The news that the British ISA is to be scrapped was met with a chorus of approval from analysts and commentators as Labour announced it would not proceed with plans to boost the ISA allowance by £5,000, with the additional allowance allocated only to London-listed companies.
The general industry consensus was that the concept of a British ISA was ill-conceived and had little chance of success.
Some called it a political ploy by the conservatives. However, with the Tories staring into the abyss and Labour setting about imposing their own plans on the UK economy, the British ISA has been binned.
“We’re pleased that the government will not be pursuing this because simplicity is key when it comes to getting people to start investing,” said Dan Olley, chief executive officer, Hargreaves Lansdown.
“That’s why the ISA allowance is so essential, it helps people start investing without any of the complexity around tax. The UK ISA would have added complexity with little real benefit for many. Our data clearly shows that British retail investors are already enthusiastic backers of British companies. Of those equities held on HL’s platform, 80% of the trades in the last year were on the London markets.”
The British ISA’s objective was clear: support London’s equity markets and encourage more people to invest. There was nothing wrong with the objectives, rather strategy to meet these objectives was flawed.
“The BRISA may have split opinion, but I think there is unanimous consensus that more needs to be done to stimulate investment in the UK, reinvigorate our capital markets and get more people investing as well as just saving,” said Dan Moczulski, UK Managing Director, eToro.
“The UK is a leader in financial services, yet when it comes to the number of households invested in capital markets, we are miles behind the US.
“We need to find ways to get people investing and part of this is about creating a stable and appealing investing environment, with the right incentives. Yet in the last two years, we’ve seen the capital gains allowance cut twice and we’re now facing the prospect of a capital gains tax raid in the upcoming Budget. I would like to see the new government begin to show their cards on this issue and give us a roadmap for how they will support retail investing in the UK.”
However, rather than showing support for retail investors, Labour’s upcoming budget threatens to curtail investment activity even further by increasing capital gains tax as they look to boost public coffers. We must note, however, no formal plans have been announced yet, and any changes to CGT are speculation at this point.
That said, investors will be on tenterhooks going into the budget as they wait to learn just how much damage Labour does to the private investor community.