Concerns arose that this new product would further complicate the investment market for individuals.

The proposed ISA, conceived by the previous Conservative government, would have allowed an additional £5,000 tax-free investment allowance specifically for UK equities, supplementing the existing £20,000 annual ISA allowance. However, the Labour government has decided against proceeding with this plan.

The decision follows warnings from investment platforms such as Hargreaves Lansdown and AJ Bell that another Isa product would only add complexity to the investing landscape and potentially discourage individuals from using ISAs altogether.

Industry leaders have welcomed the government’s U-turn. Michael Summersgill, CEO of AJ Bell, called the British ISA a “political gimmick that was doomed to fail in its objective of boosting investment in UK Plc”. He hopes the government will turn it’s focus “on simplification for the benefit of consumers”, saying that “merging Cash and Stocks and Shares ISAs is the obvious starting point”.

Mr Summersgill added: “HMRC data suggests there are around 3 million people in the UK with £20,000 or more invested in Cash ISAs and no money invested in Stocks and Shares ISAs.

“If just half of that money was invested for the long term, an additional £30 billion of investment would be unlocked. That is a conservative estimate and the actual figure may be far higher, given that HMRC’s data indicates many of those individuals hold a Cash ISA balance far in excess of £20,000.

“Given around half of ISA assets on AJ Bell’s platform are invested in UK companies or UK-focused funds, UK-based firms should disproportionately benefit as a result. From this basis, further reforms aimed at encouraging money to flow to UK business can be considered when economic circumstances allow.

“Increasing the overall ISA allowance from £20,000 to £25,000 should naturally drive more money towards UK plc, while creating a genuine incentive to invest in UK assets, such as by scrapping stamp duty on UK investments, would also help achieve this aim.”