Rachel Reeves is in danger of harming savers, damaging the housing market and hurting the UK economy if she cuts the ISA cash limit, building societies have warned. There are strong concerns the Chancellor will make the change in next month’s Autumn Budget to encourage more people to invest in stocks and shares.
The Building Societies Association (BSA) has sounded the alarm, warning such a move risks backfiring badly. It warns that cutting the cash limit would not encourage more people to invest and would punish responsible savers. As well as denying them the flexibility a cash ISA offers, the BSA claims such a move could force up the cost of mortgages.
The industry body has calculated a cut in the annual cash limit from £20,000 to £5,000 could lead to “17,000 fewer mortgage loans and reduce GDP by around £7 billion over five years, undermining economic growth and tax revenues”.
Andrew Gall, the BSA’s head of saving, said: “We are very concerned that the Chancellor is still considering cuts to the cash ISA limits. We support efforts to help more people to invest and grow their wealth, especially in the UK, but cutting the Cash ISA limit simply won’t achieve this.
“Instead, it would undermine one of Britain’s most successful savings products and a stepping stone that has helped millions to build financial resilience and confidence to invest for their future.
“We call on the Chancellor to listen to the millions of people who rely on cash ISAs to save safely and flexibly. Rather than restricting their options, we should build on what is already working and help people to make informed choices about their finances.”
The BSA argues cash ISAs should not be seen as “idle money” but help people save for a house deposit or manage their finances in retirement.
A Downing Street spokesperson confirmed changes are being considered.
He said: “We’ve always been clear that cash savings are important for people looking to put cash away for a rainy day and will protect that, but we also want to get Britain investing again so British companies can grow and British savers who choose to can get more in return. No decisions have been made; we’ll continue to consider reforms to the ISA system and the balance between cash and equities.”
