The Treasury Committee has criticised the government for not heeding its warnings that the Lifetime ISA (LISA) required reform.

In a report in June, the Committee said it was “unconvinced that the LISA effectively targets people in genuine need of financial support”.

This morning the Committee criticised plans from the government to improve the LISA, saying that they have not gone far enough.

The group of MPs also called for LISA savings to be treated in the same way as other pension savings in relation to the Universal Credit means test. The Committee said that in the absence of such reform, LISAs should be “labelled as an inferior product” and include warnings that they may disadvantage anyone who might one day claim Universal Credit.

Dame Meg Hillier MP, chair of the Treasury Select Committee, said: “The Government has taken some steps towards improving the Lifetime ISA, but I do not believe they have gone far enough. The Lifetime ISA is a confused product that requires reform.

“Recently published research by HMRC based on a sample of LISA holders found that 87% of those who had used their LISA to buy their first home said that they could have done so without their LISA. Given that the LISA is forecast to cost the Government £3 billion over the next five years, this raises the question whether the LISA is a good use of taxpayers’ money.

“The government has an opportunity at the Budget to think again on the LISA for would-be first-time buyers and those saving for retirement alike.”

The government and Treasury responded to the June report from the Treasury Committee earlier this month. In its response Emma Reynolds MP, economic secretary to the Treasury,  said that the government will consider the future development of warnings for LISA products, but did not commit to any concrete changes.

The Treasury Committee is a cross-party group of MPs which scrutinises the spending, policies and administration of the Treasury and its associated public bodies. It is not a government committee but a select committee of the House of Commons with a key role in holding ministers to account.