Spring Budget 2024

Lord Lee of Trafford Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Lee of Trafford (LD)]

My Lords, it gives me no pleasure to describe our country today as pothole Britain. For years, we have lived beyond our means, compounded, of course, by Covid and Brexit. Most public services are in dire need of greater resources. National morale is very low indeed.

I am supportive of some of the individual measures in the Budget—support for creative industries, changes to child benefit, and a focus on life sciences and artificial intelligence, and I understand the politics of the 2% reduction in national insurance. However, I believe that the money that has been saved there would be much better spent on defence, where the argument to spend more is compelling at the present time, as well as on our prisons, dentistry, youth services and the police, and on social housing, as referred to by the noble Lord, Lord Bird.

My focus today is on two things: the disposal of the NatWest shares and ISAs—the British ISA, referred to by the noble Lord, Lord Young. The noble Lord, Lord Macpherson, referred to the disposal of NatWest shares.

I think we all agree that financial education in our schools has been lamentable. The NatWest disposal of the Government’s around 30% holding gives the country a unique opportunity to improve financial education. If the Chancellor goes down the “Sid” route, which is what he is talking about, I believe that there is a real opportunity here, which myself and a number of senior Members of your Lordships’ House, including the noble Lords, Lord Lamont and Lord Howell, have put to government. Our idea is that government gives by way of gift something like £5,000 of NatWest shares free to all our state secondary schools, if they would like those shares. With just over 4,000 state secondary schools, that would probably cost around £22 million, assuming full take-up, which, frankly, is a pretty small amount of overall government spend.

These shares would have to be held for the long term. A £5,000 NatWest shareholding would give, at present, a dividend to the school of about £350 a year. Our idea is that the pupils would be empowered to decide how that £350, or the annual dividend, is actually spent. They might decide, for example, to spend it on something for the school, to subsidise a school trip, to support a local charity, or even to reinvest it in some form. But it would be their decision. Of course, because the school would own the shares, it would be able to participate in the national NatWest AGM. Indeed, NatWest may well send speakers into the schools to spread the word on financial education. This scheme would be transformative. It would, for the first time, begin to encourage and make youngsters aware of what banks are, what the stock market is and what dividends are.

In the Treasury Select Committee last Wednesday, John Baron asked the Chancellor about this scheme, which has been put to him, and his reply was that it was under consideration. Obviously, I very much welcome that. If such a scheme is actually implemented, we could build on it by encouraging regional public companies to give a small proportion of shares to state secondary schools in their locality, where their employees’ children go, and indeed where they recruit from.

Turning to ISAs and the concept of a British ISA, I have been a great supporter of this whole concept, starting to invest when PEPs, the precursor of ISAs, came in, in 1987. ISAs have developed into probably the best tax-free wrapper in the western world. Many of my overseas, foreign friends are envious of the ISA. It has been a very successful savings medium, and the newspapers over the weekend have been full of ISA content. I would be very supportive of anything that gives a boost to the UK stock market, but I have to say that the £5,000 British ISA suggested in the Budget is, frankly, something of a damp squib. It will be administratively very difficult and complex: we are probably talking about having to run two ISAs. It will obviously appeal only to the very wealthy, who will be able to put in something like £20,000 a year—£20,000 plus the £5,000. Frankly, it hardly produced a flicker in stock market interest: there were no movements at all. I am pleased to say that my own ISA is 100% invested in UK stocks—which perhaps explains its rather poor performance in recent years.

More seriously, there is a fundamental choice here. If individual savers and investors want to invest in overseas stocks, by all means let them—that is their decision—but I do not believe that we should give tax incentives, via ISAs, to those who invest overseas. Why should we? It does not make sense. Therefore, while I think it would be difficult retrospectively to argue that people should dispose of their overseas holdings, from now on those who take out new ISAs, whether they be for £20,000, £5,000 or whatever figure, should actually be restricted solely to UK stocks. If they want to invest in overseas stocks, that is their decision, but there should not be tax breaks supporting that.