Pension Investment in UK Equities

Debate between Kit Malthouse and John Glen

Tuesday 25th November 2025 Westminster Hall

[John Glen (Salisbury) (Con)]

I beg to move,

That this House has considered pension investment in UK equities.

It is a pleasure to serve under your chairship, Mr Stringer. I think all hon. Members would agree that UK pension funds are hugely important, primarily to the millions of future pensioners, but also to the many scale-up businesses that are seeking additional investment and need extra capital for growth. They are also an important part of the UK’s capital markets more broadly.

The UK has the second largest pool of pension capital in the world, but only 4% of it is allocated to UK assets. UK defined contribution pension scheme assets are set to grow from around £500 billion in 2021 to £1 trillion by 2030, an increase of 100% over nine years, and that growth will accelerate faster beyond that date. The key issue I wish to focus on is how we are to regulate, manage and enable the future form of that pool of capital, and the appropriate oversight of regulators or Government—if any—of the way it is managed.

As I think all Members want, the Government have stressed the growth imperative and its prioritisation, but under-investment in the UK economy will be a significant dampener on growth. Over the past 25 years, allocation to UK equities by UK pension funds has fallen from more than 50% to 4.4%. Since the global financial crisis, the UK has under-invested, both in absolute terms and compared with our G7 peers. Our investment-to-GDP ratio is around 17% to 18%, compared with our peers’ 20% to 25%. That investment gap accounts for around £100 billion.

The Government have introduced meaningful reforms. The closure of defined benefit schemes has resulted in large amounts of capital being moved from equities to bonds. Although that was a rational response to match the profile of obligations of those schemes, it is questionable whether it is optimal for the wider economy. That eagerness to match payouts to known obligations of a defined population has perhaps encouraged a lack of ambition in investment in the wider economy.

What has happened progressively with DC scheme regulation is passive tracking rather than active investment. We have prioritised the minimisation of costs over returns. That has incentivised more and more funds to invest in cheap asset classes, almost alternating their investments, with fixed income, property and indexed funds being used. That is very frustrating, because over the past decade we reached consensus on auto-enrolment, and there was an emphasis on saying, “Oh, we mustn’t have any fat-cat fund managers taking too-big fees”. There was an anxiety about that, which drove an oversimplification of automated fund management. It allowed everyone to say, “The fees are very low”, but we did not have the right focus on performance and whether we were investing in the right things in the economy. It is obviously cheapest for a fund to go to passive, as it does not require active management and the skills that come with it.

There have been previous fundamental reforms, such as the removal of dividend tax credits. Before 1997, when a UK company paid a dividend, it was accompanied by a tax credit, and pension funds could reclaim that credit in cash from His Majesty’s Revenue and Customs. That meant that pension funds effectively received dividends gross of tax, boosting their investment returns. That reduced the effective yield on UK equities held by pension funds by around 20%, which was then the tax credit rate. There have been changes, with ISAs introduced in 1999 and self-invested personal pensions being widened in 2006, but this has removed the focus on UK investment.

[Kit Malthouse (North West Hampshire) (Con)]

My right hon. Friend makes an interesting point about the change from defined benefit to defined contribution and the impact of the taxation changes that brought that about. Would he care to comment on whether he sees that as part of an unwitting repricing of the return on risk, which has impacted not only on pension funds, but more widely? He said that pension fund investment in the market is down, but retail investment in the market overall is also down very significantly. It feels like the British people as a whole have lost their appetite for risk, and that might be because the return on risk is now too highly taxed.

[John Glen]

Perhaps unsurprisingly, my right hon. Friend anticipates an argument that I am going to move on to about the wider culture of awareness of where investments are happening in our pensions, how important that is, and how we need to be cognisant of the gap that exists.

Stamp Duty Land Tax

Debate between Kit Malthouse and John Glen

Tuesday 28th October 2025 Commons Chamber

[Kit Malthouse]

I understand the hon. Gentleman’s hope for the next generation, and I completely agree with him. As somebody with three children, I hope they get the same housing opportunities and economic opportunities as I did. Sadly, given how the housing market has gone and is going, it does not look as if that will be the case, but he neatly makes the point that I made in opening my speech. To get young people on the housing ladder, a subsidy scheme would see us come full circle. Instead, we should think again about how we can have a deregulated free market that functions for them and allows the houses to be built that can accommodate them. Taking tax off young people and then giving it back in the form of housing subsidy is nonsensical.

To return to my point on the supply chain, thousands of small builders around the country are desperate for this kind of work and are seeing the housing market stagnating and their work reducing. Worse than that, in areas of high property value, those who do have capital decide, instead of moving, to build down, up or out. We therefore get densification, particularly in areas such as central London, which often causes significant problems.

Moving on, this tax does not work very well for Government either. First, as Members will know, it is pro-cyclical and crashes when the Government need it most. During the 2007-08 crash, stamp duty receipts fell by 60%. We saw a surge in stamp duty receipts during the window a year or so ago, but since then, they have been falling significantly. The Chancellor, who is facing significant fiscal problems, will see that fall even further, so the tax does not work for Government on that basis.

Secondly, stamp duty is a bad tax because of its salience. Economists have this idea that taxes have a salience, which is how much people notice they are being taken. VAT has low salience, because we do not really notice it. It is in the prices that we pay. Income tax and pay-as-you-earn have low salience. Stamp duty is enormously noticeable at a moment when people are making a huge decision about their lives. They are trying to progress their families and wham, here come the Government saying, “We are going to have a slice of your wealth.”

[John Glen (Salisbury) (Con)]

My right hon. Friend is making a brilliant speech. On salience, does he acknowledge that stamp duty has had a particularly pronounced effect in the capital, particularly for those who come to this country to invest here and create jobs? One of the prime reasons we have seen such a significant number—perhaps 16,000 people—leave this country is the incidence of that tax in the capital.

[Kit Malthouse]

My right hon. Friend is completely right, and he makes a powerful point. Anybody, whether overseas or here, who comes anywhere in the country, but particularly to London and the south-east, and wants to make a significant purchase is immediately presented with a massive bill that cannot be borrowed. It comes out of any equity that they may have spare lying around or that they may have saved up for years to build towards their housing decision. For the Government to show up and take it at that moment of significance in anybody’s life is extremely damaging. It is the same when the Government show up on the death of a relative and say, “We will take our slice.” Such taxes have enormous salience. As a result, stamp duty and inheritance tax are easily the two most unpopular taxes in the country.

Infected Blood Compensation Scheme

Debate between Kit Malthouse and John Glen

Tuesday 21st May 2024 Commons Chamber

[John Glen]

The hon. Lady talks about a public advocate. I am not in a position to respond to that today, but it is clearly one option that is available and I think will be part of the wider response to the report. To be clear, the interim payments of £210,000 to the infected alive which I announced today will be paid within 90 days, starting in the summer. The full payments will begin by the end of the year. I am constrained somewhat because we are setting up an arm’s length body. There is an interim chief executive and I think there will be 20 people employed in that organisation by the end of next week. I cannot account for the processes and the way it will be established, and therefore how quickly, but everything I have said to David Foley, the interim chief executive, is designed to impress on him the need for speed to expedite as many of these claims as quickly as possible in full.

[Kit Malthouse (North West Hampshire) (Con)]

I commend the Minister for his statement. I know from our conversations how seriously he takes his moral duty on this issue. However, I also know from the work done at the Cabinet Office in the summer of 2022 in getting the first interim payments out that one of the most fraught areas of consideration will be wider eligibility, and that is not just a function of complexity but a function of capacity. The Minister mentioned that the arm's length body would have 20 employees in the next couple of weeks, but can he reassure the House that, if Sir Robert Francis comes back in a few months and says, “In order to make quick decisions, I need more capacity and therefore more people”, there will be no quibbling on adequate resource in that organisation to fulfil the Minister’s rightly identified priority of getting the money out as quickly as possible to as many people as possible?

[John Glen]

I thank my right hon. Friend for what he did when he was in office to bring forward interim payments and to make progress. As for the business case for the arm's length body and the plans for the number of employees needed, I expect Sir Robert and the interim chief executive to be iteratively working up plans to expedite this as quickly as possible, and to assert what resources they need for it to be delivered as quickly as possible. I will do everything I can to prioritise swift delivery in the decisions that I make.

Oral Answers to Questions

Debate between Kit Malthouse and John Glen

Tuesday 7th February 2023 Commons Chamber

[John Glen]

The Chancellor is not doing that. There is a clear process in place, and we continue constructive dialogue with all professions in dispute with the Government and with their employers. This is obviously a challenging circumstance and we recognise how difficult it is.

[Kit Malthouse (North West Hampshire) (Con)]

When the Chancellor acceded to the Treasury throne, he appointed a panel of four advisers drawn from the City. Has the panel met, has he added anybody from small business or industry, and where can we find the minutes, please?

Charter for Budget Responsibility

Debate between Kit Malthouse and John Glen

Monday 6th February 2023 Commons Chamber

[John Glen]

It is a privilege to close this debate on behalf of the Government. I thank those who contributed to the debate, including the distinguished Chair of the Select Committee, who highlighted some of the issues and presumptions of Government policy. I cannot comment on what will happen with fuel duty, as that will be the Chancellor’s decision. I thank the right hon. Member for Dundee East (Stewart Hosie) for his contribution, in which he seemed to suggest more targets and a poverty of ambition on behalf of the Government, and I can assure him that that is not the case.

I would like to respond to my right hon. Friend the Member for North West Hampshire (Kit Malthouse), who made a number of observations about the independence of the OBR; its certification and validation role; and the iterative process and whether that compromised the apparent independence of the Treasury. He described economics as not just an art or a science but even psychology. I can confirm that the OBR’s remit is unchanged: it is the Government’s official forecaster. But—as he notes and I am pleased to confirm—the Treasury maintains considerable analytical capability to support the policy advice to Ministers, and it does a very good job of it too. There is a clear separation between the OBR and policymaking, but it is a matter of securing credibility for those policies, and I think he would agree with me that that is a very important point.

[Kit Malthouse]

I guess the issue is: whose forecasts are they? If the OBR produces forecasts and Treasury officials say, “Well, Chancellor, we have looked over the forecasts and we think they are right,” that is qualitatively different, in the public’s mind, to the Treasury producing a forecast and the OBR saying to the public, “Well, we have looked over them and we think they are right.” While it does say that the Treasury reserves the right to disagree with the OBR, the nature of the iterative process presumably means that will never happen, because they agree before anything is published.

[John Glen]

What we can agree is that the budget responsibility committee has discretion over all judgments underpinning its forecasts. Of course, there is obviously a range of views—my right hon. Friend the Member for Wokingham (John Redwood) is always clear in his disagreements with what the OBR may or may not forecast—but what we are saying is that there is validity in and a need for an official forecast, and that is what we have.

With respect to the shadow Chief Secretary, the right hon. Member for Wolverhampton South East (Mr McFadden), before he gets a little too complacent he should be wary of the £90 billion of uncosted net spending commitments that his party has made since the turn of the year. I think the OBR would be very interested in what we would find there.

The charter represents our bedrock to prosperity. It will get debt falling but invest in the future. It will rebuild our fiscal buffers, bolster our economic fundamentals and deliver for the whole country. A vote for this charter is a vote for sustainable public finances, and that is why I commend the motion to the House.

Question put and agreed to.

Resolved,

That the Charter for Budget Responsibility: Autumn 2022 update, which was laid before this House on 26 January, be approved.

Business of the House (8 fEBRUARY)

Ordered,

That at the sitting on Wednesday 8 February, notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on

(1) the Motion in the name of Secretary Suella Braverman relating to Police Grant Report not later than three hours after the commencement of proceedings on that Motion, and

(2) the Motions in the name of Secretary Michael Gove relating to Local Government Finance not later than three hours after the commencement of proceedings on the first such Motion or six hours after the commencement of proceedings relating to Police Grant Report, whichever is the later; proceedings on those Motions may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Penny Mordaunt.)