Blog ISAs have been a Great British success story. Since being introduced by Gordon Brown in 1999, they have been taken up by 21 million people and are set to hold £1 trillion of the nation’s wealth by the end of this tax year.
They help people get on the housing ladder and encourage saving and investment from a young age – something the “Tell Sid” campaign would be proud of.
Detractors argue they’re only really helpful to people who are financially literate, providing huge tax relief for people who can afford to save £20,000 a year. But that’s not an argument for scrapping them – if anything, it’s an argument for opening them up. And in fairness to His Majesty’s Treasury, they’re doing some good work to promote financial awareness: not least the Invest for the Future campaign which will start hitting billboards this autumn.
This week has been a significant checkpoint for 1 Horse Guards Road. Wednesday at midnight marked the point at which they stopped taking submissions for this year’s Budget. And, almost without doubt, a small team in the Financial Services branch will have received a memo with a silver bullet. The key to unlocking growth without spending a penny – no unpopular tax rises, no fresh borrowing, just a form here and a nudge there. It’s the kind of policy Whitehall loves most – free, painless and funded by someone else’s pound.
All it takes is a bit of nudge theory. Get people investing their ISA pots into growing UK businesses. A virtuous circle then spirals at great speed, with savers getting more returns and UK businesses getting more money to scale and grow. As silver bullets go, this is less magic, and more a sleight of hand. This certainly isn’t a new idea – indeed I faced it myself while in HMT and No.10 press offices. It’s also a neat way of avoiding the fiscal rules, while getting more money flowing in the economy.
But beyond the complexities that killed off Jeremy Hunt’s British ISA, there’s a more fundamental question: why should it be savers and the platforms that carry the risk?
The Chancellor’s speech on Monday offered a different path through the fiscal rules, pledging to draw a line under rising business costs and end the consultation culture that slows down big projects. Instead, he will carry the torch for Keir Starmer’s ‘build baby, build’ crusade.
Budgets are often criticised for not including enough detail on growth and instead concentrating on tax and spend. It was pleasing, then,that John Healey used his first major intervention this week to head that off – thankfully without any mention of ISAs.
He did talk up these so-called “puffins” (public finance institutions) like the British Business Bank, which are a more direct means of getting money into UK firms – announcing a £150 million package for fast-growing firms in the North. Done correctly, this will help drive growth without putting the burden of risk elsewhere. Importantly, it is a way of doing it without breaking the fiscal rules.
