Labour has abandoned plans for a “British Isa” that would have offered investors an additional £5,000 tax-free cash to funnel into UK companies.
A source told The Telegraph that the new savings account had been reversed following pressure from the investment industry. Sources confirmed to the FT the plans had been shelved.
The British Isa, originally drafted by former Chancellor Jeremy Hunt, has come under fire since it was announced in March with stockbrokers warning the product would do “more harm than good”.
The savings allowance would have increased investors’ tax-free investable allowance by 25pc per year, although the additional capital was only able to fund British stocks, which have struggled with poor sentiment in recent years.
The move is a reversal on the Government’s pre-election stance, in which it confirmed there were “no plans to drop the British Isa”.
Concerns were raised over what would – or should – qualify as an investable asset in the new Isa, with no clarification ever being provided on the matter. Its impact on the UK markets was also questioned, with Michael Summersgill, chief executive of stockbroker AJ Bell, suggesting its impact would be no more than a “rounding error”.
The chief executive today described the original proposal as a “political gimmick that was doomed to fail”.
“The new Government deserves huge credit for consigning this ill-conceived idea to the policy dustbin and will hopefully now take a more sensible, long-term approach to ISA reform than their predecessors, focused on simplification for the benefit of consumers.”
Shaun Moore, tax and financial planning expert at wealth manager Quilter, added that had the British Isa seen “the light of day” it would only “have further muddied the water”.
“The Isa is a simple idea, a tax-efficient place to grow your wealth; however, with various additions over the years it has now become a confusing area of personal finance.
“The British Isa was rife with issues and the proposals ran the risk of consumer confusion or poor outcomes.”
The Treasury was approached for comment.