Building societies issue Rachel Reeves huge warning over Cash ISA cuts | Personal Finance | Finance

Building society leaders are set to escalate their opposition to Chancellor Rachel Reeves’ rumoured plans to reduce the annual Cash ISA limit, warning that such a move could increase borrowing costs for homeowners and businesses.

According to a draft letter obtained by Sky News, the Building Societies Association (BSA) is urging the Chancellor to abandon plans to cut the current £20,000 Cash ISA allowance. The BSA argues that the change would discourage savers, disrupt Labour’s housebuilding targets, and hinder economic growth by making funding more expensive. The letter, which is being circulated among BSA members and is expected to be published this week, states: “Cash ISAs are a cornerstone of personal savings for millions across the UK, helping people from all walks of life to build financial resilience and achieve their savings goals. The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible.

“Cutting Cash ISA limits would make this funding more scarce, which would have the knock-on effect of making loans to households and businesses more expensive and harder to come by. This would undermine efforts to stimulate economic growth, including the Government’s commitment to delivering 1.5 million new homes.

“Cutting the Cash ISA limit would send a discouraging message to savers, who are sensibly trying to plan for the future and undermine a product that has stood the test of time.”

The draft also warns that the Chancellor’s proposals would complicate the ISA regime and make it harder for people to transfer money between cash and investments.

The BSA argues that restricting cash ISAs would not encourage more people to invest in stocks and shares, as the main barriers to investing are behavioural.

The letter then calls on Ms Reeves to maintain the current £20,000 limit and to support a long-term consumer awareness campaign about investing, rather than curbing support for cash savings.

The BSA declined to comment on the leaked draft, and the Treasury has not responded to requests for comment.

City leaders and financial firms have been mounting pressure on the Chancellor to proceed with the allowance cuts. They argue that reducing the Cash ISA allowance could encourage more savers to invest in UK companies and stimulate the stock market. Some have called for the cap to be slashed to as little as £4,000.

Ms Reeves is expected to announce a review of Cash ISA limits during her speech at Mansion House on July 15.