Listed Investment Companies (Classification etc) Bill [HL]

Earl of Effingham Excerpts

3rd reading
Friday 13th December 2024 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I shall say a word in support of the noble Baroness, Lady Bowles, before we wave this Bill goodbye. The investment trust movement is a proven success story in this country but has been uniquely caught up in the PRIIP regulations. For three or four years we have been trying to find a way through that thicket.

I appreciate that the noble Lord, Lord Livermore, and the Government have produced some temporary forbearance regulations that are now in effect, but that is only a quarter of a loaf. To rebuild the sector, we need new investment trusts, but no one will launch investment trusts with only temporary relief that might at any moment be withdrawn. Therefore, while of course the industry is grateful to the Government for what they have done, it is only a sticking plaster.

The worrying aspect is that, now that we have forbearance relief, there will be no pressure on the regulators to make their mind up and the hitherto glacial progress will proceed even more slowly. I hope the Minister might take the noble Baroness’s Bill, stick it in his back pocket and say, “It has no commencement date but, if you don’t get on and sort your mind out, we’ll put a commencement date on it and bring it in”.

[The Earl of Effingham (Con)]

My Lords, I thank the noble Baroness, Lady Bowles of Berkhamsted, who has argued so cogently and cohesively for the Bill.

Finding ourselves in this position appears to be a mistake, and it is essential that we take the right steps to ensure that disclosures relating to closed-end listed investment companies are presented accurately. This is not merely a point of minute detail. As the noble Baroness has argued so diligently, the current situation has led to the loss of tens of billions of pounds of potential investments, resulting in economic damage to our country.

The Government tell us repeatedly that they want growth, and therefore the British people expect them to take the right steps to foster that growth. Indeed, as the Minister highlighted at Second Reading, EU-derived legislation related to retail disclosure is not fit for UK markets. We understand that the Government have committed to making changes to address and resolve these issues, and His Majesty’s Official Opposition greatly hope that the Government will continue to listen to the noble Baroness in a co-ordinated and collaborative effort to foster the growth that is essential if we are to deliver optimal outcomes for everyone across the country.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I congratulate the noble Baroness, Lady Bowles, on her Bill, and I thank her for her engagement on this issue so far. The Bill seeks to address an important concern for the sector, and I am grateful for the work of the noble Baroness and other noble Lords to raise awareness of the issue. As she has rightly identified, the previous legislation relating to retail disclosure was not fit for purpose. That is something on which the Government, the Financial Conduct Authority and many Members of this House agree, and it is an area in which this Government have already taken forward action to address industry concerns.

Only last month, the Government passed legislation to replace the package retail and insurance-based investment regulations with a new framework for consumer composite investments. That has provided the FCA with the appropriate powers to deliver a new disclosure regime that is more proportionate and tailored to UK markets and firms, including for investment trusts.

The Government also heard concerns from industry that the cost disclosure requirements have had an unintended consequence for the investment trust sector and its ability to fundraise. As a result, the Government took exceptional action to temporarily exempt investment trusts from cost disclosure regulation, with legislation passed last month to that effect.

Given that investment trusts offer their products to retail investors, it is right that they must provide tailored disclosure on costs, risks and performance to support consumer understanding. Together, the instruments that the Government have already passed will enable the FCA to holistically reform cost disclosure, addressing issues with current disclosure requirements. Ensuring that retail investors can make informed investment decisions is a key component of healthy UK capital markets.

I am grateful to the noble Baroness for her continued championing of the investment trust sector and for bringing her concerns to the Government’s attention. I hope she will recognise the genuine difference that her campaign has made. However, given the Government’s legislative interventions to resolve this issue, I am afraid I must express reservations on behalf of the Government on the Bill.