Reeves warned by building society and trade body chiefs against denigrating cash ISAs

The Chancellor has been warned by building society chiefs not to denigrate cash ISAs as this will damage the economy further.

Rachel Reeves has been warned to degrade cash ISAs will make mortgages and business loans harder to apply for and industry leaders have voiced their concerns in a letter to the Treasury.

Next week Reeves is due to make a speech at Mansion House where she is to announce slashing the amount that people can invest into a cash ISA.

Reeves wants Brits to invest more into stocks and shares which is riskier compared to an ISA.

The letter by industry chiefs was signed by more than 30 building society bosses warned, “Cash ISAs are a cornerstone of personal savings for millions across the UK, helping people from all walks of life to build financial resilience and achieve their savings goals.”

The letter was also signed by credit unions and trade bodies, it reads, “The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible.

“Any significant reductions to the Cash ISA limits would make this funding more scarce which could have the knock-on effect of making loans to households and businesses more expensive and harder to come by. This would undermine efforts to stimulate economic growth, including the Government’s commitment to delivering 1.5 million new homes.”

Robin Fieth, Chief Executive of the Building Societies Association said: “Cash ISAs are used for a wide range of purposes – from saving for a first home to managing finances in retirement. These are not idle funds; they serve real, practical needs for both savers and the building societies, banks and other providers that receive the funds, and use them to support mortgage and other lending.

“Simply changing ISA limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, where investing may not be appropriate.”

In a BBC interview the Chancellor said, “I’m not going to reduce the limit of what people can put into an Isa, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings.

“And at the moment, a lot of money is put into cash or bonds when it could be invested in equities, in stock markets, and earn a better return for people. But I absolutely want to preserve that £20,000 tax-free investment that people can make every year.”