The best of the British: The time has come to start investing in our country
It’s time to cool off. A major upgrade that would breathe new life and boost our tax-friendly investment portfolios, whilst giving a huge boost to UK businesses across the country.
A mutual benefit, something essential. A standard-bearer for post-Brexit Britain, a country in which we collectively do more than we make great, a result, I think, of our lack of chutzpah (the Americans have done away with all that) and our innate inclination towards conservatism.
No, I’m not talking about a “renewal” of the government, although I would understand if some of you might think I’m thinking along those lines (Labour has yet to win the next general election).
I am referring to the urgent need to revitalize the investment habit in this country, undermined by years of government and regulatory meddling. A goal that can be achieved by restarting the tax-free Individual Savings Account and turning it into an asset to our great nation, while maintaining its 100% tax-free status (both capital gains and income). cent intact.
Ladies and gentlemen, the time has come: bring on the patriotic Great Brit Isa and let’s start investing in OUR country. An additional annual Isa allowance (£5,000 on top of the existing £20,000) that can only be used to invest in UK-listed companies. An investment vehicle that I’m sure could bring the “big guys” back to Britain and help stimulate the economy by encouraging people like you and me to buy British (shares) rather than go abroad for investment opportunities.
That is, having shares in companies such as AstraZeneca, BAE Systems, BP, Diageo, GlaxoSmithKline, Rolls-Royce and Unilever, the crème de la creme of UK plc. And then raise an occasional glass of Johnnie Walker’s Black Label (owned by Diageo) and toast them as they increase in value or give us a healthy dividend.
Yes, the British version of the Magnificent Seven itself, perhaps not as sexy in technology and artificial intelligence as the seven on the other side of the pond (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla). But companies that are world leaders in their respective fields and deserve our investment support. His moment could come this Wednesday when Chancellor of the Exchequer, Jeremy Hunt, delivers the latest Spring Budget of this Conservative Government.
In recent days, most of the Budget rumors emanating from the London offices of Her Majesty’s Treasury on Horse Guards Road have taken on a cautionary note: ‘no’ to income tax cuts (boo); ‘no’ to a reduction in stamp duty on home purchases (boo); and a resounding ‘no’ to a more lenient inheritance tax regime (boo). If these rumors are real – rather than a sly hiss from the Treasury to dampen our expectations of an end to austerity so that Hunt can look saintly on Wednesday – it will mean that little cheering news will come our way. Perhaps another one per cent cut to National Insurance and an extension of the fuel tax freeze.
And perhaps, an announcement confirming the launch of the Great British Isa. Hopefully. Certainly, Treasury officials seem enthusiastic about the idea, as do many business leaders, investment houses and former politicians like Baroness Altmann. The former Pensions Minister believes a Big British Isa would boost British businesses, revive UK financial markets and benefit both the economy and society. A big drawback could be Prime Minister Rishi Sunak, who apparently takes the view that the Government should not tell investors where they should invest their hard-earned money.
If true, this would be a great shame and would represent a betrayal of the foundation on which Isas is built. Although the Isas were born almost 25 years ago (April 1999), they were for all intents and purposes a remodeling of the previous Personal Asset Plan (Pep). Introduced in 1986 by the then Chancellor Nigel Lawson, the aim of the Pep was simple: to encourage investment in the UK stock market by UK investors, not foreign stock markets.
Pep continued to play its role in the ‘City’ revolution in the 1980s (the Big Bang), which turned London into one of the world’s leading financial centres, attracting foreign capital in droves. Investment, fueled by an ongoing privatization program (for better or worse), suddenly became de rigueur.
On Friday, Baroness Altmann told me: ‘It is very important to ensure that any investment tax relief is used to support Britain and not to bolster foreign businesses and markets. The UK stock market has devalued as our once strong investor base has shunned domestic assets in favor of low-cost, internationally invested funds that have very little in the UK.’
He added: “Supporting Britain through Isas will help revive the UK stock market, deliver better returns for investors and also help boost the economy.” A win-win situation. If people want to invest abroad, that’s fine, but why should they receive subsidies from taxpayers? Buying British should be encouraged as we have many large companies languishing with low market ratings relative to the rest of the world, when clearly they should not be.’
Toast: Investors could raise a glass of Johnnie Walker if owner Diageo’s shares rise
Beautiful words that I trust Mr Hunt will take on board ahead of Wednesday’s Budget.
There are many reasons why the Chancellor should launch the Great Britain Isa.
For starters, the Isa scheme has been a long-standing success story, fueling many people’s desire to invest for their retirement.
Although governments have tinkered with it over the years – for example, coming out with versions to help people buy their own homes or to use as quasi-pension funds – most people understand how it works. In simple terms, you can invest £20,000 in any tax year and any gains (capital or income return) are tax-free. While they are not as attractive as pensions because contributions do not benefit from tax relief, they are easier to understand and are not mired in the complicated rules in which pensions are intertwined.
The latest data from His Majesty’s Revenue & Customs indicates that around £742bn is held by adults on Isas, £460bn of which is in share-based plans.
A big British Isa would build on this success.
It’s also time for Isa to become more attractive. The £20,000 annual allowance has been frozen since April 2017 and is set to increase. The big British Isa would do this, topping it up to £25,000.
But the main reason we should have the British Isa is because it would provide a huge boost to the UK stock market (and boy does it need one).
As a result of a toxic combination of City complacency, crass City regulations that deter many institutional investors (insurance companies and pension funds) from investing in UK shares, and widespread disinterest from private investors, the market UK stock market is going nowhere. companies, as they are bought by private capital at rock-bottom prices, or decide to list in other places, such as the United States, to arouse greater investor interest in their shares.
Investment house Premier Miton says Britain’s big Isa could raise more than £200bn over five years for British companies – and drive up the companies’ share prices in response to investor demand.
Of course, not everyone is so enthusiastic about the Great British Isa. Some claim it would increase the complexity of Isas, while others say it would increase risks for investors. Some have even described it as a gimmick.
Although I respect their views, I believe they are wrong. The Great British Isa is not the answer to all the UK stock market’s woes, but it would provide a boost to both UK investors and businesses. And if countries like France, Italy and Japan already have similar plans to encourage investment in their local companies, why shouldn’t we?
Everyone wins, or as Baroness Altmann would say: “Everyone wins.”
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