visit our help guide.

Support for struggling mortgage borrowers

Due to rising interest rates, more expensive mortgages and previously very cheap fixed mortgage deals expiring, we are concerned about a national squeeze on affordability as borrowers are forced to pay much more each month after they remortgage.

We are also worried that, due to affordability rules, combined with the cost of living crisis, some may ridiculously be told they can’t afford the current, cheaper fixed deals, leaving them on more expensive variable rates. Of course, landlords are also mortgage customers, so this could have knock-on effects for renters too.

In December, Martin Lewis joined a summit of mortgage lenders, along with the Chancellor and the Financial Conduct Authority. There, he asked the industry and Treasury to consider the urgent need for flexibility and forbearance for struggling borrowers. We have asked the Treasury to continue committing to help support people with their mortgages. For more on what was discussed, read our news story. 

Urgently take the next steps to regulate buy now, pay later (BNPL) services

We have long argued that buy now, pay later services need to be regulated. Read our campaigns blog for more on why we think this is urgently needed – but in short, it would add fairness and safeguards to the marketing and promotion of BNPL, and it would allow consumers to take complaints to the Financial Ombudsman Service if something goes wrong.

Back in 2021, the Treasury committed to making this happen, and despite consulting on it last summer, when we submitted this document to Government we were no closer to seeing the industry regulated, so we asked the Chancellor to use the budget as an opportunity to kick start the lawmaking needed to regulate the industry. 

However, in February (after we submitted our Budget calls) the Treasury announced draft legislation to regulate this industry. This is good news, but it still won't happen for several months at least.

The BNPL market is growing at speed, and more people are using it as a direct result of the cost of living crisis. Progress has been much too slow – we need to see this legislation now go through Parliament as soon as possible.

Read our guide on BNPL if you want to understand more about how it works and what to look out for.

Endorse our call to reintroduce “typical” APRs on cards and loans

We have been calling for advertising of credit cards and personal loans to be much more transparent – because often what you see isn’t what you’ll actually get.  

When you apply for a card or a loan right now, you’ll usually see a ‘representative’ APR. That is an advertised rate of interest, which only 51% of successful applicants must get. In practice, this means that you might apply for a rate, and then be accepted but offered a higher one. Then you are stuck with accepting that rate, or will have to decline it, with the impact on your credit file potentially harming your ability to shop around and get credit elsewhere.

But it used to be better – before 2011, we had ‘typical’ APRs, which 66% of successful applicants had to get. The reason ‘typical’ APRs turned into ‘representative’ APRs is because of rules introduced across the European Union. Now the UK is no longer in the EU, we think this should be put back – so more consumers must get the advertised rate. 

We published a report on this in April last year – making this recommendation and several others to the Government. Then-Chancellor and now Prime Minister Rishi Sunak asked the FCA to investigate reforming APRs at the time, but right now we are no closer to this change.

The Government is currently looking at reforms to consumer credit across the board, where this could be considered, but this work will likely take years. The regulator already has the power to make this change, so we are asking the Treasury to work with the regulator on this so we can see this change much sooner – especially as more and more consumers are now taking out credit.