Martin Lewis Explains Why People End Up Paying More Tax | Good Morning Britain

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foreigner i wrote a letter to the chancellor four weeks ago explaining raising the bills by 20 again in april and it would have been a government increase because it is the government that currently sets the prices even though we know we expect the bills to arrive in july . down was an act of national harm that would have hurt the economy it would have hurt consumer confidence so it hit businesses it would have hurt inflation and it would have hurt

people

's mental health they just don't need another price increase and i wrote that letter. very moved that 135 charities, almost every big one you can think of, whether it's Alzheimer's or the witch or citizens' councils or national energy action and many

more

supported it, including Energy UK, the trade body for the energy industry, supported the letter I. sent to the chancellor and I received a letter yesterday

morning

confirming that almost everything we said would be done many

people

are a little confused because I asked for a postponement, not a cancellation of the increase and people say why no Don't you ask for it to be cancelled?

I think you have to understand what's technically going on here, so I'll explain if it's okay. There are two tariffs that set out what the vast majority of people in England, Scotland and Wales pay for energy. One is the price. cap set by the regulator outside the gem based on wholesale rates and that was what always set the rates but that was supposed to go up horribly over the winter I mean even

more

horribly than we actually had so after another campaign, the government put in the energy price guarantee, which is actually, we've had subsidized rates those horrible rates that you've been

paying

are subsidized, they're not what someone in the energy price cap would have paid in the typical use figure nonsense but let's use it anyway would have paid around £4200 over the winter the energy price guarantee meant it was £2500 and as long as the energy price guarantee is lower than the cap price , we paid the guarantee now we know the april power price cap is 3200 which means if you raise this from 20 to 3000 you're still in the power price guarantee and I was saying don't raise that keep it where It's because in July all the predictions are now that the energy price cap is going to drop to around £2,000 which means in practice what yesterday's announcement meant to people is that bills will stay longer or less the same from now until July there will be slight adjustments the unit rate for those who are technical the unit rates will go down slightly and the position the charge goes up a little bit but it will stay more or less the same as until July and now the current prediction because it is based on the price gap so we don't know if they will go down around July 20 and that will stay until the end of the year or so those rates unless there are big changes in wholesale prices maybe due to changes in Russia, Ukraine , that was the reason why I asked for a postponement.

You would never have gotten a cancellation, but in practice, if you postpone the increase until July. the price cap takes over and is cheaper, so increasing the energy price guarantee should have no effect on bills. That's

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news, Martin. I mean, really, huh. A sensational job from you and your team. but having established this and made this work and as Jeremy Hunt referred to you and many other activists in his speech yesterday for bringing this to the government's attention and being able to affect that change, I want to say it's huge the impact that will have and is already having it cannot be underestimated it can be interesting because you know what you have to think about very carefully as an activist and you should also know what I mean and some people will not like me doing this thank you very much thank you Jeremy Hunt and the government for listening when you are an activist.

I think it's very important that when you win and get what you asked for, you say thank you because otherwise I mean I do a lot of campaigning, you don't have a chance of winning another one in the future, so thank you very much to the government for listening. I mean some people say they should have done it in the first place but hey I'll always take them listening and the way you run a campaign and I thought about this very carefully what I try to do because I want to say this is quite a thing obvious and an easy thing to do the government is not going to spend as much to support any of these bills as planned because wholesale rates have gone down, but I needed to make sure the public understood that raising energy rates in April was not something of the regulator, it was not something from the companies, it was a government decision and, therefore, the work I did. and I did it here in another place it was to explain more to the people that it is the government that is raising prices and that was part of turning up the heat for the government to make everyone understand where the decision was being made and this was a choice that the government has to make and that of course makes it politically unpleasant for them to continue with that once people realize that it's actually them doing it so it was a very careful campaign, the postponement rather than cancellation was also thoughtful because that was also will allow us to hopefully get a win and I'm delighted that was understood.

I need to be clear, this is not a panacea. your head around the other things in the budget is there something i just need to explain if i may yes what i am saying is not a panacea on energy bills is the other thing and one of the reasons why this it was even more important to happen in April on energy as we see the end of the winter energy support of £66 and £67 a month so even though energy rates are not going to go up in practice the people are going to lose that 66 67 lbs a month which means you pay more and that has a disproportionate effect on the lower end users I mean to me the most important thing that happened with your question the most important thing that was in my budget really what remains to be done, yes, go ahead, yes, go ahead, Martin, well, the biggest thing that was in the budget that wasn't talked about to me is what they call fiscal drag and, as I always say, the best thing you can do right now is thinking about Jeremy Hunt, putting him in some blush, has nothing to do with what I'm talking about. about but it gives us a good picture of a fiscal burden is the fact that and we already knew that the thresholds for this tax have not increased now that we have an inflationary environment where prices are rising and wages are rising, although not as fast, what which means in real terms people's pay is being cut if you don't raise the tax thresholds then you pay more tax I'll make it very simple you can currently earn £12,570 a year tax free so someone who earns £12,570 a year, well, they wouldn't pay any tax, but if their salary goes up by five per cent and you keep the threshold the same, they're now making £13,200, so they have about £600 of earnings that are now taxed To twenty. percent so they pay £120 in tax and that works because every threshold you have was not mentioned in the budget but the biggest impact on people's pockets is the fact that the tax thresholds don't rise with inflation or with average earnings going to be a hit Child Care absolutely I think in the long run it's going to be a good move, but it won't come until September 2025, which is two and a half years from now, so I think it's an important move for the economy is one of the biggest complaints we get not just for the good they call it free child care but for funded child care we will call it 30 hours a week forever for every nine to five year old until the school age in England, but also the increase in the Universal Credit threshold, the Universal Credit cap, I think is very important and that affects more quickly in the summer and I am pensions.

I am going to avoid the discussion about the lifetime allowance that exists. a political issue i think he used a hammer instead of a chisel but to me what was really more important was the one change he didn't mention in the speech which is on the rise go with me this is getting more and more complex the money purchase allowance now what that means is currently once you're 55 you can take some money out of your pension, but as soon as you take money out of your pension, the amount you'll be able to contribute to your pension in the future and you can still put money into your pension.

Drop substantially and that level is the money purchase allowance, so currently take a penny out of your pension and you can only put well. Take a little out of your pension. put in four thousand a year from now on if you take money out of your pension you'll be able to put in 10,000 a year starting this April and I think in terms of getting people back into the workplace to know that and that's a lot more realistic so that some people know that they do not have a bigger limit on what they are going to be able to put into their pension if they have already taken the money from the pension it is very important, they have motivation to keep working and have that extra money to put if you can put more is director

martin

yeah well it's the idea that you know you made the decision and I'm going to take my pension money okay I can't really go back because you know the pension contributions I'm going to receive I won't be able to put them all right that by increasing the money purchase limit I think of all of all the measures that you did on pensions in terms of getting people back to the workplace which was probably the most important thing to me, I really don't mentioned in the speech, it was in the underlying documents.

Hourly budget special. Step by step I'll go through the practicalities, not the politics, of what this all means to you and your pocketbook and really spell it out for people so if you can please join me eight times I'm sure they will . I mean interesting too Martin, I was very optimistic when it started as you would expect a chancellor to talk about the fact that technically we are not in a recession, that inflation is going to drop significantly over the course of this year. give you a sense of optimism about what might happen over the next year.

I know there are several elements along the way that we're going to keep it on. where we could end up being in a year or so, look, I think certainly things are better than they were in relative terms, but let us have no doubt what falling inflation means, it doesn't mean the prices that the people pay for the services they have in their house and the things that are in the stores go down which means that inflation goes down is that prices will not go up as fast as they have, so people are still behind, you know that wages have not risen with inflation and costs will continue to rise, they simply won, it will not rise as much although, of course, the drop in inflation is very necessary for the economy because it prevents it from getting much worse and the fact that the economy is not going to contract in full well I'm going to contract a little bit and we won't have what's called a technical recession which means it hasn't come down for two quarters in a row we're still in a tough year and I hope things will, I mean, I always support the economy, I hope the measures that the chancellor has put in have worked.

I think whatever government is in power, we all have to support them and hope they do a good job and hope things get better, but I think the picture isn't looking for rosy for people's pockets yet and it's going to be another tough year the bills that have gone up are not going down and people's wages haven't gone up to catch up so people will continue to live in real terms with less money than in the past and we need that to change to get people back to the standard of living they had so I'm certainly glad things are looking up but we shouldn't look at it too much with rosy specs ok watch as always great to have you on the show and have your thoughts as

martin

said martin

lewis

money show uh live post budget special is on iTV 1 8 30 tonight uh even more interesting detail no doubt im picking out what i was looking at with pen and paper yes scribble yes martin thank you for joining us this

morning

hope to see you later on the show thank you.