Rachel Reeves is right to scrap Jeremy Hunt’s gimmicky British Isa | Nils Pratley

Were you preparing to do your patriotic duty by investing in a “British Isa”, that late-in-the-day invention of Jeremy Hunt when the last government was scratching around for ideas to perk up the UK stock market? Tough: it looks like you won’t now have the chance.

Rachel Reeves is poised to kill the Brit Isa before it has been launched, reports the FT, on the grounds that its design was too damn complicated. The new chancellor is correct; Hunt’s version was a muddle. If the aim was to boost investment flows into UK-listed companies, it would have involved a lot of faff for little gain.

By way of reminder, Hunt’s idea was to give savers a £5,000 top-up allowance in their tax-free Individual Savings Accounts to be invested solely in UK shares. The core Isa (current maximum: £20,000) would have continued without geographical limitations; it was just the extra helping that would have been Brit-only.

One could see immediately that the top-up element would have been relevant only to those savers who are sufficiently wealthy to max out their £20,000 allowance in any year. That is about 800,000 people and, even if they all found another £5,000, the grand total of extra cash going to the UK stock market would have been £4bn.

That’s not an insignificant sum, even if it is equivalent to only 0.2% of the £2tn-plus value of the UK stock market. But the real number would have been lower because chunks of the £20k portions already go into shares in, say, AstraZeneca or Lloyds Banking Group or UK-focused investment trusts. In those cases, no new, UK-only incentive would have been created; savers would have carried on as before, just with a bigger overall tax-free allowance.

If a chancellor wanted to move the dial seriously with a Brit Isa, only more radical versions looked likely to do the job. Why not make the entire allocation UK-only? After all, where is the national interest in the UK Treasury allowing tax perks for savers to speculate in the shares of US tech stocks such as Nvidia or Tesla?

Alternatively, as thinktank New Financial suggested at the time, increase the allowance to £25,000 and make 50% of it UK-only. It calculated such a design could have generated an extra £10bn a year of flows into UK equities, which starts to sound like serious money. The model would also have chimed with the original 50% UK threshold for UK investment when Nigel Lawson introduced personal equity plans, the predecessors to Isas, in 1986.

There’s no hint that Reeves will adopt either of the radical designs, it should be said (and she doesn’t sound keen on tax-free allowances anyway, a cynic may say). But she’s right to scrap Hunt’s pointless creation.

As for the cure to the sleepy state of the UK stock market, better answers are likely to lie in the various efforts to prod and cajole UK pension funds, which have spent the past 20 years being net sellers to take more interest. Relative cheapness versus the US, now being more widely acknowledged, also helps.