Rachel Reeves has unveiled a raft of reforms that she hopes will boost investment in the UK economy and therefore kickstart more growth. The “Leeds reforms” – which the Chancellor says “represent the widest set of reforms to financial services for more than a decade” – include tweaks to major banking rules, cutting red tape in the City, and urging more people to move cash out of savings accounts and into stocks and shares. It comes on the back of figures that suggested GDP dropped by 0.1% in May in a blow to Ms Reeves.

“It will now take something quite special for the UK to avoid an outright contraction in GDP in Q2, which doesn’t appear at all likely quite frankly given the perfect storm of downside risks,” Matthew Ryan, Head of Market Strategy at global financial services firm Ebury, said. “The government’s much maligned business tax increase is proving particularly damaging, as this is not only squeezing bottom lines, but clobbering Britain’s labour market, which is haemorrhaging jobs at a breakneck speed.”

Below is a full list of the reforms announced by the Chancellor this evening.

Individuals

A new advertising campaign will highlight the benefits of investing to individual consumers. Major banks and finance firms, including including Barclays, Lloyds, Vanguard and Hargreaves Lansdown, have agreed to take part in the campaign to help spread awareness.

Banks will be able to offer a new type of help called “targeted support” from April next year, meaning they can alert customers about specific investment opportunities, with a view to encourage groups of people with cash sitting in low-return current accounts to move it into stocks and shares.

Risk warnings on investment products will come under a review to ensure people can make accurate judgements about risk levels – potentially opening the door to some warnings being watered down.

Long term asset funds will be allowed to be held in stocks and shares ISAs next year.

The Government will continue to consider reforms to ISAs and savings to strike the right balance between cash savings and investment.

It comes after rumours swirled that the Chancellor was wanting to cut the tax-free limit of a cash ISA from £20,000 to £10,000 in a bid to get more money into stocks and shares.

Henrietta Grimston, Financial Planner at Saltus, said: “Reports that the Chancellor is now expected to consult on changes to the cash ISA allowance, rather than introduce immediate reform, will come as a relief to many savers.

“Clients with large cash ISA holdings aren’t typically chasing high returns, they are prioritising security, flexibility and peace of mind. For many, cash ISAs offer a simple and low-risk way to manage their savings without worrying about market volatility.”

Banks and building societies

Less strict lending rules will allow banks and building societies to offer more mortgages at 4.5 times a buyer’s income, which is expected to mean thousands more loans become available for first-time buyers.

The bank ring-fencing regime, which separates banks’ retail banking from their investment and international banking activities, will be reformed.

The Bank of England has raised the threshold at which smaller and mid-sized banks have to start holding emergency funding.

Easing capital requirements is expected to help smaller banks scale up by freeing up more money for lending and investment.

The City

The UK’s Financial Ombudsman Service – which settles complaints between consumers and businesses – will be modernised and simplified and decisions will be more aligned with the financial regulator.

Plans to ease rules around senior manager appointments will be sped up, reducing the number of roles that are subject to regulatory approval.

The regime was introduced after the 2008 financial crisis to make individuals more accountable for their conduct and any problems that arise under their watch.

Consumer Duty, a set of rules which set higher standards of consumer protection, will be reviewed by the UK’s financial regulator over how it applies to investment banks and asset managers.

Zopa Bank, a digital challenger bank with over half a million customers, is increasing its interest rates. The bank launched its credit card in 2020, initially attracting applicants with advertised interest rates as low as 9.9% annual percentage rate (APR).

The APR represents the yearly cost of borrowing on a credit card, including fees and interest. Despite advertising a representative APR of 34.9% (a rate Zopa Bank was legally required to offer to at least 51% of applicants), many customers with good credit scores benefited from the lower initial APR rate of 9.9%.

However, The Sun has confirmed that Zopa Bank has raised its lowest available APR for new customers to 26.6%, up from the initial 9.9% value. The digital bank is set to increase interest rates for some of its existing customers, particularly those who were previously enjoying rates lower than the new 26.6% threshold.

The changes have sparked frustration among customers, many of whom have voiced their dissatisfaction online. On a digital finance forum, one customer complained: “Just a heads up if you have a Zopa CC, Zopa have hiked my interest rate up 10 points today 12% to 22% – completely out of the blue.

“I only use it for big purchases and rarely ever go over 25% of its limit – usually always paid off within 3 months. I can’t understand why they are doing this, it’s puzzling (other than greed). I’ll just pay off what I owe before the new rate kicks in and ditch it.”

Another discontented patron reported: “Mine up from 17% to 26.7% – closed as I didn’t really need it although it was my lowest APR card, it no longer is. Not that I carry a balance – except a 0% balance transfer.”

Credit card firms routinely review and revise their interest rates due to several factors, such as shifts in the economic landscape or a reevaluation of a customer’s creditworthiness. These adjustments can be targeted at specific customers or implemented broadly.

Should your credit card’s APR climb from 9.9% to 26.6%, you’d find yourself paying an extra £167 in interest for every £1,000 borrowed over the course of a year. At a 9.9% rate, the annual interest would be £99, but at 26.6% , that figure goes up to £266.

However, there is a silver lining for those who manage to settle their statement balance in full each month. The alterations to the interest rates will have no impact, as they won’t incur any interest charges.

A spokesperson for Zopa, as reported by The Sun, said: “We regularly review our credit card interest rates to ensure they provide fair value to our customers. As part of this process, customers’ rates may increase or decrease, as is the case now. When a customer’s rate changes, we provide at least 60 days’ notice.”

They further explained: “Customers have the choice to opt out from this. If they do, their interest rate will stay the same and their credit card account will be closed once the balance is fully repaid. We don’t impose a strict repayment deadline, allowing customers to pay off their balance at a reasonable pace with no impact on their credit file or any other Zopa Bank products.”

For those who can only afford to pay the minimum balance but wish to avoid accruing interest, transferring your debt to a balance transfer credit card could be a viable solution.

Balance transfer credit cards are a beneficial tool for individuals aiming to pay off existing debt, as they usually offer an interest-free period on transferred balances, enabling more of your payments to go towards reducing the debt itself.

Zopa Bank, a digital challenger bank with over half a million customers, is increasing its interest rates. The bank launched its credit card in 2020, initially attracting applicants with advertised interest rates as low as 9.9% annual percentage rate (APR).

The APR represents the yearly cost of borrowing on a credit card, including fees and interest. Despite advertising a representative APR of 34.9% (a rate Zopa Bank was legally required to offer to at least 51% of applicants), many customers with good credit scores benefited from the lower initial APR rate of 9.9%.

However, The Sun has confirmed that Zopa Bank has raised its lowest available APR for new customers to 26.6%, up from the initial 9.9% value. The digital bank is set to increase interest rates for some of its existing customers, particularly those who were previously enjoying rates lower than the new 26.6% threshold.

The changes have sparked frustration among customers, many of whom have voiced their dissatisfaction online. On a digital finance forum, one customer complained: “Just a heads up if you have a Zopa CC, Zopa have hiked my interest rate up 10 points today 12% to 22% – completely out of the blue.

“I only use it for big purchases and rarely ever go over 25% of its limit – usually always paid off within 3 months. I can’t understand why they are doing this, it’s puzzling (other than greed). I’ll just pay off what I owe before the new rate kicks in and ditch it.”

Another discontented patron reported: “Mine up from 17% to 26.7% – closed as I didn’t really need it although it was my lowest APR card, it no longer is. Not that I carry a balance – except a 0% balance transfer.”

Credit card firms routinely review and revise their interest rates due to several factors, such as shifts in the economic landscape or a reevaluation of a customer’s creditworthiness. These adjustments can be targeted at specific customers or implemented broadly.

Should your credit card’s APR climb from 9.9% to 26.6%, you’d find yourself paying an extra £167 in interest for every £1,000 borrowed over the course of a year. At a 9.9% rate, the annual interest would be £99, but at 26.6% , that figure goes up to £266.

However, there is a silver lining for those who manage to settle their statement balance in full each month. The alterations to the interest rates will have no impact, as they won’t incur any interest charges.

A spokesperson for Zopa, as reported by The Sun, said: “We regularly review our credit card interest rates to ensure they provide fair value to our customers. As part of this process, customers’ rates may increase or decrease, as is the case now. When a customer’s rate changes, we provide at least 60 days’ notice.”

They further explained: “Customers have the choice to opt out from this. If they do, their interest rate will stay the same and their credit card account will be closed once the balance is fully repaid. We don’t impose a strict repayment deadline, allowing customers to pay off their balance at a reasonable pace with no impact on their credit file or any other Zopa Bank products.”

For those who can only afford to pay the minimum balance but wish to avoid accruing interest, transferring your debt to a balance transfer credit card could be a viable solution.

Balance transfer credit cards are a beneficial tool for individuals aiming to pay off existing debt, as they usually offer an interest-free period on transferred balances, enabling more of your payments to go towards reducing the debt itself.

A local business owner has spoken of how she has had to urge customers not to use cash after all banks disappeared from her town. Monica Hardman, the owner of Shoreham Knitting and Needlecraft in Shoreham, West Sussex, that all branches had now gone, and it would be too hazardous to continue non-card payments. The town does, however, still have a Post Office and a banking hub.

“Originally, we had six banks in our town, and our own HSBC closed over eight years ago,” she told BBC Radio 4’s Today programme this morning.

“I opened three bank accounts, one after the other trying desperately to operate cash, and gradually all these banks closed, until last year we had none. So a banking hub opened at the end of our high street in March of last year. I looked at the situation again, but decided that it was too dangerous. One of the reasons was that it was too dangerous for a member of staff to walk down the road on a regular basis, five minute walk, carrying large amounts of cash.”

Ms Hardman added: “Our last bank that closed early last year was actually next door to us.”

When asked if she felt like she was missing out on income by paying charges for card transactions, she replied: “No. Our debit cards are 1.37%, we’re charged, and most people use debit cards. Credit cards are under 1%.

“Cash, if it’s paid in, is 1.5% of total money paid in.”

The programme had another business owner, Katie Jones, of Katie’s Cakes in Wolverhampton, who was championing cash payments.

She described how she used the cash she earned in her shop to purchse goods from other local businesses, and that some of her customers simply did not want to use digital payments.

These include low-income individuals who find it easier to keep track of their finances if they have physical change or notes.

Ms Hardman said that only about 25% of her total take was cash, adding: “If someone is actually stuck, we do actually help them, and we have paid ourselves with a credit card, or a debit card, and they’ve given us the cash.”

It comes as a Treasury Committee of MPs warns that businesses could need to be forced to accept coins and banknotes in order to make sure that the UK does not drift into a loss of cash acceptance for those who rely on it.

A report said: “There may come a time in the future where it becomes necessary for HM Treasury to mandate cash acceptance if appropriate safeguards have not been implemented for those who need physical cash, and the level of cash acceptance begins to lead to widespread detriment.

“To ensure that HM Treasury has the information it needs to make this decision, cash acceptance levels in the UK must be monitored to ensure we do not sleepwalk into a loss of cash acceptance for those who need it.

“HM Treasury must provide the Treasury Committee with annual reporting on cash acceptance levels and provide an analysis of HM Treasury’s view of the tolerable level of cash acceptance in society.”