Listed Investment Companies (Classification etc) Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

2nd reading
Friday 15th November 2024 Lords Chamber

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, the hour is late and the sun is setting. The umpire wishes to remove the bails and draw the stumps and then we can all go home, so I will be very brief indeed. I do not want the House to think that such brevity is in any way lessening my support for the powerful case that the noble Baroness just made, and indeed the case made last year by my noble friend Lady Altmann.

The United Kingdom has a very proud record of pioneering innovations in the financial services industry. The investment trust movement, which has been around for over 100 years, is one such. However, only Britain could find itself in a situation where regulations being introduced as part of its membership of a political economic bloc—the PRIIPs regulations—were going to hamstring one of the most important sectors of its financial markets. Even more importantly, having decided to leave that bloc, and having done so on 31 January 2020, nearly five years later we have still not managed to find a way to answer the questions that the noble Baroness has just pointed out in her very powerful speech.

I do not put this down to a lack of political will: I am sure that the Minister would like to sort it out and that her predecessor, my noble friend Lady Penn, equally would have wished to. I put it down to a sort of extraordinary level of institutional inertia, linked to a huge risk aversion, combined at the same time with a very slow process of policy formation—what one might describe as analogue thinking in a digital age.

I am sure that we will hear from the Minister about the forbearance regulation that the FCA brought in. The House needs to understand that that does not go anywhere towards solving the major problem, which is the launch of new trusts. Nobody will take the time and trouble, or go through the expense, of launching a new investment trust if the forbearance regulations might be brought to an end at any time. It is just not getting to the heart of the problem, as the noble Baroness, Lady Bowles, has pointed out.

What is the answer? What can I offer to the Minister as a way forward? Well, she should get hold of today’s copy of the Financial Times, in which the main headline reads as follows:

“Reeves demands City watchdogs allow greater risk in push to promote growth”.


I suggest to my friend the Minister that, when this debate comes to an end, she goes back to her office, picks up the phone, talks to the Chancellor’s office and says to the Chancellor, “Have I got news for you—I have something you can do straight away that will promote growth in a very important part of the UK financial markets”.

Listed Investment Companies (Classification etc) Bill [HL]

Lord Hodgson of Astley Abbotts Excerpts

3rd reading
Friday 13th December 2024 Lords Chamber

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I wish to make a few thanks and remarks, but first I must declare my interest as a director of the London Stock Exchange and as a long-term investor in listed investment companies. I thank everyone involved in the drafting and discussions of this Bill, including the Minister—the noble Lord, Lord Livermore—who has been supportive on the issue, all noble Lords who have supported the Bill during its progress, the Public Bill Office, Nigel Farr of HSF, the AIC, many industry specialists who have contributed to the drafting, and consumer organisations such as Which? and ShareSoc which support the Bill and the wider cost disclosure campaign. I also thank journalists who have put the issue in the public eye. The noble Baroness, Lady Altmann, who is unable to be in her place today as she is recovering from a shoulder operation, trod a similar path with her Bill in the previous Session and has stood with me on this issue through many a debate and meeting. I also thank in advance the honourable Member for Hazel Grove, Lisa Smart, who is sponsoring this Bill in the other place.

Yesterday was the deadline for submission to the Treasury’s call for evidence on growth and competitiveness in financial services. I cannot help but say that it seems peculiar to be hunting for changes to promote growth when there is low-hanging fruit available to end the market disruption for listed investment companies that has resulted in more than £20 billion and counting of lost investment in the UK economy over the past two years. HMT or the FCA could lean on platforms and the Investment Association to get fully behind the changes for listed investment companies made by the legislative actions and forbearance in September. Instead, it seems they await the slow turning of the handle of consultation on, rule-making for and embedding the entire PRIIP legislation, which will take well into 2027 with tens of billions more pounds of lost investment in UK infrastructure.

By way of help, the chair of the FCA did finally confirm to the Lords Financial Services Regulation Committee on 13 November that, for listed investment companies,

“ongoing charges are not deducted from the share price”,

and that,

“as a fact, there is not a deduction from the share price”.

Yet platforms such as Hargreaves Lansdown still insist that a misleading disclosure about cost deductions from the investor must be entered or they will block retail purchase. I am told that they claim that they are urged to do so by the Investment Association, which is the association for the dominant open-ended fund sector, not for listed investment companies. The open sector is a sector that may relish scooping up some of the lost equity investment for itself but, make no mistake, it cannot replace the lost billions in social and environmental infrastructure. While this regrettable situation continues, I believe this Bill still has an important role to play.

[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.