Retail Investment

Anna Dixon Excerpts

Tuesday 22nd April 2025 Westminster Hall

[Callum Anderson]

My hon. Friend is quite right; it is really important that we encourage women and other under-represented groups to invest and participate in owning a part of their economy. By encouraging retail investment we are able to reduce a variety of wealth gaps, including the gender wealth gap. I should add that there is a social justice element, too. People from middle-class or wealthier families are simply much more likely than those from ordinary working-class backgrounds to be exposed to the range of financial options available. That creates an asymmetrical divide in confidence, knowledge and opportunity.

This matters because when UK citizens own less of their economy, the consequences are much more than just financial. It affects the efficacy of our economic model, the shape and direction of our growth path, our ability to support home-grown innovation and even, as we have seen in recent weeks, our economic sovereignty. If we want a strong economy that genuinely works for everyone, we must do what we can to help more of our constituents take part in it, not just as workers or consumers but as co-owners.

I want to reiterate that this is not about helping the City of London. It is about helping everyday people—our constituents—make the most of their money and have a say in the companies that are shaping their lives. We know that long-term investing consistently outperforms keeping money in cash savings or bonds.

[Anna Dixon (Shipley) (Lab)]

I recently met representatives of Morrisons, the fifth largest supermarket chain in the country, which is headquartered in Bradford. Since 2021, it has been owned by a private equity firm. Does my hon. Friend agree that we need to ensure that we retain family-owned British companies? When they are sold to private equity companies, there is a risk of undermining long-term patient capital and investment in the social fabric as well as the businesses themselves.

[Callum Anderson]

As I have mentioned ad nauseam since I was elected, my mum works for Morrisons, so I know the impact that various structures of ownership can have on workers and customers. My hon. Friend is right that that is one of the many factors that we should consider as policymakers.

A £100 investment in Government gilts in 1900 would have returned around £463 by 2019. The same investment in UK equities would have yielded £35,000. Despite that, many Britons still keep the bulk of their money in cash. In the G7, only the citizens of Germany and Japan hold more of their national wealth in cash than we do. Inflation, even at modest levels, steadily eats away at its value. I believe that we must do more to help people feel confident in making smart, informed, long-term choices, and that starts with awareness, the right tools and advice, and trust.

Let us take ISAs, the most commonly known product, as an example. In the 2022-23 financial year, the latest for which official statistics are known, more than 12 million adult ISA accounts were active, yet nearly two thirds of the total value—almost £290 billion—was held in cash. That is more than £290 billion earning very little return indeed. Some major high street banks, which I will decline to name, are at the moment offering as little as 1.35% interest on cash ISAs, yet we know that inflation has consistently outpaced that rate for the past four years; indeed, it has sometimes reached double figures.

Many financial experts and advisers will rightly recommend keeping three, six or nine months of living expenses in cash savings. I know from my early career in financial inclusion charities that, for many households, possessing even £500 in emergency savings can often be out of reach. Let me be clear again: this debate is not about replacing or discouraging cash savings—far from it. It is about showing that even small investments—£10, £20 or £50 per month—can make a real difference over time.

If more people invest, our economy will be stronger in the long run. Imagine if we could shift just 10% or 20% of that £290 billion towards more productive, growth-inducing assets. That would mean more companies starting, growing and scaling right here in the United Kingdom and, therefore, more jobs, better pay and more people gaining that crucial bit of additional disposable income to invest for themselves or, perhaps just as importantly, to enjoy life with their families. That is the virtuous cycle that I believe we all agree that we need to build.

How can we—Parliament, Government, regulators and the industry itself—go about working towards that together? Ultimately, I believe that the UK would greatly benefit from a long-term retail investment strategy invested in by Parliament, Government, regulators and the industry. For the purpose of this debate, I think there are four immediate priorities.

First, we need to simplify the ISA framework and reform it to better support British investment. There are four types of ISAs, each with slightly different rules. For many, that is simply confusing and, I think, off-putting. Why not consolidate those products into a single ISA, with stocks and shares ISAs the default but, crucially, people can still hold cash if they choose?

The Government might also wish to consider reviewing the stamp duty framework on share purchases. Currently, it is cheaper for an individual investor to buy shares in Illumina than in Oxford Nanopore, in Lockheed Martin than in BAE Systems, and in Tesla than in Rolls-Royce. Is it time for us to ask ourselves whether we want to continue making it more expensive for Britons to buy British?

Finally on this point, we should ensure that ISA tax exemptions align much better with the needs of the UK economy as a whole. Today, someone can put £20,000 in a tax-free wrapper that invests in companies that create no jobs in the UK, pay nothing into our Exchequer, generate no domestic growth and contribute no intellectual property or research and development. Should we as legislators be asking ourselves whether that is a good use of taxpayer subsidy? Is it time to look again at the original PEP—personal equity plan—model introduced by Nigel Lawson in the 1980s, which required at least 50% of the ISA allowance to be directed towards UK-focused assets? That could strike a better balance between supporting investment freedoms and choice, and the national interest.

Secondly, we must boost, embed and entrench the virtues of financial education, because if people do not understand how investing works, they simply will not do it. I welcome the Government’s continued support for the Financial Conduct Authority’s review of the boundary between financial advice and guidance. It is really important that people can get timely and affordable help when making big financial decisions so that they can make the most of their money, but I think there is scope for us—for Britain—to go further.

Let us be honest: as I said in my opening remarks, kids from wealthier backgrounds are more likely than those from less wealthy families to hear about compound interest, investment portfolios and ISAs at the dinner table. That is why financial education should form a part of everyone’s life, from school right through to retirement, so that people feel confident and well informed at every stage of their life. That means recommitting ourselves to properly implementing age-appropriate financial education throughout our school system, from basic budgeting and saving at a young age, to more sophisticated learning about investment, risk and long-term planning in later school years. This is not just about economics; it is about equity and fairness.

Thirdly, we need to make it easier for citizens to engage with the companies they invest in. I believe that primarily means finishing the work of Sir Douglas Flint’s Digitisation Taskforce at pace, ending paper share certificates and creating a fully transparent modern shareholding system. However, it is also about access to information: right now, only the big top-tier institutions get first-class research; retail investors get patchy websites filled with jargon, if they get anything at all. The UK should be developing high-quality and accessible investment information, especially for those smaller UK firms that have the potential to be the Googles and Nvidias of tomorrow.

Fourthly and finally, we must fundamentally shift the British culture and mindset into individual investing. Too many of our constituents still see investing as something that other people do—something for the wealthy, or the experts, or the lucky to do. We must challenge that mistaken perception head-on. Why not launch a modern, compelling and inclusive public awareness campaign—perhaps a 21st-century version of “Tell Sid”? It should focus on real people, real lives, and real, genuine, tangible benefits that people can see in their local community. It should be visible, too, in universities, in jobcentres, in community places and in our workplaces, because this is not just a personal finance issue; it is a national opportunity.

I think that the case for retail investment is clear and I believe that this Labour Government have the chance to fuse their democratic socialism with a modern brand of democratic capitalism. By helping more people to invest in their own economy, we empower citizens, grow our companies and build a more prosperous country for everyone. I believe that capital markets can and should serve everyone, and that it is our job in this place to make that a reality.

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[Kanishka Narayan (Vale of Glamorgan) (Lab)]

It is a privilege to speak with you in the Chair, Mrs Hobhouse. It is a particular privilege to follow my hon. Friend the Member for Buckingham and Bletchley (Callum Anderson), who secured this debate and led it with expected expertise. I know that he brings a great deal of professional experience from his career prior to this place. It also a privilege to see the Economic Secretary to the Treasury in her chair. I know that she also brings vast expertise and experience to this debate from both her time in this place and prior to it. For those reasons, I will humbly keep a short focus on five particular segments of potential retail investors in my remarks.

My hon. Friend the Member for Buckingham and Bletchley was very accurate in noting the focus of the debate. For me in the Vale of Glamorgan, as will be the case for many other colleagues, the focus must be on ensuring that individuals can not only accumulate prosperity through retail investment but ensure dignity, and that is the first segment of particular interest. For millions of households, retail investment is a question of saving up for a rainy day. For many households in the third decile of wealth in this country, with average net financial savings of about £1,500, the path to retail investment is through a low-cost—or hopefully even a zero-cost—accessible money market or index fund. The fundamental focus for those individuals is on how we support not just the right level of interest rate provision from our retail banks, which is absolutely necessary, but the advantages of technology in distributing index funds in a way that is accessible and understandable to many of those households.

The secondary category is novel in its composition: the young in this country. While about 39% of adults in this country have invested actively, an overwhelming third of those started during the pandemic. The vast majority of those who started in the pandemic and afterwards are aged between 18 and 34. The patterns of behaviour in that category are radically different from others across the country: 58% of 18 to 24-year-olds hold cryptocurrency as their primary asset holding; among those aged between 55 and 65, holdings in that asset class are negligible. Cash ISAs are not particularly prominent for those young individuals at the moment. For them, the interesting and salient question is how to make sure that we have a bridge to wider responsible investing across asset classes, which builds for the long term, alongside doing what they want in holding cryptocurrency or other assets.

The third category is critical to the nation’s future and private investment in this country: those who do not invest in equity today. My hon. Friend the Member for Buckingham and Bletchley has come up with a series of good practical ideas on supporting them into equity markets, but given that most of our financial assets up until the seventh or eighth decile of wealth lie in pensions rather than direct financial assets themselves, I feel that pensions will be the primary gateway to ensuring that retail investors have a bit more of a say in allocation that supports the country’s long-term goals.

In the United States a 401(k) culture of people being able to exercise discretion in what happens with their pensions has led to a radical shift in retail holding in equities in particular. The Economic Secretary to the Treasury has been at the frontier of making reforms to our pension system in her prior role and now as well. In addition to supporting funds, shifting their allocation, really pushing ambition on the implementation of the pensions dashboard and in the movement to open pensions, the data, transparency and empowered control that will help many of us to make greater moves into supporting British and wider businesses is fundamental.

[Anna Dixon]

My hon. Friend makes excellent points about the older generation and their decision making on what to invest in. At the moment older people are often over-saving, particularly in cash ISAs or very low-risk products, because of the lack of funded social care. They are having to hold on to a lot of cash just in case they need to pay for care. Does my hon. Friend agree with me that better advice is needed for pensioners to make retail investment decisions, and a better range of products is needed that will deliver them security in old age in terms of social care, but also the returns in pension income?

[Kanishka Narayan]

Yes, absolutely. My hon. Friend speaks with a great deal of expertise on this and on the wider question of how we support people with care needs. She is exactly right.

I would be interested in how we support a market in the advice context that goes all the way from what I think the guidance on the boundary of the advice market will do, which is support people getting into the advice context in the first place and ultimately into the regulated part of that market. Again, as a fervent believer in what a reduced cost of delivery through technology can do, I think there is a huge amount of progress to be made in finding different sources of advice for different sets of people. Pensions are a primary point of leverage as we think about where we can make a mark in supporting greater retail investment.

There is a fourth, really important category of those who invest in equities, but do not invest as much in British equities. It is worth distinguishing them from those who do not invest in equities altogether. My broad suggestion there is that we focus as much on the pull as the push and think about why it is that when people in Britain invest in equities, they are not investing as much in British equities. It is very clear that North American funds have had very material inflows over the course of the last decade, compared with actively managed UK funds, which have had outflows since 2016. UK-based index funds also had outflows in the two years prior to 2023. It is probably not surprising that it is in large part down to the returns profile.

If someone invested in the MSCI USA Index, they got a 303% return over the last decade. Return in the MSCI World Index was 213%. If we look at the pattern of retail investment in US companies, we see that it is the highest growth, highest returning and often in some ways the highest engagement companies that get the greatest inflows. Some 30% of retail holdings in the “magnificent seven” tech stocks, as they are labelled, are radically lower in the rest of the S&P. Given that the median age of our top 10 companies in the FTSE is about 150 compared with 40 in the US top 10, it is probably not surprising that people do not feel as captivated by the possibility of investing in Britain.

When we think about retail investment in British assets in particular, we need to think about what we are asking people to invest in and make sure that the wider set of economic reforms that we are focused on are driving at pace a sense that technology and renewable energy—things that build the country’s future—grounded in communities like Hexham and the Vale of Glamorgan are the assets that we support people to invest in.

My final point is close to my heart as a Labour politician, which is that retail investors’ primary experience of a company is the company that they work in. There is a cause here that ties together the cause of worker dignity, worker engagement and retail investment for prosperity. It is a cause close to my heart from the technology sector, because the one thing that has been so remarkable about it globally has been the ability of the technology sector to create prosperity through employee stock ownership. I humbly suggest that the Government consider adapting a very successful enterprise management incentive scheme for employee stock ownership, to make it more attractive in the modern world of technology and artificial intelligence companies.

I am conscious that I have whizzed through those five categories, but at the heart of the issue is a fundamental focus: in supporting both the prosperity and dignity of people in the Vale of Glamorgan and across the country, retail investment will be fundamental.

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[Anna Dixon]

Constituents of mine value the role of the credit union, and the Bradford credit union in particular, for small savers on low incomes. Does the Minister see a role for credit unions alongside building societies in helping to encourage not only saving, but making early steps into investment, as we have discussed in this debate, for some of our poorest constituents?

[Emma Reynolds]

Credit unions, mutuals and co-operatives play a hugely important role in our economy and our society. That is why the Government—as my hon. Friend will know, given that she stood on the same Labour manifesto as me—promised in our manifesto to double the size of the mutuals sector, why the Chancellor asked the FCA and the Prudential Regulation Authority to look at the mutuals landscape in the Mansion House speech in November and why we have supported the establishment of the co-operatives and mutuals council—I actually went to the first meeting. As my hon. Friend said, credit unions play an important role in encouraging savings, particularly for those on low incomes. We have also launched a consultation on whether the common bond needs to be more flexible so that more people can benefit from credit unions, and that is also in train.

Coming back to the issue of ISA reform, the hon. Member for St Albans rightly said that there has been some market volatility recently. I will not comment on the day-to-day movement in markets, but I will say—I think she was also making this point—that if people are in a position where they can invest in stocks and shares in our stock market or other forms of investment, they need to take a long-term view of that. Often, that investment gives better returns than just putting something away into a cash account.

Analysis by AJ Bell from February this year suggests that someone who put away £1,000 in an average-performing cash ISA every April since their introduction in 1999 would now hold about £34,000. If their savings had instead kept up with inflation, they would now have £38,000, so that person would have lost out on £4,000. That goes to show how inflation can reduce the value of cash savings over time. In contrast, if that same individual had decided to invest in a stocks and shares ISA, they could now have around £83,000—over twice as much as their cash savings would have been. That demonstrates that if someone has the confidence and the ability—we are not talking about everybody here—to invest for the longer term, they will most likely get a better return. We need to ensure that people have the confidence and ability to engage with investing, and thus to benefit from the financial security and greater returns that investing can often provide.

My hon. Friend the Member for Vale of Glamorgan talked about people on lower incomes. On that, I will take the opportunity to say something about the help to save scheme, which is targeted at working households on low incomes. It offers a 50% Government bonus on savings of up to £50 a month over four years. The Government announced at the autumn Budget last year that the help to save scheme has been extended until April 2027. From 6 April this year, we have extended eligibility for help to save to all universal credit claimants in work as well.

The second issue raised by my hon. Friend the Member for Buckingham and Bletchley was about financial education. In fact, most hon. Members who spoke talked about its importance. One of the major barriers to investing for consumers is a lack of support to make financial decisions. We know that only 8% of adults received regulated financial advice in the 12 months to May 2022, but guidance does not often go far enough to help consumers feel confident to make a decision. We have a big advice/guidance boundary gap. Many of our constituents are therefore not getting the help they need to make their money go further. Some keep a lot of their money in savings, losing out on potential returns, and others do not regularly review their investments, or invest in products that do not meet their risk appetite.

Together with the FCA, the Government are developing a new regime called targeted support, which would allow regulated firms to provide suggestions appropriate to consumers with similar characteristics. For instance, the regime would enable firms to suggest that an individual with substantial savings could consider opening a stocks and shares ISA. It would also enable firms to suggest options for how to generate an income from an individual’s pension pot, appropriate to consumers with similar needs. The FCA will consult on the rules that will underpin targeted support in the first half of this year. Getting those reforms right will help consumers make better-informed decisions, engage in capital markets, and ultimately to be in a position to get better returns on their savings in the longer term.

My hon. Friend the Member for Buckingham and Bletchley reflected on how financial education can help level the playing field for those from less wealthy backgrounds. I really liked how he expressed in his speech the asymmetry between those who already come from a wealthy background, where this might even be discussed at the dinner table, and those in a less privileged position, who are not aware of some of the opportunities. If they are not aware, even if they were given the opportunity they would not have the confidence to take it.

In England, the independent curriculum and assessment review is considering how to ensure that he curriculum is fit for purpose. The shadow Minister, the hon. Member for Wyre Forest, talked about the importance of financial education. I cannot give him any guarantees right now, because as he will know, although we have had the interim report of the curriculum review, we are still working through some of the details. I met the Minister for School Standards to discuss this work and to make sure that my work on financial inclusion and the work of the curriculum review go hand in hand. I cannot give him any guarantees on private Member’s Bills right now, but I can take the question back to the Government Whips, who will tell me where we are. As I understand it, the private Member’s Bill on financial education that he talked about is not due to be introduced until 11 July.

We are working with the Department for Education, and the Department for Education is working across Government on how we can ensure that the curriculum review improves financial education for our young people, which I would like to see. Indeed, it was striking that in the interim review parents and pupils said that finance and budgeting was the top area they would like to see more focus on in schools; that was encouraging.

Thirdly, my hon. Friend the Member for Buckingham and Bletchley asked for action to make it easier for our citizens to engage with our capital markets. The importance of UK capital markets was mentioned by many speakers, but particularly by the hon. Member for St Albans, my hon. Friend the Member for Vale of Glamorgan and the shadow Minister. We want to make UK capital markets as attractive as possible to retail investors. Our capital markets are already among the strongest and deepest globally. I know some concerns have been raised, but more than £25 billion of equity capital was raised in London last year, more than in the next three European exchanges combined. I am keen that we do not talk ourselves down. Of course, we must recognise challenges where they arise, but we must also recognise our strengths. We are the world’s largest international bond market, with more than 16,000 active bonds traded on our markets, representing over £4.1 trillion across 55 currencies.

We want to go further to reinvigorate capital markets to ensure that they support both UK and global growth. We are currently developing a financial services growth and competitiveness strategy, and have identified capital markets, and retail participation within those markets, as a priority growth opportunity in that strategy. That strategy will come later this year, and I am sure the hon. Member for Wyre Forest will quiz me about it in the weeks and months to come.

The Government are focused on making our markets more competitive, including by supporting the FCA’s work to reform the UK’s prospectus regime to give investors access to better quality information to support their decision making, and supporting the FCA’s proposals to cut red tape for corporate bond issuance, which will encourage companies listed on stock exchanges to offer bonds in smaller sizes to improve investment opportunities for retail investors. The Government have also legislated to enable the FCA to reform the UK’s retail disclosure regime to ensure that consumers have access to the most useful information to support their investment decisions. The FCA’s consultation has just closed and the Government look forward to seeing its final rules later this year.

My hon. Friend the Member for Buckingham and Bletchley also raised the work of the industry-led digitisation taskforce, which is looking at how we can improve the system of share ownership in this country and, as part of that work, at how we can remove all paper shares. The taskforce is currently finalising its final report—my hon. Friend will have seen the interim report—and the Government look forward to receiving it, and will respond in due course.

Finally, my hon. Friend the Member for Buckingham and Bletchley called for a fundamental shift in how we think about investing in our country. He is right to say that investing should not be for just the wealthy, or those with expertise; we need to build an investment culture that enables newcomers to invest confidently and grow their financial resilience. I want to deliver that change but I know that the Government, and indeed parliamentarians, cannot deliver that shift on our own. We need to work closely with regulators and industry and, as my hon. Friend suggests, make the case to consumers for investing. I thank my hon. Friend for outlining his proposal for how we could do that.

We are thinking carefully about these matters and look forward to working with my hon. Friend and others across the House to help build the strong investment culture that we want. As part of that work, we are of course looking at international examples; the shadow Minister mentioned the importance of that. Many hon. Members will be familiar with how Americans talk a lot about their 401(k)—or so I am told—and how Australians talk a lot about their supers. A few months ago, I was talking to a financial services senior leader who told me that when she lived in Australia, her cleaner often looked at her super on her phone, and tracked the return on her investment. I would love to see that sort of inclusive, democratic access to investment opportunities in the UK. I am not being patronising—I have a fantastic cleaner too, and I would like to see her in that position. We want to ensure that people across society get these opportunities. We also want people to engage with their pensions more closely, as I have already mentioned in response to my hon. Friend the Member for Vale of Glamorgan.

If I do not get to all the questions raised by the hon. Member for Wyre Forest then I am sure that I can write to him, or we can have a discussion after the debate.

My hon. Friend the Member for Vale of Glamorgan talked about what the Government could do to promote employee share ownership. The previous Government launched a call for evidence on the save as you earn and share incentive plan schemes. The Government will use that call for evidence to consider opportunities to improve those schemes, and I thank my hon. Friend for his interest in that.

The hon. Member for St Albans talked about advertising on social media. She will know that under the Online Safety Act 2023 large internet platforms will be required to put in place systems and controls to avoid fraudulent advertising appearing on those platforms. We also welcome Ofcom’s work to bring forward codes of practice on what actions firms should be considering. However, she is right to raise the issue as a matter of concern; the Government are concerned about it.

I have answered the question from the hon. Member for Wyre Forest about the private Member’s Bill on financial education, but I am sure that he asked me other questions that I have not quite got round to; I beg his forgiveness. I also answered his question on what we can do together to ensure that people know there are risks involved with holding cash above certain levels, and about the erosion of people’s cash savings by inflation, but if he wants to repeat any of the other questions, I am happy to respond.