Stock Market: First-time Investors

Baroness Blake of Leeds Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)]

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.

[The Deputy Speaker (Baroness Watkins of Tavistock) (CB)]

Does the noble Lord wish to respond?