Baroness Neville-Rolfe (Con)
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.