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Cash ISA rumours – have changes been shelved?
In recent months, cash ISAs have been at the heart of a media storm. Reeves was rumoured to be looking at cutting the annual allowance from £20,000 to £4,000 – part of a bid to get Britain investing and boost UK growth.
These plans now appear to have been shelved.
An official told the Financial Times: “We are not looking at any changes to ISAs in the Spring Statement. We recognise the range of views around the current ISA system and want to ensure it strikes the right balance between cash and equities.
“We want to continue to support cash savings whilst earning better returns for savers, boosting the culture of retail investment and supporting the growth mission.”
We share further details in: “Will Rachel Reeves impose a £4,000 cash ISA limit?”
Above: Will Reeves come for the cash ISA allowance?
(Image credit: Guido Mieth via Getty Images)
Chancellor left with “few avenues to choose from”
“The government wants to spend more; on defence, and on building the UK’s green infrastructure to power growth for generations to come. But with such geopolitical uncertainty, fiscal rules are important and breaking them would be costly,” said Danni Hewson, head of financial analysis at investment platform AJ Bell.
“Not breaking them leaves the chancellor with few avenues to choose from, especially with her fiscal headroom almost certainly evaporated, and probably in deficit,” she added.
Figures published last week showed that government borrowing came in higher than forecast in February, at £10.7 billion. Borrowing for the current financial year (ending March 2025) has already exceeded the OBR’s full-year forecast, at £132.2 billion versus a forecast of £127.5 billion.
“Promises not to increase taxes will mean even fewer choices, more cuts to public spending and the increased likelihood that the unpopular fiscal drag of frozen tax thresholds will remain with us way beyond 2028,” Hewson added.
What are the fiscal rules?
Reeves has been clear that she will stick to her self-imposed fiscal rules, which were voted into law by the House of Commons in January. There are two main parts:
- Stability rule: Day-to-day spending needs to be matched by tax revenues, not funded through borrowing.
- Investment rule: Debt needs to be falling as a share of the economy by 2029/30.
One major fiscal event each year
Rachel Reeves has previously committed to just one major fiscal event each year “to give families and businesses stability and certainty on upcoming tax and spending changes”. However, a lot has changed since the Autumn Budget last October, when tax hikes of £40 billion and spending policies of £70 billion were announced.
High borrowing costs and low economic growth have already wiped out the government’s £9.9 billion “fiscal headroom”, according to reports from Bloomberg last month.
When MoneyWeek asked the Treasury to comment on whether Reeves’s statement would involve major policy announcements, they neither confirmed nor denied, simply stating: “The government’s commitment to fiscal rules and sound public finances is non-negotiable. As previously announced, the OBR’s next forecast will be presented to parliament on 26 March alongside a statement from the chancellor”.
Above: The chancellor poses outside 11 Downing Street with the red box, shortly before delivering the Autumn Budget on 30 October 2024. Reeves has previously committed to just one major fiscal event each year, delivered in the autumn. Will she adhere to this on Wednesday when she delivers the Spring Statement?
(Image credit: Photo by Leon Neal/Getty Images)
Good afternoon and welcome to our live blog. Chancellor Rachel Reeves will deliver her Spring Statement to Parliament this Wednesday, 26 March. Reeves has said it will not be a “tax and spend” event, but spending cuts are widely expected.
Over the past two weeks, the government has already made several major announcements:
- NHS England: On 13 March, the government announced that NHS England would be abolished to “reduce bureaucracy” and “drive efficiency”. Government sources cited by the BBC believe this will save £500 million per year.
- Health-related benefits: On 18 March, work and pensions secretary Liz Kendall unveiled a series of cuts to health-related benefits, intended to save £5 billion by 2030.
- Civil Service: Over the weekend, Reeves confirmed that Civil Service running costs would be cut by 15% by the end of the decade. She told the BBC that savings would be made from back office and administrative roles.
These followed February’s announcement that the international aid budget would be slashed to fund increased defence spending. Prime minister Keir Starmer said the aid budget would be reduced from 0.5% of gross national income to 0.3% in 2027. Defence spending will increase to 2.5%.
Could further cuts be announced on Wednesday?
