Chancellor Rachel Reeves is facing a significant parliamentary backlash over her controversial plan to slash cash ISA limits, with MPs from across the political spectrum warning the move will fail in its primary objective of reviving Britain's flagging stock market.
Cross-Party Opposition Mounts
The Treasury Committee has delivered a stark assessment of the proposed reforms, arguing that simply forcing savers out of cash ISAs will not automatically channel billions into UK equities. The cross-party group of MPs expressed serious doubts that the strategy would achieve its intended market boost.
"There is little evidence to suggest that a reduction in the cash ISA limit will lead to a meaningful flow of funds into the UK stock market," the committee stated in their newly published report.
Protecting Risk-Averse Savers
MPs raised particular concern about the impact on vulnerable savers who depend on the security of cash deposits. The report emphasised that many Britons legitimately prefer cash ISAs as a safe haven, especially during periods of economic uncertainty and market volatility.
The committee warned that pushing these risk-averse investors toward stocks and shares could expose them to inappropriate levels of financial risk, potentially undermining consumer protection in the savings market.
Broader Savings Reform Needed
Rather than focusing narrowly on ISA limits, the MPs called for a more comprehensive approach to savings reform. They suggested the government should consider:
- Improving financial education to help savers make informed choices
- Addressing the fundamental reasons behind the UK stock market's poor performance
- Creating more attractive investment products for retail investors
- Ensuring any reforms don't disproportionately affect lower-income savers
Political Fallout Intensifies
The critical report represents a significant challenge to Reeves' early economic agenda and suggests the Chancellor may face an uphill battle in implementing her savings strategy. With the Treasury Committee expressing such fundamental doubts about the policy's effectiveness, the government may need to reconsider its approach to boosting UK capital markets.
The warning comes amid growing concern about London's declining status as a global financial centre, with several major companies recently choosing to list elsewhere. However, MPs have made it clear that they believe the solution lies in more fundamental market reforms rather than restricting savers' choices.
