Financial Education in Schools

Jerome Mayhew Excerpts

Wednesday 6th September 2023 Westminster Hall

[Jerome Mayhew (Broadland) (Con)]

I beg to move,

That this House has considered financial education in schools.

It is a great pleasure to serve under your chairship, Dame Angela. Tip O’Neill was famously linked to the phrase “all politics is local”, but I can go one step further and say that this politics is personal, because I grew up with no financial education at all. I was given no education or instruction on how savings work or about interest rates. I was given no education about investment or what an individual savings account was—I had no idea. I did not know what pensions were; I had heard of them, obviously, but I had never been instructed on how they work, how to apply for one, what the options are, whether I should have a workplace pension, what a final salary pension is, what a defined-contribution pension is or what the differences between them might be—I had no idea.

I had no idea what mortgages were. I had heard of them, obviously, and I knew that people had them, but I did not know how to apply for them, the differences between an interest-only mortgage and a repayment mortgage, or what an endowment mortgage was—I had no idea. I had no idea about debt and debt management; I knew that I spent my money too quickly, but I did not know anything about debt management. If I got to a stage where I was in financial stress, as many people do during their lives, I had no training at all on how to manage that effectively.

I have children now—a 20-year-old who is just going off to university, a 17-year-old, and a 14-year-old. During the recess, I asked them whether they had received any financial education or training. Getting on for 40 years since my defective education, they have not received any education about financial matters at all, yet we know that that is a crucial part of our lives. A huge amount of research has been done by academics and the financial sector on how important financial training is for people’s ability to lead normal, high-quality, independent lives. I will go through a little of that research to give Members a flavour of it.

Cambridge University and the Money Advice Service did some work in 2013 in which they established that most money habits are embedded by the age of seven. They found that it was difficult to reverse those early-learned approaches later in life. If somebody does not have them by the age of seven, when they are at primary school, they are already on the back foot.

This year, Santander surveyed a large sample of adults in the UK, and 70% reported that better financial education would have improved their ability to manage their finances during the cost of living crisis. This is a real and present issue. Some 68% of adults think that financial education should be part of the primary school curriculum, so it has broad support from the general population. This is a real problem. I am not alone and I was not unique. I am the general public; I have not received financial education. That has a huge effect on people’s lives right now.

Back in 2021, GoHenry, Censuswide and Development Economics demonstrated at the very least a correlation between the financial education someone receives as a child and their later earning capability. Some 46% of those earning less than £15,000 had received financial education; among those earning between £55,000 and £65,000 a year, 77% had received financial education. It has also been demonstrated that if somebody receives financial education as a child, they save more into their pension pot. On average, people who receive financial education as a child save 44% more each month into their pension than those who did not. That is a startling statistic, and it is not just pensions, but savings more generally: of those who received financial education, more than 50% had saved more than £5,000 for a rainy day; of those with no financial education, only a third had saved that much.

I am sure Members are asking themselves whether that is correlation or causation. If it is causation the debate should finish now because the case has been made overwhelmingly for effective financial education in the school curriculum, but let us consider whether it is correlation. What we are really saying is that there is a middle-class secret to financial education and that those who receive such education at home get a huge leg-up throughout the rest of their lives. Even if it is correlation, it is the job of state education, universally applied, to overcome the deficit and level up so that we can close the middle-class leg-up and bring everyone up to the same standard.

I accept that the formal education system is not about proselytising—it is perhaps not appropriate for a teacher to say, “You must have a pension”—but it is about providing knowledge and information so that students can go on to make good decisions themselves. It is not the role of a teacher to say, “You have to do it.” I accept that. But where the outcome of a good decision is so profound both for the individual and for society it begs the question: how much of that knowledge should the education system focus on providing? A good decision in this area has a huge impact on society.

Let us look at the economy. In 2022, the pension wealth of this country was £5.4 trillion—in private pensions, not state pensions. Some 42% of all household wealth is contained in the pension system, 69% of which is invested in UK assets. If we made a small change in the amount of money going through the pension system, that would have an enormous impact on the level of productive investment in the United Kingdom economy.

Then we have the impact on mental health. We know that 11.5 million Britons have less than £100 in savings and that financial stress has a huge impact on mental health. I have had periods when I have been very worried about money. The worry is so profound that you cannot think of anything else. It dominates your life. We know that treatment for an individual mental health episode costs the state between £600 and £800.

[Mr Gregory Campbell (East Londonderry) (DUP)]

I congratulate the hon. Gentleman on what would at any time in our recent history have been a timely debate. On the point about those 11.5 million people, most of them in the lower socioeconomic groups, does he agree that it is all the more important that teachers and those involved at the outset of people’s careers try to inculcate in younger people the need for and benefit of saving even small amounts initially, which build up to a long-term benefit in later years?

[Jerome Mayhew]

You are absolutely right. I will come on to the benefits of compound interest, which is part of the answer.

[Dame Angela Eagle (in the Chair)]

Order. I do not want to intervene too much, but if you say “you”, you are referring to me. As I am sure we all we know, he is “the hon. Gentleman”.

[Jerome Mayhew]

Of course he is. I am sorry for that slip.

Barclays, in its 2014 research, found that 17.5 million hours of productive work was lost because of financial stress. It came up with the figure of £120 billion of value lost to the economy because of financial stress in that year.

Then there is the impact on the individual. Last year, Standard Life did some research on the impact of compound interest on pensions. It created a worked example showing that if a 27-year-old got a relatively modest entry-level job paying £23,000 a year and contributed the minimum to their pension—3%—and their employer contributed the minimum that they could, which is 5%, they would, at the retirement age of 68, have a pension pot of £312,266, a very considerable sum to support them in their later years. However, if that person started saving into their pension just five years earlier, aged 22, their pot would be £424,618 at the age of 68. That is £112,000 bigger—an increase of 36%. The difference is profound not just for the person’s chances in later life, but for the state, because there are knock-on consequences for the cost of social care as we age as a society.

I come back to the point that I recognise that it is not the job of the state to proselytise or the job of educational establishments to tell young people that they have to have a pension, for example, but where the impact of failing to give people really good information on which they can take their own decisions is so profound, for the individual, for the economy and for society as a whole, surely there is a level of focus that the state should provide in giving detailed information repeatedly to young people during the educational process. The need is enormous and, in my submission, we do not go nearly far enough.

The answer, one would think, is that young people should be given financial education as part of the curriculum. “Job done,” we thought back in 2014 when the coalition Government did exactly that. For secondary education in England, it was made a statutory part of the curriculum. The devolved nations go further: they have it as part of the primary as well as the secondary curriculum. Yet the all-party parliamentary group on financial education for young people, which I am lucky enough to chair, undertook some research and reported earlier this year that, despite the legal requirement for financial education to be part of the curriculum, 56% of teachers in England did not know that it was part of the curriculum. That begs the question: how were they teaching it if they did not even know that it was part of the curriculum?

The Money and Pensions Service looked at the same issue but from the other end of the telescope. It asked children, “Do you remember ever having received any financial education?” We can forgive them a bit of amnesia, but only 38% of children recalled any. That means that 62% had no recollection of ever having received any financial education at all.

What has gone wrong? Why are we in this state despite the fact that financial education is part of the national curriculum? The first answer is that it is very easy to ignore. We know that there is a lack of awareness, because the researchers told us that the majority of teachers are not aware that financial education is part of the curriculum and they are meant to be teaching it. We know that it is not inspected by Ofsted. We know that it is something that is added in, perhaps as an afterthought, and not part of the core curriculum. There is an easy solution to that, and one of my requests today is that the Department for Education lead, or at the very least support, a determined campaign to raise awareness among educational establishments of the importance of financial education and the fact that it is indeed a statutory part of the national curriculum.

The second reason why financial education has fallen down is that teaching it is hard. Many teachers, just like me, did not receive any financial education themselves, and the survey evidence supports the fact that they do not feel confident in teaching a subject about which they know so little: 55% of teachers find it challenging. They went into further detail and said that there are time pressures and a lack of training—again, it is about their own financial confidence—and, of course, there are many, many competing priorities in the education system. We need to provide teachers with improved access to the training they need. Perhaps there is a role for teacher training colleges. Teachers are coming into the profession with no focus on financial education at all and a lack of confidence in their own abilities in this area. Could teacher training colleges have a focus on financial education as part of the curriculum?

There is a lack of time in schools. Can we integrate the teaching of financial education better into the other subjects that are already part of the curriculum, as part of applied learning? Again, I know that it is not the role of the Department for Education to dictate lesson plans to the 22,000-odd schools in this country, but it is the Department’s role to facilitate.

Using financial topics as the context of learning can increase engagement with mathematics. That is not my assertion; research has demonstrated it. In 2019, the OECD undertook a pilot scheme and found that where this subject was integrated, students’ performance on exam questions increased by 20%. That is very significant. Of the teachers who participated in the pilot, 81% said that it improved pupils’ understanding of financial matters, which we would expect, but about 50% said that their students demonstrated improved attitudes to maths as well. That is quite startling. It improves their ability to answer questions, and it improves their approach to the harder core subject of mathematics. Does the Minister agree with that analysis, and if so, what work is being done to develop this approach more widely within the maths curriculum?

Another piece of feedback, perhaps predictably, was that there is a lack of resources. There are loads of training aids out there. Every established and aspiring bank and financial institution is desperate for their environmental, social and governance departments to provide financial education to young people. Martin Lewis produced a textbook four or five years ago, which I know the Minister was involved in helping to create—more power to your elbow.

[Dame Angela Eagle (in the Chair)]

My elbow?

[Jerome Mayhew]

His elbow—I am so sorry. I am normally quite good at this!

I recognise that the textbook needs to be updated, but an improved textbook from Martin Lewis or the wider financial services sector could be taught for 30 minutes every fortnight for a couple of years during secondary education. Is that the sort of thing that the Minister and his Department could support? If so, what form would that support take?

One alternative to supporting the many multi-academy trusts out there, including in my constituency, with their internal teaching of financial education is to facilitate access for external financial education trainers to come into schools. Many of them are very keen to do so. Could we allow or even require schools that do not teach financial education internally to give access to accredited financial education training providers to do the job for them?

Let us bring that all together: we have learned that habits form early—by the age of seven. Should we not have financial education as part of the primary curriculum? Should we not learn from the good examples of what goes on in Wales, Northern Ireland and Scotland, where financial literacy is measurably higher than in England? It is not by much, but it is measurably higher, and perhaps that is because they have financial education as part of the curriculum in primary schools. Should we not follow them?

Will the Minister actively support a campaign to increase awareness of financial education as part of the national curriculum for secondary education in England? Will he support the development of improved teaching assets, either within cross-departmental curricula at the moment, or through increased access for external providers? Will he encourage, perhaps in the first instance, voluntary access to external education providers? If that does not go far enough, will he mandate access if schools are not providing financial education themselves, as they are statutorily required to do?

I started this speech saying that politics is personal, and I believe that this is one of those small areas where a tiny change, relatively speaking, could make a profound difference to the lives of the people and economy of this country. We spend so much time here dealing with fluff—the latest 15-minute scandal, the eye-catching initiative. There are relatively few small, but very significant, tweaks that we can make to policy in this country that could have such a profound effect as tweaking the provision of effective financial education for young people. I know this is not an easy win, but it is an achievable win, and I encourage the Minister to grasp it.

[Dame Angela Eagle (in the Chair)]

I intend to call the Front Benchers from 10.30 am. If hon. Members who are not on the Front Benches bear that in mind, there will not be a need for a time limit.

--- Later in debate ---

[Jerome Mayhew]

I have a number of thank yous, alongside those to hon. Members for their excellent contributions. I thank Young Enterprise—which provides the secretariat for the APPG on financial education for young people—and the Centre for Social Justice, the Money and Pensions Service and the Institute and Faculty of Actuaries for their briefings. The latter highlighted a point that has not been brought out in the debate so far: the transfer of risk from organisations to individuals, particularly in pensions, which has accelerated as we have moved towards defined contribution pensions and the ability to sell out our pensions at an earlier stage.

Financial education is a hugely important subject and it has been treated as such by all contributors. My hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) brought to the debate her experience as a teacher. The hon. Member for Feltham and Heston (Seema Malhotra) talked about the skills for life, and the need to use financial education as a tool for social mobility and to close the prosperity gap. My hon. Friend the Member for Warrington South (Andy Carter) mentioned important lessons on macroeconomics and tax, which may veer into politics in schools.

The hon. Member for Motherwell and Wishaw (Marion Fellows) shared her experience as an FE lecturer and spoke about the poverty premium. That is a really important point; there is a poverty premium in this country, and financial education is the kind of subject that can help to address it. I congratulate the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) on her new position, and thank her for bringing her perspective.

Finally, I thank the Minister for engaging with me on this subject. There is so much agreement on the state of the problem, but in my submission there is more work to be done on the strength of the answer. I recognise the work of the Money and Pensions Service, and I hear with interest the plans for the Oak National Academy and the new work it has planned for next year. I look forward to many further discussions as we work together to improve in this policy area.

Question put and agreed to.

Resolved,

That this House has considered financial education in schools.