Martin Lewis: Cash ISA limit could be cut – 'this isn’t nudge economics, it’s likely just piss people off economics'

Martin Lewis: "It's been flagged for quite a long time that she's [the Chancellor Rachel Reeves] been looking at this. I was giving evidence to a Treasury Committee on LISAs [Lifetime ISAs] and this came up and I was asked my views on it at the time, and I said I thought it was a mistake. I still think it's a mistake. Here's what is thought to be happening at the Mansion House speech on the 15 July...

"The Chancellor will announce – currently, you can put up to £20,000 per tax year into an ISA; whether it's a cash ISA or an investment ISA or a combination of both – what the suggestion is, is the Chancellor is going to lower the amount you can put into a cash ISA, which is a savings ISA, but keep the amount you can put into an investment ISA at £20,000.

"It's been discussed she might lower this to as low as £4,000 per tax year, when investments is £20,000. The concept is the idea to nudge people to invest, i.e. to put their money in the stock markets and take a risk, which in the long run should outperform savings, rather than to save.

"Personally, I think it's a big mistake. I think this might be thought of as nudge economics. I think it's p*** people off economics instead. I think most normal savers are not going to go, 'oh, I don't get the tax-free savings anymore, I'll shove it all into investments'. It's like comparing apples with ducks. You know, they're different things to different people.

"We do need more people to invest in the UK. We are too risk averse on investments. We do want people to invest in UK companies. That helps the individual and the economy. But you do it by education and encouragement and by working so people understand investment and better guidance and free guidance that's available to help people do it. This is just, I mean, this could well be Winter Fuel Payment, PIP payments, cash ISA level cut type of controversy.

"I put something out about 11pm last night [on 30 June] on my social media. It's gone absolutely viral. There's a huge amount of anger about it. So if the Chancellor is going to announce this cut in a couple of weeks' time, I think, you know it's going to be another wobbly one for them to do."

Nick Ferrari, LBC radio presenter: Martin's absolutely right then, because I know for a lot of your viewers, they would dream of having that amount of money. 'Can I put £20,000 in?' So it's a vast amount. But to reflect what Martin's just said on my show, it was remarkable on the radio because I did the story in the first hour, the number of people who phoned in and were furious and it reflects the sort of anger we've just heard from Martin; they don't want to take a punt there.

"And the other thing, which again, Martin might be able speak to, how is this going to suddenly grow if people actually don't want to invest? I would have thought it's the absolute negative of what they're trying to achieve. So real anger on the radio."

Sonia Sodha, broadcaster: "And I think the fear is as well, is that it essentially rewards more the people who are the most financially savvy, who can afford, for example, to take advice from a financial adviser, and people who are more cautious with their money will lose out. I will say, though, taking a step back, looking at ISAs as a whole, they are a good way of getting people to save.

"But again, they disproportionately reward people more who pay higher rates of income tax. So actually, if you're not paying much tax because you don't earn much money, you don't benefit much from saving into an ISA. So I think if the Government was going to be really progressive, it would think about what it would do to help people – encouraged to save perhaps smaller amounts who don't pay a lot of tax in the first place. So, I think there is that element to the picture too."

Martin: "Well, I would say there is the Help to Save scheme for people on Universal Credit that I'm a big proponent of where, which actually, you get a 50% bonus of what you've saved up to £50 a month. Anyone on Universal Credit should check that out.

"And I agree to an extent. If the Government was saying 'we're going to cut the amount you can put in ISAs in totality, because actually £20,000 a year is a lot of money, and people who can save in it are wealthy, and will cut investing', by saying, 'I'm going to leave the investment limit' – it's the wealthiest people who have investment. Yeah.

"So, but more than that, this is done on the back of lobbying from big city institutions. And what this will do is, clever people, you will still be able to effectively save in cash, in money market funds, in cash with in stocks and shares ISAs. And this will help the big city firms and be really negative for building societies – are very anti this.

"Now, I'll be honest, I've personally told Rachel Reeves I think this is a mistake and I've spoken to people at the Treasury. I know many of the building societies out there, and some of the big stocks and shares firms, are saying this is not the right way to encourage people to invest.

"But I think when it is going to end up listening to big city lobbying as opposed to the various consumer groups and others out there? This isn't about whether you should cut the limit in totality, it's about whether you should cut cash ISAs to get people to invest. I just don't think it's going to work in the way they want."