Speculation is mounting that Labour leader Andy Burnham and Chancellor John Healey could reverse the planned reduction to the cash ISA allowance, restoring the full £20,000 limit from 2027. The move is seen as a potential headline-grabber in the upcoming Autumn Budget, scheduled for October 28.
According to a report by Morningstar, Healey may "revisit this policy, scrap it, and restore the full ISA allowance for cash savings." This comes as the former Chancellor Rachel Reeves' proposed ISA reforms are set to take effect from 2027, which would slash the cash ISA allowance for those under 65 from £20,000 to £12,000.
Material Impact on UK Savings
Michael Diamantopoulos, associate director of fixed income and currency at Morningstar, warned that such a cap would have a "material impact" on the UK's savings regime. He noted that while big changes are unlikely given Burnham's commitment to the Labour Manifesto and his ruling out of abolishing or modifying the state pension triple lock, the government appears focused on symbolic wins with minimal fiscal cost.
"My reading of his announcements so far is they’re trying to achieve maximum political impact in terms of symbolism with the minimum fiscal cost possible," Diamantopoulos said. "As long as this strategy works—and it does, according to the polls—I don’t expect him to take big risks."
Home Bias and the British ISA Debate
The debate over ISA reform has also drawn in Andy Haldane, the Bank of England's former chief economist and now an advisor to the government. Haldane highlighted the historical precedent of personal equity plans, which had an explicit bias toward domestic investment. He suggested that calls for a 'British ISA' are in a similar spirit, aiming to correct the absence of 'home bias' in investment choices.
"As best we can tell, no one would be more supportive of such a shift than those whose money it is, households," Haldane said.
Autumn Budget: The Real Test
Tom McPhail, former head of policy at Hargreaves Lansdown, is looking ahead to the Autumn Budget as the moment of truth. "October is really where the rubber hits the road and we find out how much political capital Andy Burnham really has," he said. "We’re hearing a lot about spending plans, so where’s the money coming from?"
The decision on the ISA allowance is just one of many fiscal challenges facing the government. With the Autumn Budget fast approaching, all eyes will be on Burnham and Healey to see if they will deliver a bold reversal that could benefit millions of savers across the UK.
