HL Deb 23 April 1991 vol 528 cc132-4

2.45 p.m.

Lord Ezra asked Her Majesty's Government:

What progress has been made in widening share ownership, excluding privatisation issues.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, the latest Treasury/Stock Exchange survey shows that in 1991 20 per cent. of the adult population own shares, excluding privatisation shares, compared with 7 per cent. in 1979.

Lord Ezra

My Lords, despite those figures, is the Minister aware that the personal sector is a net seller of equities to the tune of £3 billion per annum? Will he accept that that trend is due to the high cost of dealing for private investors and the lack of effective fiscal incentive? Should that trend continue, is it government policy that the financial institutions should end up in virtually total ownership of British industry?

Lord Henley

My Lords, as I said, 20 per cent. of the population now own shares, excluding privatisation shares, and if we include them that figure rises to 25 per cent. The figure has steadily grown in virtually every year since 1979. I accept that a large proportion is still held by the institutions but that is no bad thing. Institutions in themselves are not ogres. In effect, that reflects the dramatic growth in, for example, occupational pension provision as more and more people become entitled to occupational pensions or have taken out personal pensions, and obviously a growth in funds that those institutions now hold.

Lord Boyd-Carpenter

My Lords, does my noble friend accept that employee shareholdings are particularly valuable from the broadest national point of view? Are the Government considering giving fiscal encouragement to their increase?

Lord Henley

My Lords, my noble friend will know that we welcome all employee profit-sharing schemes or employee save-as-you-earn related share option schemes. He will be aware that they have grown. I believe that by March 1990 some 1,800 such schemes had been approved, with a total of 2.25 million employees benefiting from shares worth an initial value of some £6.5 billion.

Lord Grimond

My Lords, are the Government aware that, although it is perfectly true that they have given considerable encouragement to employee ownership schemes, there is some evidence that they seem to be wearying of well doing, and at the moment there are no proposals to carry that excellent process further? There are still many obstacles. Indeed the cost of dealing has been mentioned as being one of them. Apart from that, there are other fiscal obstacles to the spread of ownership which could be removed. Can the Government give us some assurance that amendments to the Finance Bill which are intended to achieve that object will be favourably considered?

Lord Henley

My Lords, there have been complaints that some of the statutory schemes are too complex. But firms can select the schemes which are best suited to their own needs. Her Majesty's Government would like to encourage such schemes and certainly want to see them grow. I mention yet again for the record that some 1,800 schemes had been approved by March 1990.

Lord Monson

My Lords, does the Minister agree that the greatest obstacles to wider share ownership are, first, the much higher minimum commissions which have prevailed since the Big Bang almost five years ago and, secondly, the very wide spread between bid and offer prices faced by relatively small investors a spread that can be 10 times greater than that enjoyed by institutional investors dealing in very large bargains?

Lord Henley

My Lords, I accept that there might be a problem. There are also the problems of lack of awareness, lack of interest and lack of knowledge of the stock market. Privatisations have had a very great success in increasing the public's awareness and therefore increasing the number of other shares in which people have taken some interest.

Lord Peston

My Lords, it is not in the least surprising that the costs of putting through a share transaction hardly vary with the size of the transaction. Therefore the difference between bid and offer for a small trader will clearly be much larger than for a large trader.

However, do I recall correctly that the noble Lord's right honourable friend the Chancellor of the Exchequer had something to say on this subject in the Budget; namely, that he proposed to try to make it easier for the small trader on these matters? Have the Government any view as to why it should be so much more difficult for someone to trade in stocks and shares than in almost any other goods or services in the economy? It seems a strange state of affairs. In particular are the Government making any progress on what the Chancellor seemed to suggest?

Lord Henley

My Lords, I cannot take the noble Lord much further than to refer to what my right honourable friend said at the time of the Budget. He mentioned share shops and the increased advantages to the general public in dealing in shares by such means. He went on to say in his Budget Statement: I am today inviting proposals from the private sector for arrangements to distribute shares directly to the public through high street retail networks".—[Official Report, Commons, 19/3/91; col. 178.]

Lord Glenamara

My Lords, is the noble Lord forgetting that before privatisation 100 per cent. of the population were shareholders?

Lord Henley

My Lords, I do not accept that. I repeat to the noble Lord that in 1979 only about 7 per cent. of the population owned shares and none of the population owned privatisation shares.

Lord Williams of Elvel

My Lords, while there are substantial fiscal incentives for personal equity plans, those fiscal incentives are not available for employee stock ownership plans? Have the Government any proposals to even out this playing field?

Lord Henley

My Lords, I do not accept that there is an uneven playing field. There are fiscal incentives, as the noble Lord rightly says, for PEPs. However, while I boasted earlier about the Government's record in widening share ownership, we should also like to see a greater depth in that share ownership. We see the fiscal incentives in PEPs as one way of encouraging that.

Lord John-Mackie

My Lords, are there any figures to show how many employees of a firm have shares in that firm?

Lord Henley

My Lords, I have no figures on that. However, I shall find out whether such figures exist and write to the noble Lord.

The Viscount of Falkland

My Lords, is the noble Lord correct in stating that the Government's privatisation programme has been a help in this area? Surely a number of new investors who have made a relatively easy profit find that when faced with the realities of everyday trading on the Stock Exchange it is a very different matter to work profitably in the stock market.

Lord Henley

My Lords, the noble Lord will find that some 14 per cent. of the public own privatisation shares. Five per cent. own only privatisation shares. A great many people who have been introduced to share owning by privatisation shares have gone on to own other shares because of the greater familiarisation with the stock market and its workings.

Lord Ezra

My Lords, does the noble Lord agree with a view formed from personal experience that private shareholders tend to be more loyal to their company than institution shareholders? Therefore, it is unfortunate that the concentration of shareholding is moving away from those who are loyal to those who tend on the whole, regrettably, to take a short-term benefit.

Lord Henley

My Lords, I have already answered the question. I accepted that the proportion of equity held by individuals might be declining. The percentage of individuals owning shares has increased dramatically.