Money Advice Service

Lord Bishop of St Albans Excerpts

Thursday 12th March 2015 Lords Chamber

[The Lord Bishop of St Albans]

My Lords, I am grateful to the noble Lord, Lord Stevenson, for initiating this timely and important debate on a subject which is affecting all parts of society, sometimes with devastating social effects. While the Farnish review has yet to be published, there is no doubt that attitudes to finance and debt in the UK are a matter of real concern. It is not always easy to get precise data on what exactly is going on, but there is evidence that levels of personal debt are continuing to rise, with reports this January of new consumer debt climbing to heights that have not been reached for nearly seven years. The £1.25 billion net increase in unsecured borrowing seen in November 2014 was the third month out of five when consumers had taken on more than £1 billion of new debt.

Over recent decades, many people have come to presume that it is normal to live with debt, in some cases with considerable levels of debt. Anecdotal reports from Citizens Advice centres and other organisations working in debt advice describe the terrible problems caused for some individuals and their families. This is a profound societal change, which has developed over a number of years under different Governments and could lead us into very serious problems in the future if the trends cannot be reversed.

The problems of indebtedness are clearly too deeply rooted to be swept away by the very welcome improvements in the UK’s economy over recent months. However, it is important to keep a close eye on these trends and the extent of the rise in personal debt, not just because of those individuals I have already mentioned but because it could possibly threaten financial stability in our economy. I wonder whether the Minister could tell us what assessment Her Majesty’s Government have made of the rising levels of personal debt and, in particular, whether they have any views about the level at which such personal debt could threaten the economy? At what point does that become something of significance for everyone?

If we are to achieve sustained attitudinal change towards personal debt we need to work in the coalitions that my noble colleagues have already spoken about, made up of government, the third sector and civil society institutions. A key part of this partnership must be to improve the availability, quality and consistency of debt advice in this country. For this reason, the Church of England is keen to support the work of the Money Advice Service and other debt organisations. We are concerned that the Money Advice Service should target its work and its resources be deployed as effectively as possible. With the demand for debt advice expected to double over the next five years, the challenges facing the sector are huge.

Locally, many churches are actively involved in helping people affected by debt. There are 270 debt centres affiliated to Christians Against Poverty; I have recently been closely in touch with one of them in Christ Church in Ware, in Hertfordshire. About 140 church-based centres are supported by Community Money Advice. Another church in my diocese, in Bedford, runs Money Advice at St Andrew’s, a free, confidential service financed by church members and used by a large number of people. Many other churches provide informal help to those who are struggling with their finances.

Nationally, the Archbishop’s task group is promoting the use of responsible credit and saving to ensure that there are real alternatives to payday loans and other forms of high-cost credit that push many people into problem debt. We are also very pleased to be working with the Money Advice Trust, to which my noble friend Lady Coussins has just referred, the charity that runs National Debtline, to develop a debt awareness and signposting resource. This will better enable congregation members and volunteers to raise awareness of free debt advice and help those in financial difficulty get the advice and support that they need.

As well as helping those struggling under the burden of debt, we need to work to move our society away from the current situation in which indebtedness is increasingly seen as the norm. We need to find ways of changing attitudes to credit and saving for the long term. I therefore want to focus my remaining remarks on financial education, which is equally important but still an underfunded element of the Money Advice Service’s financial capability strategy. I welcome the strategy’s emphasis on improving the financial capability of children and young people, and agree with its recommendation that the Government should consider the case for adding financial education to the primary school curriculum in England.

Young people today grow up in an increasingly complex world, requiring them to make difficult choices that will often have a significant impact on their future. They live in a culture that is heavily influenced by consumerism, and even very young children are being targeted by commercial companies because of their “pester power” and very real spending power. Online shopping, mobile phone contracts, tuition fees and the accessibility of credit cards mean that many young people are making financial decisions and are exposed to debt at a very young age. Millions of children are directly affected by overindebtedness as their parents struggle to keep up with their bills and credit commitments. Teaching our young people financial responsibility is vital.

At the same time, evidence from national and international surveys shows that the younger generation has lower levels of financial capability than their parents. If we are to enable future generations of young people to manage their finances well, children must be given high-quality financial education in school so that they can make informed choices and take responsibility for their actions. Sadly, that imperative is not yet adequately reflected in our education system. Although 94% of teachers and 79% of parents think that it is important for young children to learn about money and financial matters at school, only about one-third of primary schools teach financial education, and only 5% of parents think that young people are leaving school with the financial skills and knowledge that they need to manage their finances.

That is why the Church of England is working with the Personal Finance Education Group, now part of Young Enterprise, to establish an effective national financial education programme for primary schools centred on school-based savings clubs. Building on the evidence set out in the financial capability strategy and elsewhere, we want to give children the opportunity to learn about money at a much younger age, focusing on developing good attitudes and habits towards money, including practical experience of managing their own money. We want to involve parents and the wider community in children’s financial education, so that positive messages about money are being reinforced from a range of different sources. We are very grateful to this Government for funding the pilot of the LifeSavers programme, starting in Bradford, Nottinghamshire and south-east London, and we hope that it will be the beginning of a stronger and long-term commitment to financial education in this country.

Finally, one practical thing that we can do is to encourage take-up of credit unions. I am glad that the St Albans credit union, of which I am a member, not only helps many adults who need advice and help but pays regular visits to one of our local schools to encourage saving. I hope that we can find ways to build on such partnerships to increase financial literacy and responsibility. To that end, the review by the Money Advice Service is vital to ensure that we are doing all that we can to improve the situation for both this generation and those to come.