Recommendation 8

HM Government Acknowledged

HM Treasury agrees with the Committee that the Investing in Women Code and the HM Treasury Women in Finance Charter have an essential role in improving diversity in venture capital allocations. The HM Treasury Women in Finance Charter aims to foster productivity, competitiveness, and innovation in the financial services sector. Over 400 firms, of various sizes and employing over one million people across the financial services sector, have signed up to the Charter’s commitments. In order to track progress, HM Treasury publishes the Women in Finance Charter Annual Review report which assesses whether the Women in Finance Charter signatories are meeting their voluntary self-declared targets to increase gender diversity at senior levels. The Annual Reviews have shown that the Charter has stimulated positive change in the sector. Female representation in senior management at signatory firms have risen steadily. Separately, the Investing in Women Code was founded in 2019 as a landmark government-led initiative in response to the Rose Review’s findings that a lack of finance continues to be one of the most significant barriers to women seeking to start and scale a business. Starting with 12 founding signatories in 2019, the Investing in Women Code now has over 200 organisations. The proportion of UK venture capital deals involving a signatory has risen from 24% in 2020 to 39% in 2022. The government is committed to ensuring that the UK is the best place in the world to start a business, regardless of gender. The number of deals made by venture capital firms with all-female teams rose from 6% in 2021 to 9% in 2022 in the broader market. We recognise that we must keep pushing forward to bridge the finance gap for female entrepreneurs. At the point of application, the British Business Bank already ask fund managers whether they are signatories of the Investing in Women Code. If they are not, then the British Business Bank requests that these applicants either join the Code or provide a reason why they do not wish to become a signatory. In practice, therefore, a ‘comply or explain’ approach is already in place for applicants seeking investment from the British Business Bank. However, the government remains to be convinced regarding the Committee’s recommendation to adopt a ‘comply or explain’ approach to EIS, SEIS and VCT eligibility. The schemes offer tax relief to individuals who invest in higher-risk, early-stage companies. Both the HM Treasury Women in Finance Charter and Investing in Women Code are targeted towards the wider financial services industry and their recommendations are not suitable for the individual investors who claim the tax relief and may not be applicable to the start-ups and SMEs that receive the funding if they operate in industries outside of financial services. Introducing a ‘comply or explain’ policy on EIS, SEIS and VCT eligibility would not achieve the desired results and would place an undue burden on the early-stage companies who benefit from these schemes.