MPs have warned Chancellor Rachel Reeves that cutting the annual cash ISA allowance will not encourage savers to invest in the stock market and could instead push up mortgage costs. The cross-party Treasury Committee argued that reducing the limit from £20,000 to £10,000, a measure reportedly under consideration for the upcoming budget, is unlikely to achieve its intended aim of promoting growth.
The committee's report, based on hearings with experts, cited Martin Lewis, founder of MoneySavingExpert, who said the idea that restricting cash savings would drive people into stocks and shares is false. 'For people to invest in stocks and shares, you need a cultural change,' Lewis told MPs. In the 2023-24 tax year, two-thirds of ISA contributions went into cash, a trend the government hopes to shift.
Building society bosses told the committee that reducing cash ISA inflows would make the mortgage market less competitive, potentially raising rates for homebuyers. They explained that savings deposits are crucial for funding mortgages, and a reduction could tighten lending conditions.
Committee chair Meg Hillier said the MPs support the chancellor's ambition to help savers achieve better returns through informed decisions, but added: 'We are a long way from that point.' She stressed that without better financial education, moves to cut the cash ISA limit 'will not deliver the change she seeks, instead hitting savers and mortgage borrowers.'
The warning comes ahead of the 26 November budget, which is expected to include tough decisions as the Office for Budget Responsibility downgraded productivity estimates, costing the chancellor an estimated £20bn a year. Other measures reportedly under consideration include changes to stamp duty, inheritance tax, and limited liability partnerships.
