FEAR OF FINANCE

Last week it was the unit trust movement advancing its cause as a cheap investment vehicle for long-term savings, and lobbying the Government for tax reforms to allow unit trusts to compete with pension funds on equal terms. This week the advocates of direct investment have had their say, promoting their own wares and asking for tax concessions to give a level playing field.

The committee set up last autumn under the chairmanship of Sir Mark Weinberg to look into measures to promote wider share ownership reported this week. It found that the number of private shareholders has fallen from a peak of 11 million in 1990 to around 9.5 million now, but still many more than before the privatisation process began in the early 1980s. But small shareholders accounted for an ever-smaller proportion of the total volume of shares.

The committee is asking for the same tax favours for shares as other investments enjoy. It emphasised the need for simplicity and a campaign to educate young people in particular in the ways of personal finance.

Even more important, however, is the need for brokers to make share dealing less daunting and, above all, cheaper for ordinary folk, including the 3 million investors who have savings in excess of pounds 5,000 yet hold no shares.

The Share Centre, one of the new breed of share dealing operations established since Big Bang to compete with the traditional stockbrokers, has taken the lead in trying to encourage more investors by cutting the minimum purchase commission on its Economy Share Account from pounds 7.50 to just pounds 2.50 for each purchase.

Investors still have to pay stamp duty of 0.5 per cent, helping to raise pounds 1.2bn a year for the Treasury, but, says the Share Centre's chief executive Gavin Oldham, the Government could abolish stamp duty on deals of less than pounds 10,000 at a cost of only pounds 50m a year, reducing the current yield of the duty by less than 5 per cent, and challenging major dealers not to split up their own deals to evade duty. Crest, the new trading and settlement system which will gradually replace the existing Talisman system, could also do its share by confining its central charges of pounds 2-pounds 3 a transaction to deals worth over pounds 100,000.

Crest has made a great song and dance this week to try and reassure the small investor that nothing will change, immediately at least. But as the stock market moves steadily to electronic share transfers and shortens settlement periods it is inevitable that small investors with a cheque book and share certificates will feel at a disadvantage.

It seems probable that they will be pushed, or rather priced, into opening nominee accounts, although nominee accounts will increasingly alienate the small investors by denying them the right to attend company meetings or receive annual reports or shareholder perks. That could be overcome only if the Stock Exchange establishment insists on changing the rules so that small investors have the same rights as big investors.

The Stock Exchange could do even more, says the Share Centre, by allowing all private shareholders access to rights issues, and changing the rules to encourage companies launching new issues on the Stock Exchange to offer the shares to the public rather than placing them all with institutions in order to reduce costs.

Whether any of this can overcome the small investor's suspicion that the odds are loaded against him by the big institutions is another matter.