Imagine being punished for doing the responsible thing. That’s exactly what Rachel Reeves is contemplating.
The Chancellor is considering slashing the tax-free limit on cash Isas – a move that would hit millions of careful savers across Britain.
It’s a policy aimed, according to Labour ministers, at pushing more people into investing in stocks and shares instead.
But if people want to use their Isa allowance to invest in the stock market, they already can. For those currently saving into a cash Isa, they are not simply going to switch all their money into investing instead.
In reality this would be a tax raid, pure and simple. Rachel Reeves now admits she is planning more tax rises, having promised last year that she would not be coming back for more.
She has blown a colossal hole in the public finances and is now scrambling around for ways to make the numbers add up. This new savings tax is on her list of options. Analysts at Morgan Stanley have estimated that limiting tax reliefs on Isas could amount to a tax rise on savings of around £5billion a year.
Mel Stride: The Shadow Chancellor says cutting cash Isas would be wrong
Cash Isas aren’t some obscure financial tool. For many they are a backbone of household savings.
Used by pensioners, first-time buyers, and ordinary working people, they offer a simple, trusted way to protect hard-earned money from the taxman.
For many, they are the first – and sometimes only – step into financial security.
Penalising saving in cash to push more people into stocks and shares may sound clever in a Treasury memo.
But in the real world, it’s a reckless attempt to override the cautious instincts of millions of savers – and to do so by quietly raiding their returns.
It’s wrong in principle and dangerous in practice.
Of course, investing has its place. I want more people to be investing in British companies and enjoying higher returns on their money. But people who choose to hold cash do so for good reason: they want stability, flexibility, and security. They’re not wrong to prioritise those things.
And this move wouldn’t just hurt savers. It could choke off an essential source of mortgage funding.
Building societies, which hold around 40 per cent of all cash Isas, use those deposits to support mortgage lending.
Starve them of funding, and the outcome is clear: higher mortgage rates, reduced competition, and yet another barrier to home ownership for young people and families.
Labour must know this. The sector has warned them. Over 50 financial institutions have written to the Chancellor urging her to back off. But still, Treasury officials are reportedly pushing ahead, floating Isa cuts behind closed doors while refusing to come clean with the public.
It’s little wonder that the Daily Mail has stepped in to defend savers through its Hands off our Cash Isas campaign.
The paper has given voice to the millions of responsible people who stand to lose out, shining a light on what could be one of the most controversial and calamitous decisions of Rachel Reeves’s torrid eight months as Chancellor.
Their campaign has rallied public pressure and is forcing the Government to think twice about punishing prudence – and rightly so.
This is no way to make policy. It’s a tax raid, dressed up as reform.
We should be making saving easier, not harder. We should be rewarding financial responsibility, not taxing it. And we should be creating more pathways to investment, not closing doors to security.
The Isa system works because it gives people choice. Want to invest in equities? You can. Prefer the safety of cash? That’s up to you. It’s simple, flexible, and trusted – which is exactly why Labour should leave it alone.
Savings policy isn’t just about charts and forecasts. It’s about real lives – the retiree planning ahead, the young couple saving for a deposit, the family saving for a rainy day. Undermining that with a tax raid is not just short-sighted, it’s unfair.
If Rachel Reeves would only get spending under control, she would not need to be looking at a new savings tax to plug the hole she has made in the public finances.
In the end, governments must make choices – and the Conservatives would be making very different ones.
Labour came to power with no plan, and Starmer and Reeves are too weak to stand up to their own MPs. In contrast, the Conservatives have a clear, detailed plan for a stronger economy, led by a leader with backbone and a strong team ready to deliver. We have set out £47billion of savings to cut the deficit and get taxes down, not keep raising them ever higher.
Because the Conservatives still believe that responsibility should be rewarded – not taxed.
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