Share Dealing: Investor Protection (Hansard, 5 March 1986)

§ Lord Pender
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Lucas of Chilworth
My Lords, Her Majesty's Government believe in a property-owning democracy in the widest sense. Ownership of shares is an effective mechanism available to spread ownership of economic activities and the rewards of economic success; hence the Government's privatisation programme, and the special measures they have taken, in pursuing it, to favour employees and small investors. The members of the Stock Exchange have a crucial part to play in the process of spreading share ownership.

§ Lord Pender
My Lords, I thank my noble friend the Minister for that reply. Would he consider that there is an urgent need to simplify the mechanism of share transactions in order to dispel the reservations of potential investors? Can the noble Lord state the precise number of individual shareholders in the United Kingdom compared with the total in 1979?

§ Lord Lucas of Chilworth
My Lords, the other place is currently considering legislation, through the Financial Services Bill, and also the Building Societies Bill, both of which are in part designed to strengthen investor protection and knowledge and thereby to 177 reduce one possible cause of hesitation to invest in shares. I think that there is an acknowledgment that members of the Stock Exchange are perceived as unapproachable. I think that is a psychological barrier which needs to be broken down, but the remedy is very much in their own hands. As regards the second part of my noble friend's supplementary question, there are no precise comparative figures available, but we believe that ownership of listed stocks has approximately doubled since 1979.

Lord Bruce of Donington
My Lords, is the noble Lord aware that his honourable friend in another place and his department have supplied an answer to his noble friend, in that the estimated number of shareholders in the United Kingdom is 2,700,000? Is the noble Lord further aware that that number has not been altered perceptibly by the Government's process of privatisation, in that large numbers of people have taken advantage of the bull market and realised a profit, as was indicated in the Economist on 21st February last—and perhaps the noble Lord would look at that issue? If the noble Lord wants to ease the way in which one obtains shares, will he take note of the fact that the easiest way of acquiring shares is to have the money to acquire them, when it becomes quite simple, and that over 60 per cent. of the population do not have the resources to buy shares at this time, because the rich are getting richer and the poor are getting poorer?

§ Lord Lucas of Chilworth
My Lords, the noble Lord, Lord Bruce of Donington, reminds me of what my honourable friend said in another place. I know what my honourable friend said in another place, and the 2 million-plus figure that he mentioned represents 28 per cent. of listed equities directly owned by individuals, which is a reversal of the position that obtained in the 1950s. As regards the owners of shares selling in a bull market, that is exactly what the marketplace is about. I do not know why the noble Lord should mention it in such a condemnatory manner. However, in relation to his last point, I think it is interesting to appreciate that of the 2,130,000 applicants for BT shares there are today 1,650,000 of the original shareholders, and they represent some of the people who are not normally known to be dealing in shares and who have small stakes, which I think knocks on the head the inference contained in the noble Lord's last point.

§ Baroness Fisher of Rednal
My Lords, in such a property-owning democracy would the noble Lord consider the bid from the British Leyland consortium and allow that also to be a participant in the business which it has set up? I refer not only to the management but also to the employees in that organisation.

§ Lord Lucas of Chilworth
My Lords, I think that I have made it quite clear on a number of occasions that the Government welcome the participation of management and workers in all of industry, as they encourage wider share ownership throughout industry.

§ Lord Glenamara
My Lords, if the Government want the wider ownership of shares, does the noble 178 Lord think that the noble Lord, Lord Pender, is on to a very important point? He asked whether the dealing in shares—and perhaps I may add the cost of dealing in shares—should be simplified.

§ Lord Lucas of Chilworth
My Lords, of course my noble friend is concerned in this matter, which is indeed why he put down his Question. I believe that my original Answer, and indeed my answer to my noble friend's supplementary question, explain some of the measures which the Government have taken. To elaborate, perhaps I may add that over the years we have taken a number of very important fiscal measures—for example, the abolition of the investment surcharge in the Finance Act 1984; the continued uplifting of the capital gains tax threshold; the indexation provisions; the business expansion scheme through the Finance Act 1983 and the stamp duty reduction to 1 per cent. All of these measures have made the ownership of shares easier in both a financial and a mechanical manner.

Lord Morris
My Lords, is my noble friend aware that the simplest way to encourage further share ownership is to do everything to foster the correct environment for brokers to open local offices rather than insisting that their clients come to London?

§ Lord Lucas of Chilworth
My Lords, I agree with my noble friend. He will appreciate that a number of members of the Stock Exchange have changed the method by which they sell and deal. There is a growth in out-of-London membership and an increase in the number of what I might call share shops in departmental stores being opened by some of the leading stockbroking companies. One anticipates that the practice will gather momentum

§ Lord Kinnaird
My Lords, is my noble friend aware that it may not be wise to make share dealing too simple? Anyone who has been in the Stock Exchange—I was in it for 25 years—will know full well that it is far easier to lose money than to make it.

§ Lord Lucas of Chilworth
My Lords, I have a lot of sympathy for my noble friend. I think that the provisions in the financial services legislation on advising potential buyers will undoubtedly underline the losses as well as the profits that may accrue through dealing in shares.

§ Lord Mackie of Benshie
My Lords, is it not extraordinary that in spite of all the steps that the Minister has so triumphantly delineated the country continues to decline in the export of manufactured goods?

§ Lord Lucas of Chilworth
My Lords, the country is not declining in the export of manufactured goods. Total exports of manufactured goods in 1984–85 are at a record high and they are growing month by month.