The Institute explained that, compared to the assets held by pension funds, cash ISAs make up less than 10% - £300 billion. Given their relatively small size cash ISAs would have been the wrong area for the Chancellor to focus on to generate economic growth, so news of a move away from this is positive.

However, any reserve powers to mandate asset allocation must be subject to strict transparency, oversight and safeguards to mitigate undue risk of capital loss, particularly where such risk is elevated by exposure to higher-risk or less liquid asset classes.

Meanwhile, the regulatory burden is holding back innovation and growth, the Institute added, and more proportionate, transparent and forward-looking regimes are essential to boost the economy. For capital markets, this includes a need to implement the reformed UK prospectus regime to streamline further access to capital,  and for support to increase mobilisation of private capital without mandating allocation, both with appropriate protections and safeguards and reliable information.

ICAEW said it wanted the government’s financial services sector plan – expected next week - to provide concrete steps to meet its pledge to cut regulatory costs for businesses by a quarter. Additionally, it should eliminate inefficiencies and duplication and streamline data collection.

It added that the government should also boost competition across UK capital markets, as choice and innovation would encourage listings and risk-taking. This includes a need to support repositioning of AIM as a growth market.

Finally, ICAEW said that assurance of information that supports capital markets must evolve to remain fit for purpose, and to ensure that trusted and reliable information continues to  maintain investor confidence.

Alan Vallance, ICAEW Chief Executive, said: “A year after the General Election, growth remains the government’s most pressing mission and we hope the Chancellor will use her Mansion House speech as an opportunity to reduce the regulatory burden on financial services.

“In our view, a change to cash ISAs would have been misplaced, and instead a focus on improving conditions for the much greater funds held by institutions would yield the most benefit to UK plc. Cash deposits by individual savers support mortgage lending, and a limit to that supply would raise the cost of capital for building societies, resulting in higher mortgage rates and higher inflation.

“Meanwhile, a concrete plan to cut the cost of red tape by a quarter and to ensure regulation is proportionate, transparent and forward-looking will help reduce the burden on business. It’s vital that the Chancellor uses her speech on Tuesday to outline measures to boost flows from both institutional and private investors back into the UK’s capital markets and remind global business why London is the world’s top financial centre.”

ENDS

Notes to editors

1. The Pensions Policy Institute puts UK pension scheme assets at £3.2 trillion. There is £300 billion in cash ISAs.
2. ICAEW last month published a paper on the role of the reporting accountant and how it could evolve.
3. More information on ICAEW’s asks for the financial services sector plan is available.