Retail Investment

Mark Garnier Excerpts

Tuesday 22nd April 2025 Westminster Hall

[Mark Garnier (Wyre Forest) (Con)]

It is a pleasure to serve under your leadership, Mrs Hobhouse, and I congratulate you on your first Westminster Hall debate as a member of the Panel of Chairs—you have handled it masterfully. I also congratulate the hon. Member for Buckingham and Bletchley (Callum Anderson) on securing this debate. He previously worked for the London stock exchange; he may be interested to know that I started my 27-year investment career as a dealer on the floor of the exchange in what we like to refer to as “the olden days”. There will be an almost unanimous outbreak of agreement across the Chamber. The hon. Member made some very important points. There is one point on which I slightly disagree, but he could basically have written my speech.

One of the things that the hon. Member mentioned is the idea of acclimatising people to the idea of investment. When I was first elected as an MP, a number of us spearheaded a campaign to get investing and financial education into the national curriculum. At the time, it was clear that too many young people were leaving school without any understanding of the basics of personal finance, let alone the potential of sensible long-term investment. Whether it is saving for a rainy day or putting away money to buy a home, making the right investment choices is absolutely vital. Retail investment should absolutely form a cornerstone of any investment strategy, but not enough people are aware of the long-term benefits of stocks and shares investment versus cash deposits.

Polling conducted by Opinium last year highlighted that fewer than half of respondents felt confident about opening a stocks and shares ISA. I have always felt that the lack of knowledge starts with the lack of the right education. Better financial education was recommended by the Parliamentary Commission on Banking Standards when I was on it over a decade ago—a long time before many Members here were elected. In 2014, I thought we had finally settled the debate about financial education in the curriculum. The national curriculum was updated to see financial education become a statutory part of it for the first time. Although it is still on the national curriculum, it has become clear that there is not enough focus on getting schools to teach it consistently. Academy schools that do not follow the curriculum have no requirement to teach financial education if they choose not to.

I thank my hon. Friend the Member for Mid Leicestershire (Mr Bedford) for recently taking up the baton. His private Member’s Bill would make financial education mandatory for all students aged five to 18, which could resolve some of the issues we are debating here.

Of course, things have moved on since my original campaign. It is clear that there is a real appetite for young people to become investors. Although the UK continues to lag behind countries like the United States when it comes to active retail investment, since the pandemic interest in investing has substantially risen among younger age groups, particularly Gen Z. That has partly been driven by cryptoasset investment, which, if I am being entirely honest, is something I find a bit odd.

Younger investors aged between 18 and 24 are more likely than older investors to invest in cryptoassets. A survey carried out by the Financial Conduct Authority showed that 46% of young investors report holding cryptocurrencies compared with just 7% of investors aged 55 to 65. They are influenced by trends they see on social media such as TikTok, with cryptocurrency influencers bragging about fabulous returns—of course, there are fabulous losses as well. The bedrock of financial education is the old adage, “If it is too good to be true, then it probably is.” I am not against investment in cryptoassets, but as any good investor knows they should be seen as part of a balanced portfolio. Any young people with an appetite for taking investment risks should know that they could be better served with investments into the stock market rather than in the volatility of cryptotrading.

I hope the Minister will outline how the Government intend to get our schools teaching financial education. Will she confirm whether the Government support the principles set out in the Financial Education Bill, which has had cross-party support?

Online trading platforms have now made it easier than ever to become an investor. Despite the easy accessibility, the FCA’s 2022 Financial Lives survey showed that while more than 15 million adults in the UK have investable assets exceeding £10,000, more than half hold at least 75% of those assets in cash. There are very good reasons to hold cash, particularly as people get towards retirement age or want to divest to buy a property or a car. It is for that reason that we believe it is important to retain the individual choice of how to use a tax-free ISA and keep its current allowance unchanged. There is another important point about cash ISAs. They provide substantial capital for building societies, which use the capital to lend on in the form of mortgages. If we reduce the amount of money that can go into cash ISA, we potentially reduce the amount of money available to the mortgage market. We need to think in a balanced way.

There are other ways to focus the minds of people, helping them to make better investment decisions, while retaining the flexibility to spend their ISA in their and their families’ best interests. The Investment Association has called for cash products to come with risk warnings, in the same way as all financial products. That could be as simple as comparing the quoted savings rates against inflation—a point the hon. Member for Buckingham and Bletchley made. In that way, an investor would know that their investment could in fact be losing money in real terms versus inflation. Just as we rightly warn investors that markets can go down as well as up, we should also be honest that holding cash, while it may feel safe, risks steadily losing value through inflation.

The Investment Association has also suggested that renaming the stocks and shares ISA the investment ISA could be a way of changing the mindset of investors. I would welcome the Minister’s thoughts on how we can highlight to investors the pitfalls of holding long-term cash. A successful hearts and minds campaign could, according to estimates from Aberdeen, unlock £3.5 trillion of capital for markets, if UK adults held as much wealth in investments as their US peers. That clearly raises another question: how do we encourage retail investment into UK stocks and shares?

If we are serious about encouraging long-term investment and wider public participation in the UK’s capital markets, we must take a hard look at stamp duty on shares—again, the hon. Member for Buckingham and Bletchley made that point. At 50 basis points, the UK has one of the highest rates of this kind of transaction tax in the developed world. We should not be taxing investment in British businesses; we should be incentivising it.

Stamp duty creates a direct disincentive to buy UK shares and disproportionately impacts those investing smaller amounts, for whom every pound counts. It also reduces the attractiveness of London as a global listing destination and adds friction to the secondary market, which ultimately feeds back into the cost of capital for UK firms. In short, stamp duty is a tax on growth, on participation and on financial inclusion. We need to ask ourselves whether that levy, introduced in a very different era, still serves a useful purpose, or whether reform could help us to unlock a stronger culture of long-term share ownership in this country. I ask the Minister to consider whether the tax could be looked at again, particularly for retail investors.

As an idea, perhaps we could also look again at how the ISA tax-free allowance could be incentivised to stay in the UK. I recently spoke to a successful investor, someone who makes full use of his £20,000 annual stocks and shares ISA allowance. As one would expect, he is shrewd with his money, putting it where he believes it will deliver the best returns. In recent years, that has meant investing primarily in the American markets, where growth has outpaced much of what has been available here in the UK. What struck me was a comment he made a little later about his gardener, who is on minimum wage. The gardener can only afford to put a tiny amount of money, if anything, each month into a cash ISA; yet through his taxes he is effectively subsidising a tax break that allows his employer to invest tax-free in overseas companies. That does not feel right, and it is another point also made by the hon. Member for Buckingham and Bletchley.

ISAs are a cornerstone of our savings culture, but if they are primarily being used to funnel capital abroad, it is time we asked ourselves whether the current system is doing what we intended it to do. Perhaps it is time to explore how we can better direct ISA investment towards British companies. I am sure the Minister will be addressing that subject in her speech.

I think we are all in wholehearted agreement on the need for more retail investment in the UK. The opportunity for investment into UK companies is substantial if we can get it right. I am sure the Minister will have a plethora of ideas—she is writing them down ferociously as I speak—and we look forward to hearing what she has to say.

--- Later in debate ---

[Emma Reynolds]

Credit unions, mutuals and co-operatives play a hugely important role in our economy and our society. That is why the Government—as my hon. Friend will know, given that she stood on the same Labour manifesto as me—promised in our manifesto to double the size of the mutuals sector, why the Chancellor asked the FCA and the Prudential Regulation Authority to look at the mutuals landscape in the Mansion House speech in November and why we have supported the establishment of the co-operatives and mutuals council—I actually went to the first meeting. As my hon. Friend said, credit unions play an important role in encouraging savings, particularly for those on low incomes. We have also launched a consultation on whether the common bond needs to be more flexible so that more people can benefit from credit unions, and that is also in train.

Coming back to the issue of ISA reform, the hon. Member for St Albans rightly said that there has been some market volatility recently. I will not comment on the day-to-day movement in markets, but I will say—I think she was also making this point—that if people are in a position where they can invest in stocks and shares in our stock market or other forms of investment, they need to take a long-term view of that. Often, that investment gives better returns than just putting something away into a cash account.

Analysis by AJ Bell from February this year suggests that someone who put away £1,000 in an average-performing cash ISA every April since their introduction in 1999 would now hold about £34,000. If their savings had instead kept up with inflation, they would now have £38,000, so that person would have lost out on £4,000. That goes to show how inflation can reduce the value of cash savings over time. In contrast, if that same individual had decided to invest in a stocks and shares ISA, they could now have around £83,000—over twice as much as their cash savings would have been. That demonstrates that if someone has the confidence and the ability—we are not talking about everybody here—to invest for the longer term, they will most likely get a better return. We need to ensure that people have the confidence and ability to engage with investing, and thus to benefit from the financial security and greater returns that investing can often provide.

My hon. Friend the Member for Vale of Glamorgan talked about people on lower incomes. On that, I will take the opportunity to say something about the help to save scheme, which is targeted at working households on low incomes. It offers a 50% Government bonus on savings of up to £50 a month over four years. The Government announced at the autumn Budget last year that the help to save scheme has been extended until April 2027. From 6 April this year, we have extended eligibility for help to save to all universal credit claimants in work as well.

The second issue raised by my hon. Friend the Member for Buckingham and Bletchley was about financial education. In fact, most hon. Members who spoke talked about its importance. One of the major barriers to investing for consumers is a lack of support to make financial decisions. We know that only 8% of adults received regulated financial advice in the 12 months to May 2022, but guidance does not often go far enough to help consumers feel confident to make a decision. We have a big advice/guidance boundary gap. Many of our constituents are therefore not getting the help they need to make their money go further. Some keep a lot of their money in savings, losing out on potential returns, and others do not regularly review their investments, or invest in products that do not meet their risk appetite.

Together with the FCA, the Government are developing a new regime called targeted support, which would allow regulated firms to provide suggestions appropriate to consumers with similar characteristics. For instance, the regime would enable firms to suggest that an individual with substantial savings could consider opening a stocks and shares ISA. It would also enable firms to suggest options for how to generate an income from an individual’s pension pot, appropriate to consumers with similar needs. The FCA will consult on the rules that will underpin targeted support in the first half of this year. Getting those reforms right will help consumers make better-informed decisions, engage in capital markets, and ultimately to be in a position to get better returns on their savings in the longer term.

My hon. Friend the Member for Buckingham and Bletchley reflected on how financial education can help level the playing field for those from less wealthy backgrounds. I really liked how he expressed in his speech the asymmetry between those who already come from a wealthy background, where this might even be discussed at the dinner table, and those in a less privileged position, who are not aware of some of the opportunities. If they are not aware, even if they were given the opportunity they would not have the confidence to take it.

In England, the independent curriculum and assessment review is considering how to ensure that he curriculum is fit for purpose. The shadow Minister, the hon. Member for Wyre Forest, talked about the importance of financial education. I cannot give him any guarantees right now, because as he will know, although we have had the interim report of the curriculum review, we are still working through some of the details. I met the Minister for School Standards to discuss this work and to make sure that my work on financial inclusion and the work of the curriculum review go hand in hand. I cannot give him any guarantees on private Member’s Bills right now, but I can take the question back to the Government Whips, who will tell me where we are. As I understand it, the private Member’s Bill on financial education that he talked about is not due to be introduced until 11 July.

We are working with the Department for Education, and the Department for Education is working across Government on how we can ensure that the curriculum review improves financial education for our young people, which I would like to see. Indeed, it was striking that in the interim review parents and pupils said that finance and budgeting was the top area they would like to see more focus on in schools; that was encouraging.

Thirdly, my hon. Friend the Member for Buckingham and Bletchley asked for action to make it easier for our citizens to engage with our capital markets. The importance of UK capital markets was mentioned by many speakers, but particularly by the hon. Member for St Albans, my hon. Friend the Member for Vale of Glamorgan and the shadow Minister. We want to make UK capital markets as attractive as possible to retail investors. Our capital markets are already among the strongest and deepest globally. I know some concerns have been raised, but more than £25 billion of equity capital was raised in London last year, more than in the next three European exchanges combined. I am keen that we do not talk ourselves down. Of course, we must recognise challenges where they arise, but we must also recognise our strengths. We are the world’s largest international bond market, with more than 16,000 active bonds traded on our markets, representing over £4.1 trillion across 55 currencies.

We want to go further to reinvigorate capital markets to ensure that they support both UK and global growth. We are currently developing a financial services growth and competitiveness strategy, and have identified capital markets, and retail participation within those markets, as a priority growth opportunity in that strategy. That strategy will come later this year, and I am sure the hon. Member for Wyre Forest will quiz me about it in the weeks and months to come.

The Government are focused on making our markets more competitive, including by supporting the FCA’s work to reform the UK’s prospectus regime to give investors access to better quality information to support their decision making, and supporting the FCA’s proposals to cut red tape for corporate bond issuance, which will encourage companies listed on stock exchanges to offer bonds in smaller sizes to improve investment opportunities for retail investors. The Government have also legislated to enable the FCA to reform the UK’s retail disclosure regime to ensure that consumers have access to the most useful information to support their investment decisions. The FCA’s consultation has just closed and the Government look forward to seeing its final rules later this year.

My hon. Friend the Member for Buckingham and Bletchley also raised the work of the industry-led digitisation taskforce, which is looking at how we can improve the system of share ownership in this country and, as part of that work, at how we can remove all paper shares. The taskforce is currently finalising its final report—my hon. Friend will have seen the interim report—and the Government look forward to receiving it, and will respond in due course.

Finally, my hon. Friend the Member for Buckingham and Bletchley called for a fundamental shift in how we think about investing in our country. He is right to say that investing should not be for just the wealthy, or those with expertise; we need to build an investment culture that enables newcomers to invest confidently and grow their financial resilience. I want to deliver that change but I know that the Government, and indeed parliamentarians, cannot deliver that shift on our own. We need to work closely with regulators and industry and, as my hon. Friend suggests, make the case to consumers for investing. I thank my hon. Friend for outlining his proposal for how we could do that.

We are thinking carefully about these matters and look forward to working with my hon. Friend and others across the House to help build the strong investment culture that we want. As part of that work, we are of course looking at international examples; the shadow Minister mentioned the importance of that. Many hon. Members will be familiar with how Americans talk a lot about their 401(k)—or so I am told—and how Australians talk a lot about their supers. A few months ago, I was talking to a financial services senior leader who told me that when she lived in Australia, her cleaner often looked at her super on her phone, and tracked the return on her investment. I would love to see that sort of inclusive, democratic access to investment opportunities in the UK. I am not being patronising—I have a fantastic cleaner too, and I would like to see her in that position. We want to ensure that people across society get these opportunities. We also want people to engage with their pensions more closely, as I have already mentioned in response to my hon. Friend the Member for Vale of Glamorgan.

If I do not get to all the questions raised by the hon. Member for Wyre Forest then I am sure that I can write to him, or we can have a discussion after the debate.

My hon. Friend the Member for Vale of Glamorgan talked about what the Government could do to promote employee share ownership. The previous Government launched a call for evidence on the save as you earn and share incentive plan schemes. The Government will use that call for evidence to consider opportunities to improve those schemes, and I thank my hon. Friend for his interest in that.

The hon. Member for St Albans talked about advertising on social media. She will know that under the Online Safety Act 2023 large internet platforms will be required to put in place systems and controls to avoid fraudulent advertising appearing on those platforms. We also welcome Ofcom’s work to bring forward codes of practice on what actions firms should be considering. However, she is right to raise the issue as a matter of concern; the Government are concerned about it.

I have answered the question from the hon. Member for Wyre Forest about the private Member’s Bill on financial education, but I am sure that he asked me other questions that I have not quite got round to; I beg his forgiveness. I also answered his question on what we can do together to ensure that people know there are risks involved with holding cash above certain levels, and about the erosion of people’s cash savings by inflation, but if he wants to repeat any of the other questions, I am happy to respond.

[Mark Garnier]

I think the Minister has covered most of my questions, but I will review and we can perhaps have a conversation later.

[Emma Reynolds]

Such great cross-party working—do not tell anyone else about it! It is really good to work with the hon. Gentleman. I remember fondly—well, not that fondly—being a shadow Minister and having very good, if different, working relationships with the Ministers who I shadowed. I very much welcome the constructive way in which he has contributed to the debate and I look forward to Thursday, when we will debate the Bank Resolution (Recapitalisation) Bill.

I thank my hon. Friend the Member for Buckingham and Bletchley for securing this debate and I also thank all the hon. Members who spoke. It has been a very constructive and interesting debate, certainly from my perspective, and I thank all hon. Members for their contributions. The Government are determined to make the UK’s retail investing environment more attractive and to boost the UK’s investment culture, and I will reflect carefully on the points raised.