In a Budget that trailed most of the major announcements before the Chancellor stood up to speak, and where what was said was nothing much to write home about, one proposal stood out: the idea of a ‘British ISA’.

The government is consulting (in that way where the policy decision has already been taken) to create a British Isa “which will allow an additional £5,000 annual investment for investments in UK equity with all the tax advantages of other ISAs.”

The consultation on the ‘UK ISA’, as it’s termed in the official papers, sets out that this new ISA will be on top of existing ISA allowances, so that’s something positive at least. Yet the question being posed is more ‘how do we do this?’ rather than ‘should we do this?’

But before we move to implementation mode, maybe more time should be spent on that second question.

Not another one…

It wasn’t all that long ago when we were talking about ISA simplification. In the Autumn Statement in November, there were various tweaks to the ISA regime which were supposedly about “making it easier for people to choose the best ISA accounts for their needs and move money between them.”

We also had an attempt by the FCA to resurrect simplified advice for investing in stocks and shares ISAs, an idea shelved last summer due to lack of industry support, and which has since been folded into the wider work around the advice guidance boundary review.

There are already four main types of ISA: cash, stocks and shares, innovative finance ISAs and Lifetime ISAs, not including the Junior ISA, or ISAs of the past like the Help to Buy ISA.

All of that is to say that launching yet another ISA doesn’t feel very much like ISA simplification.

Stumbling blocks

If a British Isa does get over the line, there are some other questions that need answering.

One of these is how many people a British ISA actually helps? The Financial Times puts the figure at about 1.6mn people who maxed out their ISA allowance in 2020/21, the latest data available. Linked to this is the question of what counts as investing in the UK especially, as critics point out, many companies listed in London are not British companies.

My learned colleague Mike Barrett, who is never one to miss a Consumer Duty angle, points out that even putting aside the target market argument, there may be question marks around avoiding foreseeable harms here.

If Mr or Mrs Client comes to an adviser with an extra £5k and a burning desire to only invest this in UK equities, there would presumably have to be a conversation about whether they have used their £20k ‘other’ ISA allowance first, which offers more flexibility and a greater range of investment choice. (Swiftly followed by a conversation about the tried and tested benefits of a globally diversified portfolio.)

Home bias

Clearly, the British ISA concept reflects the fact that the government has a bee in its bonnet about getting more people investing in the UK and, in so doing, self-propelling a UK economic recovery.

We have seen this too with the focus on pension funds investing in illiquid assets, and this was another point Jeremy Hunt hammered home with his talk of “unlocking more pension fund capital” and “making it easier for pension funds to invest in UK growth opportunities.”

Having been privy to conversations in and around pension policy with our man in the know, Tom McPhail, there are a fair few pension providers who aren’t quite signed up to this ideal of ‘productive finance’. The theory goes that pension schemes invest in the UK for the good of the economy overall, which in turn is good for pension savers themselves.

The reason providers are opposed is mainly because they believe there are other orders of business higher up the priority list, like the promised rollout of the pensions dashboard, enforcing value for money, or waking people up to the realisation that they probably need to save more for their retirement.

But there is also another question being asked around all of this: what are pensions and long-term savings actually for? It’s why a long-term savings commission is being called for, by us and others. Rather than piecemeal policymaking, what is the overarching goal?

Is it right that saving and investing is consistently used as a political football for point scoring, deployed in this case to power the UK? Or is actually about individuals planning for their future in a way that meets their needs, with a long-term strategy that’s fit for this purpose?

That’s one particular exam question we all probably know the answer to.

Image: Chancellor Jeremy Hunt is interviewed by GB News, at No 11 Downing Street. Picture by Kirsty O’Connor/HM Treasury.

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