Stock Market: First-time Investors

Lord Leigh of Hurley Excerpts

Monday 3rd February 2025 Lords Chamber

[Lord Leigh of Hurley (Con)]

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.