Labour’s cash tax embodies the fatal flaws at the heart of this government

 We didn’t need any further evidence that this Government invents its policy on the fly to fit whichever ministerial proclamations have been made to assuage the group that shouted at it loudest that week, yet here we are again.

When Rachel Reeves announced last year that she would be cutting the amount you could save into a cash Isa by 40pc, nobody expected it was a well-considered policy. But the shambles it has become has taken even the most ardent cynics by surprise.

The move was never a serious attempt to address the root cause of why Britain doesn’t invest or why its stock market has floundered. If it were, perhaps at some point, the Treasury’s sharpest minds might have listened to the advice pouring out of the City of London.

Instead, what we have witnessed is the cultivation of an entirely unworkable policy based on zero-sum thinking, one which lacks any intellectual heft, is driven by the idea that the wrong people have too much money, and will inevitably amount to little more than throwing the baby out with the bathwater.

I suppose you could say that of just about any policy this Government has foisted upon the nation over the past two years.

This Isa debacle represents not just the faults of the incumbent party, but the recent history of how the most effective tool of financial independence has been ripped apart by people who neither know nor care about these products.

The design failings of the Lifetime Isa or “Lisa”, for example, belong to the Conservative government, but are just as egregious as those being pursued by Labour. Chief among these is the clearly unfair 25pc penalty for withdrawals, which can only have been designed by somebody who doesn’t understand percentages.

The Government pays a 25pc bonus on your contributions, so somebody thought a 25pc penalty would reclaim this money. But the bonus is included in the total sum, which means the Government essentially steals some of the saver’s money, too.

Reeves’s cash Isa reform has also been defined by arbitrary changes, the kind that would only be made by people with the barest grasp of the situation.

The £12,000 limit has never been explained and nobody has been able to divine a satisfactory answer. Excluding savers over the age of 65, too, is a limit set with no rhyme nor reason.

If you were insistent that the savings squirrelled away into cash Isas would serve the individuals and nation better in the stock market, why would you ring-fence the group with the greatest proportion of savings from your mandate?

Obviously, the move was made as a concession to pensioners in the wake of the winter fuel payments opprobrium, yet nobody thought to check what the state pension age is – it hasn’t been 65 for almost a decade.

It has now been well over a year since rumours first began to swirl about an Isa cut, and more than six months since Reeves confirmed the move at her second Budget. Plenty of time to iron out the creases.

Yet, as my colleagues and I have revealed in recent days, the Treasury remains in disarray over the details.

With roughly 10 months left until this proposal is due to come into effect, Whitehall has yet again delayed the publication of the rules, leaving banks, building societies and investment platforms in the dark as to what they’re supposed to prepare for.

We published the nonsensical rules they had reached, notably including the 1p loophole that would allow savers to effectively dodge the entire regime, and now they’ve gone back to the drawing board. I’m sure there’s no connection.

The loophole is a clear indication that the people designing this policy don’t know what they’re doing – and I can’t necessarily blame them for failing at an impossible task.

They were told to prevent people from pumping all their money into “cash-like” investments, and discovered that it’s much easier to take an all-or-nothing approach rather than monitoring levels regularly.

This approach makes sense from a simplicity perspective, but fails when it meets reality.

The core issue in all this is that it adds complexity to a product that is successful because it is simple, but is now being further complicated.

We should remove the distinction between the cash Isa and stocks and shares Isa (and simplify or cull the other types of Isa that have proliferated) and make these a single product in which individuals can easily move their capital between savings and the stock market.

Instead, we continually invent complexities that inevitably result in people throwing their hands up and stuffing their cash under the mattress.

You can make this point ’til you’re blue in the face, but if experience is anything to go by, it’s the hope that kills you.