New British ISA gives savers and fund managers an exciting new opportunity, says ALEX BRUMMER

The second cut to employees’ National Insurance payments in four months will increase the average worker’s income by £1,500 over the next financial year.

This may not fully offset the tax relief freeze until 2028-29, but it does put extra money back into the pockets of working households and should be an incentive to work, spend and save rather than collect benefits.

Those with surplus income will also have the opportunity to support Britain.

One of the big failures of recent times is the way pension funds and asset managers have abandoned the UK, leaving listed companies vulnerable to cheap overseas and private equity takeovers. .

At the time of writing, there are several UK companies under siege, including innovative insurer Direct Line, logistics pioneer Wincanton and advanced telecommunications provider Spirent.

Chancellor Jeremy Hunt is taking two specific steps to try to right a wrong that has stripped the UK of control over its own research and development (R&D), intellectual property, key staff and corporate tax revenue. Of greatest interest to savers will be the British individual savings account.

Despite rampant inflation, the ISA allowance for tax-efficient savings has been frozen at £20,000 for more than seven years.

The new UK ISA will allow savers to save an extra £5,000 a year as long as they choose UK-listed companies.

It is not yet clear exactly which companies will qualify and whether there will be any opportunity to invest in UK startups.

However, with much of the FTSE 350 undervalued compared to its New York comparables, there should be plenty of promising opportunities to invest in growing companies.

Hunt also relies on the power of transparency and follows the lead of Australian superannuation funds.

Citizens there can see exactly how their pensions are invested and watching the value of local businesses rise is, as I know from my own family Down Under, something of a national obsession.

If the UK’s own defined contribution schemes, including the Government’s Nest default pensions, are forced to disclose all their investments, then pressure for a more patriotic and equity-related culture could be fueled.

Savers have a new opportunity and asset managers a new responsibility. They must grab it with both hands.

Negotiating

Much has been made of the UK’s weak international trade performance post-Brexit.

One reason for this is that analysts, including the Office for Budget Responsibility, often add up import and export totals.

This tends to give a distorted picture because imports from the EU have been falling while those from the rest of the world have increased.

Be that as it may, the great untold story of Britain outside the EU is the great success of the services sector. An analysis by the Office for Budget Responsibility reveals the UK’s triumph in what used to be called “invisibles”.

Financial services have long been a major strength, but are now supported by other business services such as management consulting, research and development and advertising.

UK services trade has had the strongest growth among the richest G7 nations and was 12 per cent above 2019 levels at the end of 2023, compared with a 9 per cent improvement elsewhere of the G7 in the third quarter. A reward for ingenious British ingenuity.

green tint

The Debt Management Office will be busy again in 2024-25.

Budget documents reveal that gross funding needs, new and replacement public borrowing, will be £276.8 billion this year, up from £241.3 billion.

National Savings and Investment will lighten the load by around £9.5bn and there will be a new issue of innovative ‘green’ bonds.

If the Treasury can find a better route for retail investment in bonds (they are a feature in Japan and Italy), that would be a plus.