Rebuilding Societies: How Mutuals Can Fight Back Against Rachel Reeves’ Cash ISA Raid
Building societies face an existential threat. Not from market forces or technological disruption, but from our own government.
According to reports in the Financial Times, Rachel Reeves has confirmed she will slash the Cash ISA limit to £12,000 in tomorrow's budget in a bid to force savers into equities. People close to preparations for tomorrow's Budget said Reeves had decided to reduce the limit from the current level of £20,000 but slightly higher than the £10,000 cap that had been considered.
Despite this softening, the institutions which have quietly underpinned British homeownership for over two centuries, must now mount an aggressive defence of their funding model, and the arithmetic demonstrates why. At the end of September 2024, building societies had cash ISA balances of £153.9 billion, a 40% share of total UK cash ISA savings balances. As of March 2025, 39% of building societies' £485 billion of mortgage lending was in effect funded by the £190 billion of deposits held in cash ISA accounts.
This isn't money sitting dormant, it's the lifeblood that allows mutuals to lend to first-time buyers, self-employed borrowers, and others who mainstream banks increasingly regard as too troublesome.
Robin Fieth, chief executive of the Building Societies Association, warned that cutting the cash ISA allowance will have ramifications for mortgage pricing, impacting first-time buyers. Building societies, which account for over 35% of all first-time buyer lending, rely on retail deposits, including cash ISAs, to fund mortgage lending. If those deposits evaporate, mortgage rates will rise – precisely when the government claims it wants to deliver 1.5 million new homes.
Yet investment platforms have already begun their offensive. London-based trading platform IG dismissed building society warnings as "scaremongering," arguing that redirecting cash ISA funds would have minimal impact. This is either breathtaking naivety or deliberate misinformation designed to protect their own business model. The investment industry has billions in fees to gain; building societies have everything to lose.
So how do mutuals fight back? Not on spreadsheets or by being defensive, they need to win where decisions actually get made: in the court of public opinion, by aggressively reclaiming the narrative and reminding savers why they chose building societies in the first place.
93% of building society customers agreed that their provider offered good customer service, compared to 87% of bank customers, according to the Building Societies Association. This isn't marginal, it's a huge advantage that building societies have failed to exploit aggressively enough. 95% of building society members surveyed attested to receiving good service, with 88% expressing trust in their society, eclipsing relationships not just with banks but with technology giants.
Building societies need to stop being modest and start communicating this relentlessly. Every Cash ISA campaign should hammer home: "Your money funds mortgages for your neighbours, not bonuses for shareholders." Showcase the first-time buyers in Leeds, the self-employed borrowers in Plymouth, the families building their dream homes, all funded by ordinary savers' Cash ISAs.
Reframe cash savings as productive capital
The investment industry's greatest rhetorical success has been convincing policymakers that money in Cash ISAs is "sitting dormant." This is an extraordinary lie that building societies have allowed to take root.
As Richard Fearon, Chief Executive Officer of Leeds Building Society, noted: "It's naïve at best, or deliberate misinformation at worst, for fund managers to say money saved in cash ISAs is dormant. We use it to fuel our mortgage lending". Cash ISAs aren't hoarding, they're productive lending to the real economy. Every pound becomes lending for homeownership, the most important wealth-building asset for ordinary families.
Building societies should commission research demonstrating the economic multiplier effects of their mortgage lending versus passive equity investment. Show voters that their Cash ISA at Yorkshire Building Society has more tangible economic impact than £20,000 in a global tracker. Make the government defend why encouraging homeownership is less worthy.
This is highly relevant to the public. Over 18 million cash ISA accounts are in use, nearly half of which belong to individuals who earn less than £20,000 a year, with an average balance of £13,400. These aren't wealthy hoarders, they're people for whom that cash represents genuine financial security.
Building societies must relentlessly highlight that the push to cut Cash ISA limits disproportionately harms working-class savers. Someone earning £18,000 who has saved £13,000 shouldn't be forced into equity markets by a government that claims to represent working people. Run testimonial campaigns featuring nurses, teachers, and pensioners. Make it politically dangerous for Labour to proceed.
Leeds Building Society paid interest above average market rates totalling £175 million in 2024 – the mutual dividend in action. Building societies consistently offer more competitive savings rates because they don't have shareholders demanding their cut.
Innovation Within the Mutual Model
Worryingly, building societies risk losing the next generation. Building societies possess just 32% of market share overall, dropping to 24% amongst 18–34-year-olds. As we explore in our piece on how the cash ISA squeeze threatens young savers and building societies alike, the mutual model is actually a strategic advantage for younger generations who increasingly turn to neo-banks and investment apps.
Leeds Building Society launched a new digital ISA application in 2024, with one-in-five members now using mobile to apply. That's progress, but not enough. Building societies need app experiences which rival Monzo Bank and Nutmeg. The mutual model is actually an advantage here: neo-banks ultimately answer to venture capital backers demanding exponential growth. Building societies answer only to their members. Market that difference.
Building societies and mutual-owned banks have total assets of almost £648.3 billion. This is a substantial sector with significant resources. Yet when faced with an existential threat, the response has been tentative press releases and polite lobbying.
The government's assault on cash ISAs isn't really about encouraging investment. This is a stealth raid on prudent savers who've done everything right.
For building societies, it's about survival. Lose that £190 billion in cash ISA funding and the mutual model itself becomes unviable. Mortgage lending contracts. First-time buyer products disappear. The institutions that helped generations of working families achieve homeownership wither. But here's what the government has miscalculated: building societies have something investment platforms will never possess – genuine trust earned through 250 years of putting members first. Building societies accounted for all mortgage market growth in 2023 while other lenders contracted. When families need help buying a home, they turn to building societies.
This is exactly where public relevance matters. Policymakers respond when the human consequences become visible and unavoidable. Cash ISA holders aren’t a technical input to a balance sheet; they’re the people politicians claim to champion. Make them visible, and the policy calculus changes.
So the mutuals have the trust, the credibility, and the lived proof of impact. That trust is a weapon, but only if building societies finally choose to wield it. The time for polite lobbying is over. This is a fight for survival, whoever shows they speak for ordinary savers will shape the policy outcome. It requires the mutual sector to be as aggressive in defending its model as the investment industry has been.
The government may think it can strong-arm savers into equities. Building societies need to show them that 14.4 million Cash ISA holders aren't a target market to be manipulated, they're members with a voice, voters with long memories, and communities that know which institutions actually serve their interests.
