City welcomes reports Healey will reverse cuts to cash Isa allowance
City experts are welcoming reports that chancellor John Healey will scrap plans to slash the annual cash Isa allowance from £20,000 to £12,000 a year.
According to the Financial Times, Healey had concluded that this is the wrong way to persuade people to invest more in stocks and shares.
The move had been announced by Healey’s predecessor, Rachel Reeves, in an attempt to encourage people to invest in UK companies.
It would have meant that from 6 April 2027, anyone under 65 would only have been allowed to save up to £12,000 in a cash ISA. Anything above that will have to move into a stocks and shares Isa.
Tom Selby, director of public policy at AJ Bell, has cheered the move, and criticised Reeves’s “calamitous reform agenda”, saying:
Jo Harris, chief customer and operations officer at Quilter, points out that u-turns have costs:
The Green Party have accused the government of ‘tinkering’ by scrapping gas standing charges in the budget, rather than taking ‘bold action’.
A Green Party spokesperson says:
British energy bills are predicted to rise 16% in January to reach the equivalent of about £2,000 for the typical annual dual fuel bill, up from £1,729 a year in the current quarter.
Andrew Sissons, director in sustainable future at Nesta, has welcomed the move, saying:
The case for abolishing the gas standing charge
Abolishing standing charges on gas is also attractive to the Treasury, because it won’t cost them anything!
UK research and charity foundation Nesta recently published a very handy case for abolishing the gas standing charge – which included five reasons why it would be an “an impactful policy change”:
It reduces bills for a majority of people
It is progressive: poorer households will save more than wealthier ones
It supports electrification by reducing the electricity-to-gas price ratio
It should be popular, because people view standing charges as unfair
It costs the Treasury nothing
They also explain that “every home pays the same standing charge, but the amount of gas used varies a lot, and is skewed by a small number of households with outsized consumption.”
The median dual fuel household uses 9,700 kWh of gas per year, but the average is 11,900 kWh.
The top five percent use over 25,000 kWh annually, which jumps up to over 42,000 kWh for the top one percent.
How heavy users of gas could end up paying more
Abolishing the standing charge doesn’t mean that every gas user will save money.
Because the cost is shifting onto the unit rate of gas, a household that consumes a lot of gas might end up paying more overall.
Currently, regulator Ofgem has capped gas bills at 7.97 pence per kWh, plus the 29.68p daily standing charge.
Consumer advice website MoneySavingExpert has estimated that today’s move could add around 1p to each kWh of gas used.
Based on their estimations, using current energy prices, this would see the typical gas unit rate rise from 7.97p/kWh to 9.11p/kWh, they say here.
The Treasury argues that households who don’t benefit from an automatic saving will still have better control over their bills without the worry of affording the standing charge.
It aso says the government will set out “targeted mitigation for a small number of households” in the future.
Abolishing the standing charge will help households control how much they spend on gas, explains energy secretary Miatta Fahnbulleh:
Breaking: UK to end standing charges on household gas bills
John Healey has pledged to provide households with “breathing space” from the rising cost of living pressures.
And the Treasury has just announced a new measure to help – the government is removing standing charges from household gas bills in Great Britain.
These fixed daily fees – £108 a year for the typical household on average – cover the costs of connecting to a supply. They are controversial as households pay them even if they only use little energy
Healey will ask regulator Ofgem to end this “unfair and outdated practice” in 2027, or as soon as possible afterwards.
The plan is to shift the cost of standing charges into the unit rate of energy instead.
The Treasury says this could save 60% of account-holding households around an average of £45 off their annual bill.
Healey says:
Introduction: City investors hope fot a quiet budget
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s budget day! And City investors are expecting that chancellor John Healey avoids any bold spending pledges or tax hikes in his first fiscal statement.
Investors anticipate a cautious budget from the chancellor, reasoning that he will prioritise stability in the bond market at a time when borrowing costs are close to their highest levels in around two decades.
With memories of Liz Truss’s budget disaster yet to fade in the City, traders will be alert to any signs that Healey is wavering on the government’s fiscal rules – but the mood music from the Treasury is that fiscal stability is still in vogue.
Last night, the chancellor warned that the world is “a highly uncertain place.”
In a video released before the budget, he said:
One key question for the City is how much fiscal headroom the chancellor has chosen to maintain. That buffer – which measures the safety margin the government enjoys to hit its fiscal rules – will have shrunk as UK borrowing costs rose this year. Back in March, the headroom was a comfy £23.6bn.
Economists predict it will have fallen to between £15bn and £20bn – a figure below £15bn might spook the City.
Morgan Stanley reported on Tuesday that investors they’ve spoken to largely expect a low-key, low-volatility event today.
They told clients:
Bank stocks could be hit by the budget too – we’re expecting new taxes on the banks, but we don’t yet know if Healey will simply reverse the Tory-era cut to the bank surcharge, or raise it by more.
The agenda
12.30pm GMT: The budget statement begins
1.30pm GMT: Office for Budget Responsibility releases its latest economic and fiscal outlook
2.30pm GMT: Office for Budget Responsibility press conference
