ISAs and tax subsidies

Around 18 million people hold a Cash ISA (individual savings account). That’s a specific kind of savings account where the interest you receive is tax free. Understandably, they’re very popular. Roughly £70 to £85 billion goes into them each year, and the Treasury Committee puts the total sitting in them at £360 billion. The tax relief on ISAs costs the Exchequer somewhere around £9.4 billion a year.

That’s a public subsidy on unearned income, on a scale that would fund a national retrofit programme on its own.

It is held by banks, mostly, where it becomes ordinary deposit funding. British banks lend the bulk of their money against residential property. Which means a large share of our tax-subsidised savings ends up financing the purchase of houses that already exist, bidding up the price of the very asset our children cannot afford to buy.

We pay £9.4 billion a year for that. The government has noticed. Twice.

In February 2025 a Treasury minister asked the House of Lords why Britain has hundreds of billions of pounds sitting in Cash ISAs, and called it a failure.¹

Twice, ministers tried to attach a destination to the money.

Chancellor Jeremy Hunt proposed a British ISA in March 2024: an extra £5,000 of allowance, for UK-listed shares only. The investment platforms lobbied the Treasury not to, saying it would complicate the market. It was dropped that September.

Rachel Reeves came back with a version requiring a minimum fifth of the money to go into UK equities. Again the investment institutions pushed back. That was dropped too.

What survived was the one measure with no destination attached. From April 2027 the Cash ISA allowance falls from £20,000 to £12,000 for the under-65s, to push savers out of cash and into shares.

Which shares? Any shares. American ones qualify. A stocks and shares ISA can hold US-listed stock. In practice British taxpayers end up underwriting the capital of American corporations.

Tax policy has to be about more than raising money. It’s about incentivising behaviour.

That is the case for a National Infrastructure ISA. Not a new tax. Not a compulsion. A savings account, backed by the Treasury, where the money is ring-fenced for tangible domestic assets – the grid, the retrofit programme, municipal housing. The saver’s return is fixed and guaranteed, as it is with any NS&I product. What makes that rate affordable is the real boost they give the economy: income from energy, rents, and the taxes on the employment they create. The National Infrastructure ISA would be the name of the account available to savers, and various term lengths of National Development Stocks would be the instruments they buy.

“Keep the tax relief for savings that build Britain. Anyone who prefers to back Silicon Valley remains entirely free to do it. But with their own money.”

We recognise that savers need access, while infrastructure projects need decades. Most savers in Cash ISAs roll their money over. While they might switch from one provider to another, they don’t withdraw it.² Term length is a choice the saver makes, not a condition the state imposes. Instant access for the emergency fund, at a modest rate. Longer terms for money that isn’t going anywhere, at a better rate. That is how the savings market already works, and how NS&I already works.

No new institution is needed. NS&I exists. No new legal power. The Treasury already sets ISA rules every year, and has just used that power to cut the allowance. No compulsion. No confiscation. Nobody’s savings are touched.

This is not financial repression. Everyone keeps their freedom to invest wherever they choose, and earn a fair market rate in the process. 

It’s just a condition that tax relief on British savings income should be used to benefit Britain.