My Lords, despite my disappointment over the last three amendments, I congratulate the Government on having brought forward this amendment. It follows the Government’s sensible decision earlier in the passage of the Bill to give the Financial Policy Committee an explicit objective of growth and employment. This amendment achieves a sensible and pragmatic solution, takes account of the needs of the economy and the priorities of business and the financial sector, and at the same time allows regulators rightly to focus on their important consumer protection and financial stability objectives.
There is a small sting in the tail for the Minister. Given that this is a new requirement for the regulators, I encourage him to ask the FCA to come forward with its vision of how it will interpret its regard to economic growth. The regulator is already up and running in shadow form, with designated leadership teams already starting to set out publicly their approach. It is clearly important that the will of the Government and indeed of Parliament is incorporated in that regulatory planning. I applaud the Government for bringing forward this amendment but would argue that in order to achieve their desired goal of supporting growth, work needs to begin now to set out how the regulators will interpret and implement this new requirement.
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As a second point, will the Minister to explain a little about the use of crowd funding? The Prime Minister has said that he wants the UK to become “a start-up nation”. As he puts it, he wants to,
“set business free to drive our economy forward, not burden business”.
This amendment shows that the Government are, quite rightly, leaving no stone unturned in their search for growth in our economy.
Last week, we saw the re-election of Barack Obama to the White House in the United States. In the US, the Jumpstart Our Business Startups Act, best known as the JOBS Act 2012, is one of the main pillars of the White House’s growth strategy. The JOBS Act creates a new regulatory start-up regime for crowd funding—meaning in this case investment, mainly over the internet, in start-ups and small businesses—that is exempt from mainstream US securities laws. It allows ordinary retail investors to invest up to a maximum of 10% of net income through crowd funding sites at low cost,
creating a whole nation of potential angel investors. It would be a start-up nation, which may be just what we need in the UK.
It is estimated that if Americans invest just 1% of their savings via crowd funding this policy change will deliver more than $300 billion to small US businesses, which will stimulate entrepreneurship, innovation and job creation. Imagine the benefits to the UK if we could bring about a similar shift. Reverting slightly to our discussions earlier this evening, however, I am concerned that our financial promotion regime remains too paternalistic and does not yet sufficiently reflect the opportunities and challenges presented by social media, which are rapidly developing. Is there any problem with ordinary retail investors being able to invest small amounts of money in businesses of their choice, as risks are limited where the amounts are capped? Should we not make investors free to make their own choices? At present, the regime is too costly and too restrictive.
As was said earlier, I am aware that the Government are looking at the possible reform of the financial promotion rules as part of their Red Tape Challenge, and I welcome that initiative. I would favour reform of the rules to allow retail investors to invest, say, up to a defined cap of £500 per annum. Once the system has been shown to work, consideration could then be given to increasing that sum. When he comes to finalise a reply on this debate, will my noble friend tell the House whether the Government are looking at the US JOBS Act; and what, following the passage of the Bill, they will do to explore whether our own financial promotion rules can be reformed to allow US-style crowd funding investment to take place in the UK and give breadth, depth and life to the Government’s amendment?