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Finance (No. 2) Bill

I want to support amendment No. 12 and make a couple of observations from my experience about the investor base in VCTs. Increasing the holding period for an investor from three years to five years will unquestionably reduce the attractiveness of the investment to private investors. Investors in VCTs are, by definition, individuals who have reached a certain stage of maturity in their investment life. I hesitate to say that the majority of those individuals are pensioners, but judging by those who turn up at the annual general meeting of my VCT, the majority who take an active interest are pensioners, although that may be because they have readily available leisure time in which to attend AGMs. The manager of the VCT group with which I am involved has analysed the average age, investment expectation and holding period of investors in VCTs. People invest in VCTs for a number of different reasons: some are interested in capital appreciation in a tax-free environment; some are interested in income in a tax-free environment; and some are interested in a combination of the two. However, the notion that they would put at risk the tax relief available on their initial subscription if they were to seek to sell their holding within five years will undoubtedly lead a number of investors to move away from VCTs. Those investors will not necessarily include larger investors, who have further opportunities for portfolio diversification and may invest primarily for the tax reliefs, but a lot of small investors want exposure to smaller companies and feel that they are doing what the Government want by helping to finance young, energetic companies run by entrepreneurial people, which contributes to the growth and revival of the British economy. Indeed, some people choose to invest in VCTs for altruistic reasons. Increasing the holding period is the most significant measure among those proposed by the Government to change the VCTs regime, and it will restrict the attractions to investors and therefore limit the Government’s policy objectives.