The Labour government is expected to abandon plans for a ‘British Isa,’ a scheme initially proposed by the previous Conservative administration to encourage investment in UK stocks.

The move comes amid concerns that the initiative would complicate the individual savings account (Isa) market rather than effectively support UK equities.

The ‘British Isa’ was announced by former Chancellor Jeremy Hunt in his March budget as a measure to promote investment in domestic stocks, offering a tax-free allowance of up to £5,000 in UK shares on top of the existing £20,000 Isa allowance. The proposal aimed to address worries about the valuation gap between UK and US-listed companies and the relatively low level of retail investment in equities on the London Stock Exchange.

However, the policy faced criticism from industry players who argued that it would overcomplicate the investment landscape. Leading DIY investment platforms, including AJ Bell and Hargreaves Lansdown, voiced concerns that the ‘British Isa’ could deter potential investors from using Isas due to its added complexity. Reports of the government’s decision to scrap the policy were first published by the Financial Times.

Michael Summersgill, Chief Executive of AJ Bell, welcomed the decision, stating: “The UK Isa was a political gimmick that was doomed to fail in its objective of boosting investment in UK plc. The new government deserves huge credit for consigning this ill-conceived idea to the policy dustbin and will hopefully now take a more sensible, long-term approach to Isa reform than their predecessors, focused on simplification for the benefit of consumers.”