Reducing the attractiveness of cash Isas may have prompted a considerable backlash from, often older, savers unwilling to take greater risks with their money in investments.
Reeves and the government have already faced some difficult weeks, owing to U-turns on winter fuel payments and welfare. The Treasury received “differing views” from the sector on potential reform to Isas.
Many investment companies that sell stocks and shares Isas backed a change, while banks and building societies who dominate the cash Isa market are against it.
The former said lowering the cash Isa limit would encourage investment with billions of pounds languishing in savings accounts doing little for individuals and the economy.
Opponents warned many people may not save at all, or would simply pay more tax on any money held in non-Isa accounts.
Building societies, in particular, point out it would also reduce the amount of money they receive from savers’ deposits which can then be lent out as mortgages or other loans.
The Treasury is expected to continue to talk to banks, building societies and investment firms about options for reform.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: “We’ve consistently made the case, alongside others across the mutual and building society sector, for maintaining the full allowance, and welcome any decision to consult further with industry rather than rush through damaging reform that would disincentivise saving.”
