Stock Market: First-time Investors

Question for Short Debate

19:54:00

Asked by

To ask His Majesty’s Government what plans they have to encourage first-time investors in the stock market.

My Lords, it is a privilege to open this short debate on encouraging first-time investors. I have been a private investor for 65 years, investing solely in United Kingdom companies. Through books, articles and platforms, I like to think I have been something of an evangelist for the private investor. I am also privileged to be the patron of ShareSoc, the premier body representing private shareholders. We all know the problem. Research by Abrdn, the old Aberdeen fund manager, has indicated that, whereas one-third of Americans’ personal wealth is in equities and mutual funds, the comparable figure here in the United Kingdom is only 8%. Yet there is no shortage of money here: 22 million people have £120 billion in premium bonds, and research by Barclays, using FCA data, estimates that, after contingencies, there is no less than £430 billion in cash held by 13 million individuals. So we have to change the climate and the culture of investing and encourage new investors, break down barriers and be much more creative. The consumer duty Act of 2023 made it very unattractive for traditional stockbrokers to take on new clients, so I welcome the Chancellor’s determination to move the dial, telling regulatory bodies to deliver “a mindset shift on regulation”. Indeed, I have to say that, had we been able to buy shares in the regulators, they would have been great growth investments. I have seven specific suggestions. The first deals with young people. It is absolutely ridiculous that grandparents are not able to take out junior ISAs for their grandchildren. At present that has to be done through parents, and that restriction should be abolished immediately; I see no merit in it. The second is on financial education in schools, which has been and is abysmal. The Government still own something like 8% of shares in NatWest. When the previous Government were in power, I and a number of Members of your Lordships’ House wrote to Jeremy Hunt with the idea of gifting £5,000-worth of NatWest shares owned by the state to willing state secondary schools, to be held for the long term. The idea was that this £5,000 would deliver a £350-a-year dividend and the pupils themselves—this was the whole point—would decide how to spend that dividend. That would be transformative and of modest cost, and for the first time it would make youngsters aware of what a bank, a dividend and the stock market were. There are only approximately 4,000 state secondary schools in the country, so the cost would be a relatively small £20 million. Unfortunately, of course, the general election intervened, but Rachel Reeves could still deliver this, because the Government still have 8% of NatWest, as I previously indicated. Parallel to this, I would like to encourage regional public companies to gift shares or cash to their local schools—schools from which they will recruit and where perhaps their employees’ children go to school—to enable those schools to become shareholders in those local companies, thus building bridges and raising awareness. So far, I have discussed it with only one public company, the flavours and fragrances company, Treatt, based in Bury St Edmunds, where I am a shareholder. It gives something like £100,000 a year to charities. It is considering this approach and applauds the concept. It is happy to be quoted on this. I hope that the Quoted Companies Alliance, the trade body for smaller regional public companies, will support and promote this idea and take it forward. Next, I come to television. There has been a near failure—indeed, a total failure—of television over the years to cover the stock market or investment opportunities. We have so many exciting UK companies to invest in. On television, we have any number of gambling advertisements and advertisements for medallions of dubious value, but virtually nothing on the stock market. I think television producers and similar are fearful of the regulations. I urge the Government to call in television and media chiefs and challenge them to deliver programmes to encourage private investors and, in the nicest way, to tell the regulators to back off. Fifthly, we should aim to encourage and increase employee share ownership. The Government should take up the sensible and positive recommendations of ProShare, and encourage companies to disclose the level of employee share ownership in their annual reports. Sixthly, in parallel to notifying premium bond prize-winners, as currently, that they have won a prize and that they have the choice of taking cash or buying more bonds—unless they have the maximum number—I suggest that we could, and should, inform them of the possible routes to stock market investment, giving information on possible investment platforms and such things as ISAs. Finally, I come to ISAs themselves, which have been such a wonderful tax-free wrapper over the years. They have been a huge success, and I am certainly a grateful beneficiary. However—and I know this will be controversial—I would suggest that all future ISAs should be restricted to only UK-quoted shares. If people want to invest overseas, that is fine, but why should we give them tax relief to enable them to do so? To be clear, I am not suggesting that existing ISA holders should have to divest their overseas holdings; that would be retrospectively unfair and administratively messy. Perhaps, it is also time to look at cash ISAs. Is there a case for making them less attractive, taxation-wise, than stocks and shares ISAs? These are very much personal ideas of mine, and, I repeat: I am sure that some of them are controversial. I very much look forward to hearing contributions on boosting share ownership from other colleagues in the short debate this evening. In the nicest way, I do not expect the Minister to be able to answer in detail a number of these specific points. However, she is a Leeds lass and a very respected former Leeds City Council leader. Therefore, she will certainly know the Chancellor, who of course is a Leeds Member of Parliament, personally. All I would ask of her is that she endeavours to draw the attention of the Chancellor to the suggestions that I am making and that other colleagues will be making during this debate. It would be very disappointing if our ideas were lost in a Treasury in-tray or, even worse, perhaps, in a Treasury wastepaper basket.

20:03:00

My Lords, I very much thank the noble Lord, Lord Lee of Trafford, for introducing this short debate and I look forward to hearing other speakers. I have been reading the Financial Times for nigh on 60 years and, for many years, one of the highlights was the columns written by the noble Lord about investing on the stock market. The headline on his last column—which, unfortunately, has now ceased—was: “The first ISA millionaire says there are only two essentials in investing: common sense and patience”. Clearly, he knows what he is talking about, but there is a problem: an inherent conflict is involved. I am going to put words into the mouth of the noble Lord now but, as I understand it, what the noble Lord, Lord Lee, advocates for investing is patience, resilience during market downturns and an unwavering commitment to high-quality companies, reinforcing the belief that wealth is built over time rather than through frequent trading. That is clearly right, but it is not easily transferable. Investing is a skill that, I suspect, is not readily available to large numbers of people in our country. I am not against people investing in the stock market; if people choose to do so with the necessary knowledge and information, that is good. However, the Government should not put themselves in the position of, in effect, proffering financial advice. That is not the Government’s job because, while the potential gains are real, so are the risks of the downside. Everyone needs to start from somewhere, and training and education are clearly important, but the key is that we need people to understand that, while investing in the stock market offers opportunities to grow your money and build financial security, the risks are just as real. There are so many stumbling points at which people will lose out. The previous debate was about risk; another key to successful investment is understanding the risks. I return to the point that I made initially, which is exemplified by the noble Lord’s own career: the need to understand that investing takes time. There is no quick fix to successful investment on the stock market. It is not a shortcut to wealth; it requires patience, learning and discipline.

20:07:00

My Lords, I congratulate the much respected and admired noble Lord, Lord Lee of Trafford—no relation, I add—on securing this debate. It is an issue on which he has campaigned tirelessly and ceaselessly with good reason, and we wish him well with it. Our whole system of capitalism, which has served us so well for hundreds of years, needs to be explained to our fellow citizens as early as possible in their lives, with every effort made to include them all so that they can benefit from its success and determine for themselves who to back with their own savings. “Capitalism” has become a word that some regard as a negative—nearly always people who are employed by the state and regard equality as the most important focus. They fail to recognise that all our prosperity is enhanced by a market system that rewards success and, yes, allows for failure, which is sometimes painful. The incentivisation to succeed is a basic, natural desire of us all to do better for ourselves, our dependants and our communities. Some critics complain that the drive to capitalism is the enemy of the environment, but they are so wrong. The market created Outlook for email to replace paper. The market created electronic vehicles to replace the combustion engine. For further prosperity, which we have to accept will not necessarily be spread equally, we need to encourage investment. The current discussion by left-wing politicians seeking to penalise people who have what they call “unearned income” is a flashback to the dark days of the 1970s, when two classes of income were taxed differently and, in my view, unfairly. In particular, we need to teach kids that so-called “earned income” is paid, weekly or monthly, without any risk whatever, while “unearned income” is typically generated from an investment, which involves risk to capital and, therefore, deserves greater reward. As interest rates begin to fall again, we must make the case for people to move out of cash into riskier but more rewarding investments, and, in that respect, stop putting people off with all the mandatory and unnecessary disclaimers. It is as if when people are buying shares in companies, they are at the same time lighting a cigarette and inhaling deeply. They are not. By the way, the same damaging and discouraging risk could be said for the mountain of bumf which public companies, even AIM ones—I declare an interest as the chairman of one—have to include in their annual reports. This just serves to frighten off anyone, in the unlikely event that they actually read it. It is another barrier to an efficient market, as huge resources are spent providing irrelevant information on issues irrelevant to success; it just highlights incredibly unlikely risks. In 2017, an aspiring young MP wrote a paper for the Centre for Policy Studies. The author, a Mr Rishi Sunak, pointed out that 55% of the US population was then invested in the stock market, as opposed to 19% in the UK—broadly similar to the figures of the noble Lord, Lord Lee. As a result, our markets are currently failing us. I declare an interest as the senior partner of Cavendish, and my investments are as in the register. The Conservatives had an excellent idea to facilitate investment with the proposed British ISA. Labour abandoned plans for it last September, which was a shame, because before the election a Labour spokesman said that the party had no plans to drop it. There was justified criticism of the British ISA, but it needs another look. I urge the Minister—who has been outed as part of the Leeds mafia—to look at this again through the spectrum of investment by young people, possibly as an extension of the junior ISA. Children should be taught how investment creates growth, which can help them as the economy grows but, more excitingly, can benefit them as investors. The current Government are on a dangerous course of sucking money out of British business, through initiatives such as the much-reviled national insurance scheme, to spend on public sector initiatives. There is no chance of economic growth with this route. What we need to do is create interest, connection and passion in the free markets and capitalism, and investing in businesses at as early a stage as possible.

20:11:00

My Lords, in following the noble Lord, Lord Leigh of Hurley, I have to go briefly to a report from the Intergenerational Foundation, which notes that the current UK tax regime strongly favours unearned income over earned income. I thank the other noble Lord, Lord Lee—with a different spelling—for securing this already interesting debate. I invite noble Lords to imagine seeing billboards on their trip home this evening, whether on the Tube or along the side of the road. They will find advertisements directed towards retail investors for investments in the stock market or elsewhere. They might see a widely smiling young woman from a minoritised community, holding the latest iPhone and looking like she has just won the Esports championship, even though the advert is for an investment app. They might see signs on these adverts saying, “Earn up to £100 as a welcome bonus”, “No minimum balance”, “Robo-advice” and “Coaching services for all”, or perhaps they will feature the old traditional piles of spilling gold coins. There is no hint here of the skills and patience to which the noble Lord, Lord Davies, referred as a necessary part of retail investing; you will not find that in those adverts. If noble Lords have a quick look at the work of the Advertising Standards Authority, they will find plenty of rulings against companies that are not even following our limited law. They are not putting—in a small and hard-to-read font in the most obscure corner—a warning about the initial investment being at risk, or an acknowledgement that the product is not covered by protective legislation. It is the Wild West out there, and I have not even got to TikTok and Instagram, where our regulators are at least starting to catch up. Last year, there was a crackdown on so-called finfluencers, a handful of whom, with a collective Instagram following of 4.5 million, were finally caught up with. I do not have time to go into the issue of greenwashing, on which, again, our regulators are just starting to catch up. As we were reminded just this morning, we live in an age of shocks—geopolitical, political, climate and health—which can have massive impacts on even the most apparently solid investments. What is solid today? As our always clear and succinct Library briefing says: “Retail investors are often advised not to buy shares unless they can afford not to access that money for more than five years, to give stock prices time to recover if they should fall”. But that assumes, in this age of rapid technological, social and political change, that they will recover. I start in this debate from a position of concern about the existing vulnerability, under current arrangements, of so many retail investors in today’s world. I do not think that we are in a position to boost, as the noble Lord, Lord Davies, suggested; rather, we should be thinking about better protections. There is one thing that the noble Lord, Lord Lee—to my left—and I can certainly agree on: that financial education in UK schools is abysmal. I have noted already that the Financial Times regard it as so bad that it made it the subject of last year’s Christmas’s appeal. But I suspect the noble Lord might find that financial education would not have the effect that he desires. Understanding of the financial system might well produce more concern about it—a rejection of it, as much as engagement. I certainly hope that is the case with cryptocurrencies, on which more education is urgently needed. This was demonstrated by the newsworthy fact today that, as calculated by three blockchain analysis firms, entities behind President Donald Trump’s crypto coin have accumulated close to $100 million in trading fees in less than two weeks. Meanwhile, tens of thousands of small traders have lost, if not quite their shirts, two-thirds of their “investments”.

20:16:00

My Lords, I thank the noble Lord, Lord Lee of Trafford, for this debate and for his excellent opening speech. This debate comes on a day when stock markets are tumbling and hedge funds have bet billions on a market crash triggered by trade wars unleashed by US President Trump. These events further highlight the casino nature of stock markets, which can easily burn first-time investors. Woe betide any Government which encourage people to gamble on the stock market, especially if people incur losses. Due to inequitable distribution of income and wealth, most people simply do not have the cash to gamble on the stock market. One recent survey suggested that 34% of adults either had no savings or had less than £1,000. Another reported that 66% of adults had average savings of less than £10,000, so buying and selling shares is not really a priority for most people, and they will inevitably look for safer investments. A key requirement of risk management is to hold a diversified portfolio. That means holding securities that are negatively correlated—a correlation coefficient of minus one would be ideal, but nevertheless they have to be negatively correlated. However, that is not easy to achieve for first-time investors if they are directly investing. Institutions have lunch-table meetings with companies to extract information, but individual investors have no power to extract any information, and they cannot even analyse the publicly available information. The annual report of HSBC is over 400 pages long. I do not how many investors are going to pour over that to make any sense of it, even when this information is publicly available. Before any Government encourage shareholding, they need to look at the impact of the shareholder model of corporate governance. Shareholders focus on the short term and have no loyalty to any business or community. Some time ago, the Telegraph reported that the average shareholding duration in the US was just 22 seconds. Can the UK really be that far behind? How would that stabilise investment and companies? Shareholders really want to resolve uncertainty as quickly as possible, and the way they do it is by demanding returns very quickly. Andy Haldane, one-time Bank of England economist, noted that in 1970 major UK companies paid out about £10 of each £100 of profits in dividends; by 2015, that amount had increased to between £60 and £70, and this was accompanied by a squeeze on labour and investment. Basically, the country’s corn seed was being destroyed. Most corporate investment these days is funded by debt or retained earnings. Annual share buybacks exceed the IPOs. The net result is that the UK languishes near the bottom of the OECD league for investment in productive assets. Much of the daily churning of share transfer money is really transfer from A to B; hardly any of it goes directly into the productive assets of the company. Therefore, I do not think that the Government should encourage first-time investors to gamble in the stock market without improving people’s disposable income and rethinking corporate governance and powers and the rights of all stakeholders, not just shareholders.

20:20:00

My Lords, I declare my interest as a director of the London Stock Exchange. I commend my noble friend Lord Lee of Trafford for securing this debate and for his enlightened vision on school investment portfolios. For anyone starting to invest, perhaps with an idea or two but wanting diversification, a go-to investment for 144 years was listed closed-end investment companies, which offer a treasure chest of good things. Some offer portfolios of other quoted equities, both UK and international, but over half invest directly into social infrastructure such as hospitals, homes, schools and renewable energy. Some have local connections. How inspiring would that be to be able to visit projects or attend a shareholders’ meeting showing, for example, how unrecyclable waste wood is turned into energy instead of landfill? Can we not just get this off the ground? This requires listed investment companies to still be around to inspire all investors, especially in the infrastructure sector. Let us remind ourselves why they were the jewel in the crown of the City for so long. They are diversified and can hold a wider range of assets than open-ended mutual funds—notably, real assets such as vital infrastructure and housing. They provide permanent capital to the underlying investment because, when investors buy and sell listed investment company shares, the manager does not need to disturb the underlying asset; nor are they exposed to run withdrawals. There are no deductions from investor share value, with market share prices already discounting expected expenses from net asset value. The wisdom of markets scrutinises and sniffs out performance and all other issues with alacrity; they are transparent public listed companies with audited accounts. Unfortunately, the Government are contributing to killing them off. How? They are doing this by legislating that listed investment companies must be double-regulated; growing the mountain of lost investment to £100 billion while we wait for FCA rules; undermining the stock market and its reputation; opening the door to attack by Saba and their ilk, and not being internationally competitive. Why? It is because we cling to EU legislation that, since 2022, we alone enforce, counterproductively, so that listed investment companies’ internal expenses—already discounted in share prices—are presented as additional deductions to be paid directly by shareholders, when they are not. The FCA is consulting on change, with products such as open and closed-ended funds being described as substitutable, when they are not. It continues its obsession with comparing costs as the yardstick for selection. Open-ended funds have different mechanisms behind their costs. They have to continually rebalance portfolios. They cannot use leverage. They do not have maintenance cost for real estate. The list goes on, so why compare? It is far better for each to explain what each does. It is easy for a Government who need growth and a stock market recovery to do one simple thing: end double regulation and return listed investment companies to their original status, when they made small fortunes for countless private savers while supplying essential capital to British infrastructure and industry.

20:24:00

My Lords, such is the reputation of the noble Lord, Lord Lee of Trafford, that when a couple of colleagues heard I was speaking in this debate, they said, “We’ll see you tomorrow and get a few good tips”. In the noble Lord’s opening remarks, I think he listed seven points, which I obviously cannot deal with tonight, but there were some good ideas. One point he touched on was education. One thing we do not do in this country, generally speaking, is teach our children practical examples of the world they are entering into. We read recently—I think it was last week—that Generation Z do not know how to change a lightbulb. We do not teach people how to interact with their own Government—with Revenue and Customs—and practical things like that. But there are examples, even at primary level, where some far-seeing teachers—even for primary school kids—get them organised to run little businesses in their own schools. We should teach people where money comes from. People assume that it is just there; it is the Government’s, and they will provide it. There is a difference between this country and the United States in the availability of investment. Understandably, we have to protect people, and we know that the stock market is a form of gambling. But we do nothing about the real gambling. When we had the Budget, we had the opportunity to tax the gambling companies; we did not. Instead, we taxed the pensioners, and these people get away with it. We know what the risk is, as the chances of winning are miniscule. At least with a share, there is a chance of a long-term investment and there is usually some asset—not always, but usually. We have this perverse situation where we put the most vulnerable people in our community at the mercy of companies that are fleecing them. They even have people knowing what to do at 3 am when a certain demographic is unsettled and are watching their programmes. They came and gave evidence to a committee I was on in your Lordships’ House and openly told us. We have to educate, and that has to go right down to the schools. People have to understand where wealth and jobs come from. They do not come from the Government. The Government are taking that money from people who make it, quite rightly, and spending it on public services. We do not connect the dots. If people are not taught that through their education, we lose it. There is also the fact that there is a vast amount of capital that is unproductive. In some US states, they even forced their pensions to ensure that a certain percentage of their assets were invested in women’s businesses, so that women were encouraged to become actively involved in business, and it was quite successful. But we are not focused on business. We are not focused on the competition we are facing. We take this very lackadaisical approach. The noble Lord, Lord Lee, has raised a flag for a number of issues. It does not simply apply to first-time investors. I think we have our whole reward scheme system completely wrong, as the noble Baroness, Lady Bowles, has just told us with some specifics. I hope that the Government will look seriously at ensuring that our education system teaches our children about some practical things they can do in business.

20:28:00

My Lords, this has been one of the most enjoyable debates I think I have ever been part of. Let me congratulate my noble friend Lord Lee on grasping a key issue and finding creative solutions. As the noble Lord, Lord Davies, said, his newspaper columns and his children’s books on investing are some of the best around. He is both an expert and a communicator, and I love his faith in the young. I am particularly taken with his proposal to engage young people in investing, or understanding investing, by persuading the Government and companies to donate shares to secondary schools. Youngsters can then, in a very real way, learn the practicalities, opportunities, pitfalls and risks of investing, by managing the portfolios in a place where support and advice are available. This is surely a far better way to build financial literacy than abstract theory, and it can build that confidence which extends into many other areas of finance: understanding the risk-reward spectrum. Your Lordships will be aware that 18 to 34 year-olds are far less intimidated by financing than older people and have a greater risk appetite, but their knowledge is dangerously limited. Some 46% of young people report holding cryptocurrency—I am shocked by that number—typically with no understanding of the asset they have just put their money into. Young people are now a major target for financial scams, primarily via the internet. There are good courses in schools. My youngest granddaughter took business A-level and we were really impressed by the sophistication of the finance segments, so it is possible to get it into a curriculum. But most youngsters do not take the relevant courses, and I hope the Government will take that on board when they look at the new curriculum proposals that we expect in the next few months. I suspect we all agree that financial savvy is no longer needed only by a small handful of wealthy people but, frankly, by everybody. At the very least, every youngster will eventually be engaged in pensions. I also support the noble Lord, Lord Lee, in his proposal for grandparents to be able to set up junior ISAs. But I am unpersuaded by the proposal to limit ISAs to UK stocks. When people need to build a financial bedrock—if they can—they should, to my mind, be able to balance risk effectively and without bias. The lack of current interest in UK stocks is a different and complex issue which we do need to tackle. My noble friend Lady Bowles talked about the travesty of what is happening with disclosure rules that distort the picture on closed-end limited-investment companies. This is an area where we really need the Government to move, and move fast. If the economy is to grow and strengthen, we need to increase our understanding and communication. The appeal of UK stocks will come, not with a kind of special intervention for the UK but with broader education and proper economic recovery and growth. We have talked for a long time of the need for financial literacy, proper advice, ways to expose scams, and helping people understand risk and their own appetite for risk, and their need to seize opportunity. If we can demystify investment and get people to invest with knowledge, and to start acquiring that knowledge in a very real way when they are young, we will have effectively contributed to the future.

20:33:00

My Lords, I am very grateful to the respected and engaging noble Lord, Lord Lee, for such an interesting debate. In my view, our theme today has two aspects. The first is helping individuals to build their own individual wealth—a worthy endeavour—and the second, equally important, is achieving this while strengthening the British economy. Investing in the stock market offers an important way for people to grow their savings, plan for the future and gain financial independence—all important in a free country and a free economy. In 2024, some 23% of Brits—roughly 12.5 million people—said they had invested in the stock market, making stocks and shares the most popular investment type. This is a notable increase from 18% in 2023, partly reflecting the fact that last year was a good year for stocks and, of course, in the long run equities yield more than bonds or interest-bearing accounts. It is, however, under half the proportion in the US, as my noble friend Lord Leigh pointed out. Before addressing the imaginative proposals of the noble Lord, Lord Lee, we should remind ourselves that, for most working people, pensions are the best investment. This is because employers usually at least match individual pension contributions, and because pension savings have tax advantages—albeit that the Chancellor’s Budget decision reduced those benefits. I had an interesting meeting with the Pensions Management Institute last week about how defined contribution pensions might be adapted to encourage more savings into both short-term and lifelong national savings plans, in partnership with business. This would also benefit the UK stock market. I understand that the Resolution Foundation has developed some similar ideas. Will the Minister get the new Pensions Minister to meet them, particularly given his Resolution Foundation background? I strongly believe that we need people to save and invest more, which brings me to the innovative suggestions from the noble Lord, Lord Lee, on how we can encourage young people to invest. The first is to give schools shares in government-owned NatWest stock, or in regional public companies, so that the pupils can use the dividends to invest elsewhere and learn about risk and reward from their experience. He is absolutely right that financial matters need to become part of the school curriculum. This was indeed one of the secondary recommendations in my review of the state pension age. Some 47% of UK adults do not feel confident about making financial decisions, and 61% of young adults do not recall receiving financial education at school, so they do not understand the glories of compound interest or the associated importance of investing early and of not putting all one’s eggs in one basket—the diversified portfolio that the noble Lord, Lord Sikka, talked about. Can the Minister confirm whether the Government will commit to improving the financial education of young people? I sense support for this across the House, from the noble Lord, Lord Empey, and the noble Baroness, Lady Kramer, and even from the noble Baroness, Lady Bennett, who rightly spoke of the dangers of bitcoin. A second idea relates to ISAs. I have to say that it was disappointing that the new Government decided to abandon Jeremy Hunt’s plans for a British ISA. I think that the suggestion of the noble Lord, Lord Lee, of linking future ISAs more closely to UK investments merits consideration, and I agree that grandparents as well as parents should be able to take out ISAs. However, I am against the idea, mooted in the papers, of abandoning the cash ISA, which is a good savings vehicle for those who want to take less risk. I would add that the lifetime ISA, introduced under the previous Government, has seen a notable increase in popularity. As for the other ideas of the noble Lord, Lord Lee, on non-executive directors, premium bonds and company reports, I understand his good intentions, but they are all new regulatory requirements and we need to be lifting the burden of regulation to drive growth. We need to reduce, not increase, the burdens, a point that the noble Baroness, Lady Bowles of Berkhamsted, with her stock exchange and European background, was making. The path to growth is laden with good intentions and, without great care, new legislation becomes a Christmas tree of burdens, as we are seeing with so many of the new Bills. However, I thank the noble Lord, Lord Lee, and I believe that we should encourage first-time investors, especially the young, to invest in our stock market.

20:38:00

My Lords, I start by sincerely congratulating the noble Lord, Lord Lee, on securing this debate. I agree that it has been an enjoyable exchange of views. It is a very important matter and one that does need discussing. As so many noble Lords have mentioned, I recognise his passion as a real advocate for the benefits of retail investment, and I thank him sincerely for sharing his insights with the House. Indeed, my noble friend Lord Davies expressed very well the respect that is held for the noble Lord. Of course, how could I fail to be taken by his comments about Leeds and my former role there? I will not mention the football result from the weekend. I also thank other noble Lords for their contributions this evening. I am sure we can all agree on the importance of encouraging newcomers to engage with the world of investing in the appropriate way. Getting this right will of course help savers make their money work harder, but it will also drive economic growth. The Government want to see more people taking part in capital markets and benefitting from the long-term financial security that investing can provide. We know that more people in this country could potentially benefit from moving out of cash and dipping their toe into investing. The Government want to see an investment environment that enables the broadest range of people possible to invest confidently and grow their long-term financial resilience, although I recognise my noble friend Lord Sikka’s comments about those who are currently excluded from this area altogether. As noble Lords may know, the Government are taking forward work to improve the support available to consumers to help with their decision-making when it comes to investing. The Treasury is working alongside the Financial Conduct Authority and the financial services industry to review the regulatory boundary between financial guidance and advice—an area we have heard a great deal about tonight. The case for change is clear. In the 12 months to May 2022, only 8% of adults received regulated financial advice, as the noble Lord, Lord Lee, mentioned. With the cost of living being high, financial advice and guidance from trusted professionals is critical to help people make their money go further. That is why, at Mansion House, the Chancellor reaffirmed the Government’s commitment to driving forward the advice guidance boundary review, and I welcome those comments. Together with the FCA, the Government are developing a proposal for a new regime called targeted support, which would allow authorised firms to provide suggestions appropriate to consumers in similar circumstances. For example, financial services firms could suggest that an individual with substantial savings considers opening a stocks and shares ISA. The FCA is currently consulting on high-level proposals for targeted support. This would not only benefit consumers in making better informed decisions but help them engage in UK markets, boost productive investment and support growth. Our capital markets are at the heart of the UK’s economy and our growth mission. Last year, more equity capital was raised in London alone than in the next three European exchanges combined. The UK is one of the largest centres for international bond issuance, with more than 16,000 active bonds trading on our markets, representing over £4.1 trillion across 55 currencies. At Mansion House, the Chancellor launched a call for evidence to kick-start the co-design process for the first ever financial services growth and competitiveness strategy. The strategy will focus specifically on how to deliver long-term, sustainable and inclusive growth of the sector. The call for evidence, which closed in December, identified UK capital markets and increasing retail participation as a priority growth opportunity. The call for evidence welcomed further information on how to improve consumer engagement with investing, and the Government are considering the feedback provided. Alongside our work to set a long-term strategy for UK markets and retail investment, the Government are continuing an ambitious programme of reforms, to make our markets more competitive and ensure that we tackle the existing barriers to retail investment. I am sure noble Lords will be aware of the work that is being done around the listing review of the noble Lord, Lord Hill, and the success that has led to. The Government legislated to empower the FCA to rewrite the rules for prospectuses. The new regime will be simpler and more effective, giving investors access to better quality information and allowing companies to raise funds more quickly. Access to information is one of the key ingredients to ensuring greater and better retail access to markets. That is why, beyond the reforms to prospectuses, we have legislated to enable the FCA to reform the UK’s retail disclosure regime for more complex investment products. This will ensure that consumers have access to the most useful information—including on risks, costs and performance —to support their investment decisions. The FCA’s consultation is currently open for views, and the Government look forward to seeing the final rules later this year. A great deal of the discussion tonight has focused quite rightly on financial education, with contributions from the noble Lords, Lord Empey, Lord Leigh of Hurley and Lord Sikka, and the noble Baronesses, Lady Neville-Rolfe, Lady Bowles and Lady Bennett—so many I cannot possibly do them all justice tonight. I want to stress that financial education is central to the Government’s thinking on how we can help prepare the next generation for financial capability. We know it is part of the school curriculum in all UK nations. In England, it is a compulsory part of the national curriculum for citizenship education at key stages 3 and 4. However, we know that it goes beyond the curriculum; Money and Pensions Service research found that 102 financial education programmes are taking place in the UK beyond those delivered by teachers and practitioners. But the emphasis on developing a financial inclusion strategy has to run alongside this. I know the pressure that is on teachers at the moment in all of our schools, and the extra support that will be needed to make this area of work successful. We know that 6 million children and young people annually are being reached by these programmes and that there is excellent support, as we have heard tonight. Many of the biggest banks provide free financial education resources, as well as financial literacy lessons to children and educators. In 2023, UK Finance members delivered financial education lessons to over 4.1 million children and young people in schools and community settings, as well as providing training for teachers, which is fundamental. I acknowledge that there is still much more to do, and I am grateful for the comments that have been made. In closing, I will address some of the specific points raised by noble Lords—although I will confess now that I will not reach all the points that have been made. I am happy to respond to the challenge of the points of the noble Lord, Lord Lee, and will respond in writing to those that I do not reach. The noble Baroness, Lady Neville-Rolfe, is quite right to note the important role that pensions play in building long-term savings and ensuring that citizens have a secure retirement. She will know that the Government’s pensions investment review is under way. On the specific point she raised, I note that phase 2 of that review will consider further steps to improve pension outcomes and whether further interventions may be needed to ensure that these reforms benefit UK growth. I am sure that DWP and the Treasury will consider any representations that are made. The noble Lord, Lord Lee, is right, generally, about the whole aspect of financial education and the need to be creative. However, with regard to the specific proposal about the NatWest shareholding, he will not be surprised that the belief of the Government is that it would bring significant delivery challenges, with the additional resources required to implement such an approach likely to be disproportionate to its benefit. Furthermore, this approach would complicate the objective of achieving a full exit from the Government’s NatWest shareholding, as it would leave a portion of NatWest shares in ongoing public ownership. We have heard various comments tonight from my noble friend Lord Davies and other Members about the concern around the media, and the noble Baroness, Lady Bennett, raised some graphic examples here. We believe strongly that regulation is important to take it through, and that this should not present a barrier to educational information. We also heard a lot about junior ISAs going forward. I will quickly pick up the point raised by the noble Baroness, Lady Bowles, some of which we have discussed in Grand Committee. It is right that the investment trusts, like other products that directly market to retail investors, must provide tailored disclosure on costs, risks and performance to support informed decision-making. The FCA will use the flexibility provided by the statutory instrument to ensure that disclosure is tailored to reflect UK markets and firms, and to meet the needs of investors. I emphasise that I welcome her contribution to the debate, as well as that of the noble Baroness, Lady Kramer, and I encourage the conversations to continue so that we can achieve the best possible outcomes. My time is up, and I apologise for not reaching all the contributions that I would have liked to have responded to. I repeat my sincere thanks to the noble Lord, Lord Lee, for his continuing championing of retail investment. I assure him and this House that the Government will reflect very carefully on the points raised by noble Lords in this very thoughtful debate.

Does the noble Lord wish to respond?

Given the lateness of the hour and the time pressure, there is nothing that I would like to contribute. Obviously, I could deal with a number of the points that have been raised, but I do not think that there is time to do that now.

20:51:00

Sitting suspended.