MPs raise alarm as Rachel Reeves set to slash cash ISA limit
Rachel Reeves has been urged to avoid slashing the cash ISA limit in the coming Autumn Budget as she looks to drive investment into the London stock market.
The Chancellor is reportedly set to revive plans to cut the tax-free limit after putting previous proposals on ice after the move faced fierce backlash.
The tax-free allowance could be slashed in half to £10,000 a year as part of Reeves mission to push savers into stocks.
But a group of influential MPs have warned the Chancellor such a move would have “negative knock-on effects for consumers”.
In a fresh report, the Treasury Committee has cautioned a reduction would mean a less competitive market for financial products and result in higher prices for consumers.
Chair of the group Dame Meg Hillier, said it was “not the right time” and urged the Treasury to focus on “ensuring that people are equipped with the necessary information and confidence to make informed investment decisions”.
“Without this, I fear that the Chancellor’s attempts to transform the UK’s investment culture simply will not deliver the change she seeks, instead hitting savers and mortgage borrowers.”
Reeves warned on Labour’s housebuilding targets
Shadow Chancellor Mel Stride has said the move would “in reality be a tax raid”.
“[Reeves] has blown a colossal hole in the public finances and is now scrambling around for ways to make the numbers add up,” Stride wrote in the Mail.
Building Societies have led calls for Reeves to ditch the ISA plans warning a change to the limit would hike warning costs.
A letter from the Building Society Association (BSA) warned Labour’s housebuilding ambitions risked being bulldozed by the changes.
Hillier said: “This Government is meant to be supportive of mutuals, with a manifesto commitment to grow the sector, so it must carefully consider how changes could badly impact Building Societies, which provide affordable mortgages for so many.”
Almost £100bn is estimated to be held in cash ISAs by individuals with £20,000 or more who do not invest, according to AJ Bell.
The average stocks and shares ISA account is worth over £65,000 while a typical cash ISA account holds under £13,500.
The City has been left divided by the speculated changes with its supporters arguing the changes would not only improve savers’ returns in the long-term but also provide capital-starved firms with a needed boost of investment.
Tom Selby, director of public policy at AJ Bell, said: “While the chancellor’s policy goal of boosting retail investing in the UK is the right one, slashing the Cash ISA allowance would be a clumsy and ineffective way to go about it.”