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Rachel Reeves is considering a less dramatic cut to the annual cash Isa allowance following a backlash from building societies, as the chancellor tries to push through potentially unpopular reforms to funnel more money into UK stocks.<\/p>\n
In recent weeks the Treasury has privately floated a level of \u00a312,000 a year, down from the current \u00a320,000 but higher than Reeves\u2019 initial \u00a310,000 proposal, according to people familiar with the plans.<\/p>\n
Officials said they had not ruled out still halving the allowance, but the talks come after building societies raised concerns, warning that cutting cash-based individual savings accounts could hamper mortgage lending.<\/p>\n
The government is also encouraging Isa providers to revamp their stocks-and-shares Isa products on a voluntary basis to push more money into London-listed equities, the people said.<\/p>\n
An option under discussion is a type of \u201cdefault\u201d or pre-packaged Isa that allocates about 25 per cent to UK equities, with the remainder available for international stocks, the people said. The Treasury declined to comment.<\/p>\n
One person said on Thursday that the Treasury \u201cwants a UK element and ideally that would be voluntary\u201d for the sector.<\/p>\n
The latest development comes after months of discussions on overhauling the Isa regime, following lobbying from City firms that would benefit from more money flowing into London-listed stocks.\u00a0<\/p>\n
Reeves\u2019 allies say she wants to encourage people to invest more in UK equities, which have suffered in recent years as investment has flowed into global stocks, leading to a drought of company flotations in London.<\/p>\n
But building societies and banks have fought back, warning that restricting this type of funding would push up the cost of mortgages and could result in lenders offering fewer first-time buyer loans, which are deemed riskier.<\/p>\n