The roll-out of a British ISA has been scrapped by the new government despite Labour insisting it had “no plans” to ditch the scheme in the run up to the election.
The specialist stocks and shares ISA would have allowed savers to invest an extra £5,000 tax-free in UK equities, on top of the £20,000 ISA allowance.
However, the government is now set to drop the plan, according to the Financial Times, with one official stating “we are not planning to complicate the ISA landscape even further”.
This stands in stark comparison to what Labour had said on the campaign trail, telling City A.M in May: “Labour has no plans to drop the British ISA.”
“Labour wants to make it as easy as possible for people to feel the benefits of saving and investing their money, including through increased utilisation of stocks and shares ISAs,” a Labour spokesperson said at the time.
Labour initially remained quiet on whether it would stick with the plans and the Treasury placed “everything under review” during the election campaign.
News that the government would row back on the policy was welcomed by some investment groups today.
“The UK ISA was a political gimmick that was doomed to fail in its objective of boosting investment in UK Plc,” said Michael Summersgill, chief executive at AJ Bell.
“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.”
After the Chancellor Jeremy Hunt announced plans for a British ISA in March’s Spring Budget, the Treasury launched a consultation to run until 6 June.
However, response to the consultation was then delayed by the election, and the policy received a mixed reaction from the City.
“Labour’s reported scrapping of plans to create a British ISA is a sensible move,” added Shaun Moore, tax and financial planning expert at Quilter.
“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. If the British ISA did see the light of day, it would have further muddied the water.”
The Treasury has been contacted for comment.