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Individual Savings Accounts

Volume 723: debated on Monday 20 December 2010


Asked By

To ask Her Majesty’s Government why shares listed on the Alternative Investment Market are excluded from eligibility from individual savings accounts.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as owning an ISA and a number of shares in AIM-quoted companies.

My Lords, individual savings accounts are the Government’s main non-pensions savings incentive and are held by 20 million adults. The Government believe that ISAs should be mainstream savings products and therefore do not intend to allow shares on the Alternative Investment Market, which can be riskier and less liquid, to be qualifying investments for ISAs. Companies listed on AIM may already benefit from other incentive schemes, such as the enterprise investment scheme and venture capital trusts.

My Lords, I thank my noble friend for his Answer but I find it very thin and disappointing. The arguments for allowing AIM shares to be eligible for ISAs are, frankly, overwhelming. They are supported by the Stock Exchange and the Quoted Companies Alliance. Eligibility would widen the shareholder base, improve liquidity and facilitate fundraising. It would also be tax neutral from the Treasury’s point of view. What is the logic in allowing AIM shares to be eligible for SIPPs but not for ISAs? I thought that the policy of this coalition Government was to encourage personal choice and indeed investment in our smaller growing companies.

My Lords, I am sorry to disappoint my noble friend, who has been assiduous over the months in asking questions about AIM shares and ISAs. Within the range of products available, there are distinct differences between the aims of ISAs and those of other savings channels. When the ISA was introduced in 1999—and it has been an enormously successful investment channel—it was intended to be a mainstream product with easy access and liquidity. A line therefore has to be drawn between the sort of investments that are thought suitable to qualify and those that are not. AIM shares were kept out in 1999 and I believe that it is still appropriate, taking into account principally the nature of the product and the ease of access to liquidity investment, that they should be. SIPPs, which are a more sophisticated, tailored pension product with a different time horizon—for example, they do not require 30-day withdrawal—can rightly benefit from having a much wider range of investments held within them.

My Lords, I declare an interest as chairman of an AIM-listed company that may not benefit from the method that the noble Lord, Lord Lee, recommends. I recognise that the response that the Minister has given is based on the best possible advice available to him, but I am not sure that he is right in the general sense. Would he be prepared to go back to his advisers and ask them at least to reconsider his answer, as the noble Lord, Lord Lee, makes a reasonable case?

I am sorry to shut the door on this one, but the Government have considered this issue since we came into office, just as no doubt the previous Government had plenty of advice since they introduced ISAs in 1999. We have looked at it again and I am sorry to say to both the noble Lord, Lord Barnett, and my noble friend Lord Lee that I cannot hold out any other prospect. The AIM market continues to thrive. At the moment, almost 1,200 companies are quoted on it, 974 of which are UK companies, and the market is quoted at £67.6 billion, so it continues to be in good health in what I recognise are challenging investment conditions.

My Lords, I, too, declare an interest as a director of an AIM-listed company. What tests are not applied to AIM-listed companies that are applied to full exchange-listed companies? Does the Minister accept that the boards of AIM-listed companies feel that they are subject—indeed, they are subject—to the same accounting rigour as FTSE-listed companies and that it is therefore now completely illogical to maintain this distinction?

My Lords, without wishing at all to cast aspersions on the quality of AIM companies, it is nevertheless the fact that you can come to the AIM market without a trading record and with no minimum number of shares in public hands. Also, the UK Listing Authority does not usually vet the prospectus of AIM-listed companies and there is no minimum capitalisation requirement. Therefore, there are different requirements and obligations on AIM companies from those that apply to listed companies.

My Lords, will the Minister recognise that, with his reply, he has disappointed a wide range of opinion in the House, including— to complete the position—Her Majesty’s Official Opposition? He will know that earlier this year we were looking positively towards this issue. We would have thought that the present Government would adopt something more than just a straightforward negative stance on a situation where it is quite clear that, with SIPPs being able to invest in these companies, there is a good case that ISA investors should be able to as well.

I did not want to be controversial in the week running up to the holidays. I pointed out that ISAs were introduced by the last Government and that they have been a successful channel for savings. I gently point out, however, that the last Government had from 1999 to May 2010 if they had wanted to make AIM shares eligible for ISAs, but they chose—rightly, I think—not to do so. We have not taken a decade to mull over this, but we have thought about it carefully in the last few months.