Mark Garnier

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.