The chancellor has told the financial industry it must change the “negative” narrative around savers investing money in stocks and shares in order to help grow the economy.

In a speech, Rachel Reeves said: “For too long, we have presented investment in too negative a light, quick to warn people of the risks without giving proper weight to the benefits.”

The government is working with the financial regulator to provide support for would-be investors.

It comes as Reeves stepped back from cutting the tax-free limit on cash Individual Savings Accounts (Isas) after a backlash from lenders – she is keen to shift some of the £300bn in these accounts to being invested in the UK and its companies.

At the annual Mansion House dinner in the City of London, Reeves told business leaders: “Our tangled system of financial advice and guidance has meant that people cannot get the right support to make decisions for themselves.”

She said the government is consulting with the Financial Conduct Authority “to introduce a brand-new type of targeted support for consumers ahead of the new financial year”.

The government is under pressure to ignite growth after figures revealed the UK economy shrank in May following a contraction in April.

Meanwhile, U-turns on welfare benefits and the winter fuel allowance have stoked speculation there could be tax rises in the Budget later this year.

Some Labour MPs have previously suggested a wealth tax, such as a 2% tax on assets worth more than £10m, could raise £24bn per year.

Speaking at the Mansion House event, Sir William Russell, former Lord Mayor of the City of London, told the BBC: “Unfortunately, there’s going to be this pause between tonight and October. In a way, that’s not good because there’ll be speculation about wealth tax which I don’t think will happen, this government is much more sensible than that.”

But he said: “That pause doesn’t help because there is uncertainty and if there’s one thing we all would agree with, the City does not like uncertainty.”

Reeves said the new measures to encourage consumers to invest would mean “savers can reap the benefits of UK economic success”.

But the value of investments in assets such as shares can go down as well as up, and savers have tended to be cautious over the risks involved, although the spending power of savings can be eroded by rising prices.

The government has in the past encouraged the public to buy shares in UK companies, including in 2013 when Royal Mail was floated on the London Stock Exchange.

But perhaps the most famous example was in 1986, when the state-owned British Gas was privatised and Margaret Thatcher’s government launched the “tell Sid” campaign. TV adverts featured characters urging each other to “tell Sid” about the chance to buy shares in British Gas.

Altaf Kassam, head of Europe investment strategy and research at State Street Global Advisors, told the BBC’s Today programme the chancellor was trying to “rebuild trust” which had been “scarred from the financial crisis”.

“It’s going to be a long process, but this does feel like several steps in the right direction and the mood music is definitely warming up to the City, to financial services, to investing generally,” he said.

In reference to her recent travails – including a tearful appearance in the House of Commons – Reeves said that during a visit to a school, a girl had asked her what job she would do if she could have any job in the world.

“Given the events of the last few weeks, I suspect many of you would sympathise if I had said “anything but chancellor”,” she joked with the audience. “But I didn’t.”

In her speech, Reeves said she would “continue to consider further changes to ISAs, engaging widely over the coming months”.

She also provided more details about changes to the UK’s financial services sector including reforming regulation.

“In too many areas, regulation still acts as a boot on the neck of businesses,” she said. “Choking off the enterprise and innovation that is the lifeblood of growth.”

She said regulators in other sectors “must take up the call I make this evening not to bend to the temptation of excessive caution but to boldly regulate for growth in the service of prosperity across our country”.

Ahead of giving his own speech at the Mansion House gathering, Bank of England governor Andrew Bailey was asked if there was a trade-off between providing stability and growth.

In the past, Mr Bailey has been cautious about deregulation.

But he told the BBC: “In no way am I suggesting that all our rules are perfectly formed so no, there isn’t a trade-off, but that doesn’t mean to say that we don’t change and modernise the system and keep it up to date – we balance those two things.”