Stock Market: First-time Investors

Baroness Kramer Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, this has been one of the most enjoyable debates I think I have ever been part of. Let me congratulate my noble friend Lord Lee on grasping a key issue and finding creative solutions. As the noble Lord, Lord Davies, said, his newspaper columns and his children’s books on investing are some of the best around. He is both an expert and a communicator, and I love his faith in the young.

I am particularly taken with his proposal to engage young people in investing, or understanding investing, by persuading the Government and companies to donate shares to secondary schools. Youngsters can then, in a very real way, learn the practicalities, opportunities, pitfalls and risks of investing, by managing the portfolios in a place where support and advice are available. This is surely a far better way to build financial literacy than abstract theory, and it can build that confidence which extends into many other areas of finance: understanding the risk-reward spectrum.

Your Lordships will be aware that 18 to 34 year-olds are far less intimidated by financing than older people and have a greater risk appetite, but their knowledge is dangerously limited. Some 46% of young people report holding cryptocurrency—I am shocked by that number—typically with no understanding of the asset they have just put their money into. Young people are now a major target for financial scams, primarily via the internet.

There are good courses in schools. My youngest granddaughter took business A-level and we were really impressed by the sophistication of the finance segments, so it is possible to get it into a curriculum. But most youngsters do not take the relevant courses, and I hope the Government will take that on board when they look at the new curriculum proposals that we expect in the next few months. I suspect we all agree that financial savvy is no longer needed only by a small handful of wealthy people but, frankly, by everybody. At the very least, every youngster will eventually be engaged in pensions.

I also support the noble Lord, Lord Lee, in his proposal for grandparents to be able to set up junior ISAs. But I am unpersuaded by the proposal to limit ISAs to UK stocks. When people need to build a financial bedrock—if they can—they should, to my mind, be able to balance risk effectively and without bias. The lack of current interest in UK stocks is a different and complex issue which we do need to tackle. My noble friend Lady Bowles talked about the travesty of what is happening with disclosure rules that distort the picture on closed-end limited-investment companies. This is an area where we really need the Government to move, and move fast. If the economy is to grow and strengthen, we need to increase our understanding and communication. The appeal of UK stocks will come, not with a kind of special intervention for the UK but with broader education and proper economic recovery and growth.

We have talked for a long time of the need for financial literacy, proper advice, ways to expose scams, and helping people understand risk and their own appetite for risk, and their need to seize opportunity. If we can demystify investment and get people to invest with knowledge, and to start acquiring that knowledge in a very real way when they are young, we will have effectively contributed to the future.