The Chancellor’s first Budget highlights once again how closely financial inclusion is tied to individual and household resilience.
We welcome measures including the reversal of the cash ISA decision, the £4.7 billion ‘Your First Home’ equity loan scheme, the planned removal of gas standing charges and the explicit focus on face-to-face banking on the high street through the £100 million Post Office transformation programme, the Post Office Plus pilot and the rollout of 350 banking hubs.
However, some of the support on offer lacks detail and needs to go further. The £100 energy payment relies on 1991 property values, meaning, as the Resolution Foundation notes, that around one in eight households in the bottom half of the income distribution will miss out.
On pensions, we welcome the restraint shown ahead of the Pensions Commission’s report early in the new year, as this discipline is essential to retaining consumer trust and confidence. However, the new exemption to ensure the State Pension is not taxed creates an effective 53% tax rate that LCP estimates could hit around 200,000 low-income pensioners. Over the coming year, the Government should examine whether this result can be avoided. We also cannot continue to stand still on the wider challenge of income in retirement; we must increase participation in saving and investment to help build financial resilience, while ensuring people obtain the guidance they need to make good decisions about their retirement savings.
With the Government focused on giving households “breathing space”, we regret that the opportunity was not taken to review Insurance Premium Tax on essential cover such as motor, home contents and buildings insurance. With the gap between market rents and Local Housing Allowance widening, we would also have liked to see Universal Credit means-testing rules, including regulation 66, reviewed, with disregards introduced where insurance claim proceeds are used to meet essential costs such as rent, council tax, utility bills, WiFi and childcare.
Over the coming year, we will continue to work with government, the third sector and industry, to press for financial inclusion to be treated as a priority across Government, with the Financial Inclusion Strategy delivering clear timelines, targeted support for those most at risk and accountability for the systemic changes required.
— Sian Williams, Chair Financial Inclusion Commission
For media enquiries please email the team at Rachael@financialinclusioncommission.org.uk
