Chancellor Rachel Reeves is likely to unveil a campaign to encourage savers to invest in the stock market after ditching plans to reduce the cash ISA allowance.
It was thought the Chancellor would cut the tax allowance for cash savings in favour of investments in shares as part of a plan to help British business and change the savings culture.
Some building societies reported a jump in cash ISA applications last week, as speculation mounted over the future of the allowance.
Hampshire Trust Bank (HTB) said a survey of its customers showed an overwhelming 97% against reducing the allowance. While the Government hoped it would encourage savers to open stock and shares ISAs, only 9% say they would do so
However, after consultation with the industry, the plan has been dropped, though not permanently, and not without some criticism from those who believe the system only helps savings institutions.
Michael Healy, UK managing director of IG, said: “This is a big win for the defenders of a broken system. £300 billion is currently stagnating in cash ISAs, earning paltry returns and doing nothing for the British economy.
“Our analysis shows that since cash ISAs were introduced in 1999, real returns from UK shares have been seven times greater.”
Mr Healy insisted that building societies and pro-cash ISA campaigners “are defending a damaging status quo, depriving savers of any real long-term wealth creation and UK businesses of vital capital”.
He added: “It seems deeply wrong that we expect ordinary savers to subsidise building societies with cheap deposits, all under the guise of prudence.
“Instead of shielding outdated products, the Chancellor should be ripping up the cash ISA and consigning it to history.”
Ms Reeves is expected to use her Mansion House speech next week to set out ways to encourage savers to invest in companies.
The SNP once again turned the issue in a political point-scoring exercise. The party’s economy spokesperson Dave Doogan MP said: “The Labour Party’s plan to introduce a new tax grab on people’s savings by slashing the cash ISA should be scrapped entirely – not just paused.
“Almost a third of Scots hold a cash ISA. These are ordinary people with small savings and, for many, they are a popular and safe way to put money aside – they do not want the Labour government dipping its fingers into their life savings.”
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