Stock Market: First-time Investors

Lord Lee of Trafford Excerpts

Monday 3rd February 2025 Lords Chamber

Asked by

[Lord Lee of Trafford]

To ask His Majesty’s Government what plans they have to encourage first-time investors in the stock market.

[Lord Lee of Trafford (LD)]

My Lords, it is a privilege to open this short debate on encouraging first-time investors. I have been a private investor for 65 years, investing solely in United Kingdom companies. Through books, articles and platforms, I like to think I have been something of an evangelist for the private investor. I am also privileged to be the patron of ShareSoc, the premier body representing private shareholders.

We all know the problem. Research by Abrdn, the old Aberdeen fund manager, has indicated that, whereas one-third of Americans’ personal wealth is in equities and mutual funds, the comparable figure here in the United Kingdom is only 8%. Yet there is no shortage of money here: 22 million people have £120 billion in premium bonds, and research by Barclays, using FCA data, estimates that, after contingencies, there is no less than £430 billion in cash held by 13 million individuals.

So we have to change the climate and the culture of investing and encourage new investors, break down barriers and be much more creative. The consumer duty Act of 2023 made it very unattractive for traditional stockbrokers to take on new clients, so I welcome the Chancellor’s determination to move the dial, telling regulatory bodies to deliver

“a mindset shift on regulation”.

Indeed, I have to say that, had we been able to buy shares in the regulators, they would have been great growth investments.

I have seven specific suggestions. The first deals with young people. It is absolutely ridiculous that grandparents are not able to take out junior ISAs for their grandchildren. At present that has to be done through parents, and that restriction should be abolished immediately; I see no merit in it.

The second is on financial education in schools, which has been and is abysmal. The Government still own something like 8% of shares in NatWest. When the previous Government were in power, I and a number of Members of your Lordships’ House wrote to Jeremy Hunt with the idea of gifting £5,000-worth of NatWest shares owned by the state to willing state secondary schools, to be held for the long term. The idea was that this £5,000 would deliver a £350-a-year dividend and the pupils themselves—this was the whole point—would decide how to spend that dividend. That would be transformative and of modest cost, and for the first time it would make youngsters aware of what a bank, a dividend and the stock market were. There are only approximately 4,000 state secondary schools in the country, so the cost would be a relatively small £20 million.

Unfortunately, of course, the general election intervened, but Rachel Reeves could still deliver this, because the Government still have 8% of NatWest, as I previously indicated. Parallel to this, I would like to encourage regional public companies to gift shares or cash to their local schools—schools from which they will recruit and where perhaps their employees’ children go to school—to enable those schools to become shareholders in those local companies, thus building bridges and raising awareness.

So far, I have discussed it with only one public company, the flavours and fragrances company, Treatt, based in Bury St Edmunds, where I am a shareholder. It gives something like £100,000 a year to charities. It is considering this approach and applauds the concept. It is happy to be quoted on this. I hope that the Quoted Companies Alliance, the trade body for smaller regional public companies, will support and promote this idea and take it forward.

Next, I come to television. There has been a near failure—indeed, a total failure—of television over the years to cover the stock market or investment opportunities. We have so many exciting UK companies to invest in. On television, we have any number of gambling advertisements and advertisements for medallions of dubious value, but virtually nothing on the stock market. I think television producers and similar are fearful of the regulations. I urge the Government to call in television and media chiefs and challenge them to deliver programmes to encourage private investors and, in the nicest way, to tell the regulators to back off.

Fifthly, we should aim to encourage and increase employee share ownership. The Government should take up the sensible and positive recommendations of ProShare, and encourage companies to disclose the level of employee share ownership in their annual reports.

Sixthly, in parallel to notifying premium bond prize-winners, as currently, that they have won a prize and that they have the choice of taking cash or buying more bonds—unless they have the maximum number—I suggest that we could, and should, inform them of the possible routes to stock market investment, giving information on possible investment platforms and such things as ISAs.

Finally, I come to ISAs themselves, which have been such a wonderful tax-free wrapper over the years. They have been a huge success, and I am certainly a grateful beneficiary. However—and I know this will be controversial—I would suggest that all future ISAs should be restricted to only UK-quoted shares. If people want to invest overseas, that is fine, but why should we give them tax relief to enable them to do so? To be clear, I am not suggesting that existing ISA holders should have to divest their overseas holdings; that would be retrospectively unfair and administratively messy. Perhaps, it is also time to look at cash ISAs. Is there a case for making them less attractive, taxation-wise, than stocks and shares ISAs?

These are very much personal ideas of mine, and, I repeat: I am sure that some of them are controversial. I very much look forward to hearing contributions on boosting share ownership from other colleagues in the short debate this evening.

In the nicest way, I do not expect the Minister to be able to answer in detail a number of these specific points. However, she is a Leeds lass and a very respected former Leeds City Council leader. Therefore, she will certainly know the Chancellor, who of course is a Leeds Member of Parliament, personally. All I would ask of her is that she endeavours to draw the attention of the Chancellor to the suggestions that I am making and that other colleagues will be making during this debate. It would be very disappointing if our ideas were lost in a Treasury in-tray or, even worse, perhaps, in a Treasury wastepaper basket.

--- Later in debate ---

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

Does the noble Lord wish to respond?

[Lord Lee of Trafford (LD)]

Given the lateness of the hour and the time pressure, there is nothing that I would like to contribute. Obviously, I could deal with a number of the points that have been raised, but I do not think that there is time to do that now.