It’s not up to retail investors to revive the London Stock Market

The British Isa has once again reared its head. We report this week that Standard Life chair Nicholas Lyons has argued that the tax-free wrapper on a stocks and shares Isa should be restricted to investments in UK assets. “Do we really want to be lowering the cost of capital for American companies by giving a tax incentive for investors in Isas?”

he said. “If you want to invest in US stocks, go right ahead, pay the capital gains and take the capital losses.” There is something persuasive about this argument.

But would it even achieve its expressed objective? Brits contribute in the order of £30bn a year to stocks and shares Isas, much of which doesn’t go into UK equities. But that’s the equivalent of barely more than 10 per cent of the market cap of just one London constituent – HSBC.

It’s hardly going to move the dial, in terms of UK cost of capital, if you get a few extra billion into London stocks. There’s also the small matter of what Isas are actually for. In an interview with City AM yesterday, Brian Byrnes, Director of Personal Finance at Moneybox, says: “These wrappers were created to help individual people save and invest more.

And stocks and shares Isas have been a great success over the last 25 years. Play Video “The reason that they’ve been so successful is they’re incredibly simple to talk about. They give you tax-free investing, but we need to keep them as simple as possible.

What we have to stop doing is trying to solve capital markets problems with these retail investing wrappers.” Byrnes puts it well. One thing people detest – whether it’s average joe investors or global institutions – is regulatory tinkering.

Unless it’s to make things easier, even minor changes can quickly become burdensome. They are to be resisted, particularly when they are being designed to support some kind of wider policy goal, rather than to directly support the people to whom the rules apply. This is especially true with retail products like Isas, many of whose users may ha