Financial Education

Robin Walker Excerpts

Thursday 15th December 2011 Commons Chamber

[Mr Robin Walker (Worcester) (Con)]

I join colleagues in congratulating my hon. Friends the Members for North Swindon (Justin Tomlinson) and for Brigg and Goole (Andrew Percy), and all hon. Friends and colleagues who have contributed to this excellent report. I am pleased to hear the Minister’s clear statement that the report will feed into the curriculum review. Like many Members, I have come across some terrible cases of constituents who have found themselves in dire financial trouble as a result of not having the tools to understand financial matters. It is tragic that such situations arise as often as they do, and with the growing complexity of the financial marketplace, combined with the growing ease with which people can access it, the case for the Government addressing financial education is stronger than ever.

It is welcome that the coalition Government are in the process of undertaking a curriculum review. I support the clarity of vision with which Ministers have carried through this and the many other vital reforms of our education system. I understand the Secretary of State’s desire to simplify and slim down the core curriculum to focus on the essential subjects that will enable us to compete in the 21st century, and to ensure that it is uncluttered, with a strong emphasis on numeracy and literacy. However, like many other colleagues, I believe that personal financial education is one of the elements that are vital to our ability to compete in this century and protect the life chances of our constituents.

As my hon. Friend the Member for Wyre Forest (Mark Garnier) neatly set out, financial education also has enormous relevance to the national scene today. Today’s debate and the excellent report of the all-party group on financial education for young people provide valuable tools for dealing with that problem, both nationally and locally, in all our constituencies. We need financial education that gives people a clear understanding of budgeting, as my hon. Friend the Member for High Peak (Andrew Bingham) pointed out, and of the costs and uses of debt.

We should not see financial education as an entirely negative problem; it should also provide an opportunity. More financially educated students today will be better placed to be the next generation of business people and entrepreneurs tomorrow. Businesses are crying out for greater financial skills, and by providing better financial education we can meet that need and provide those skills. A higher degree of financial literacy among the public will also mean people are better able to see and understand the problem of balancing budgets at the town hall and in Whitehall, and the costs of long-term debt. Vitally, it means that fewer people will get into financial difficulties in the first place, which bring such huge financial and social costs to themselves and their families.

One of the many constituents who urged me to take part in this debate wrote to me to say that financial education was

“a hugely important concept. Unfortunately I got myself into some financial difficulties in my early 20s and for the last 5 years I have had to work 2 jobs in order to repay the debt. I have very little spare time and am unable to afford holidays or luxuries that others take for granted. I still have debt to pay off but I now ensure that I keep myself educated financially to make sure that I am getting the best financial products for my needs. I have learnt the hard way, but if this education was provided in schools, I feel fewer people would end up in the situation I found myself.”

That provides a perfect illustration of why this debate is so important, but why is it so important right now?

We face a crisis of debt and, as Martin Lewis has pointed out, we live in a time when the stigma of debt has somehow been diminished. We also live in a world where we are all increasingly bombarded by offers of credit, as my hon. Friend the Member for High Peak neatly pointed out. I do not know whether I am the only Member who regularly receives calls on my House of Commons office telephone carrying recorded messages offering me cheap debt deals or spurious payment protection insurance compensation. [Interruption.] I see from the reaction of some hon. Members that I am not the only one. I hope that this is not a comment on my own financial circumstances.

Not only by telephone marketing, but through the internet and increasingly through mobile phone apps, credit is more available and more heavily marketed than ever before. In some respects, this need not be a bad thing—credit can help people to manage their finances, and legal credit at reasonable rates is infinitely preferable to the alternative of loan sharks and doorstep lenders. However, the constant bombardment becomes a real problem when people lack the tools to understand concepts such as APR—annual percentage rate—or to develop a proper understanding of the real costs of the debt they are being offered. It is a shocking fact that only one in three adults in the UK knows what APR stands for, let along what it means financially.

It is particularly concerning that many of these credit services are heavily targeted at students who are managing their finances for the first time—perhaps without the benefit of the useful book of guidance produced by my hon. Friend the Member for High Peak—and the level of financial knowledge among many university students does not seem to be as high as we would hope. The surveys showing that only 36% of adults knew the definition of APR showed that this fell to less than 31% for people under 30, and I have heard from student representatives a number of worrying stories of students actually boasting about the level of APR they were paying on a loan, believing that a higher APR meant a better loan. As the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) pointed out, there is strong demand for students to be better informed on these issues.

We have debated the issue of high-cost credit separately, and I continue to believe that there is a need for some sort of system of flexible caps and that there is potential for a levy on high-cost lenders to help to finance the cost of debt advice and financial education. I am hopeful that the Government’s research into this area will produce both those results. However, in a world where such credit is as prevalent as it has become and when students are having to take on more long-term, low-cost debt as part of the process of getting higher education, it is clear there is a demand for them to be better prepared to understand and manage it.

All these reasons point to the urgency of including personal financial education in the curriculum, but they do not dictate how it should be included. There is not necessarily any contradiction between the Government’s desire for a simple curriculum that focuses on the basics and the inclusion of this basic tool for life in the curriculum. In my view, and in the view of the all-party group report, there is no need for a new subject to be added or for time to be set apart in the timetable. Rather, the provision of better financial education can be included in the teaching of maths and PSHE.

Indeed, as Carol Vorderman has pointed out, making maths more relevant and giving it a firmer basis in the real world might help to deal with some of the stigma that many students attach to it. I well remember as a teenage pupil being profoundly uninterested in algebra and trigonometry, but waking up and paying attention when maths touched on the finances of a business or the cost of a shopping trip. I suspect many pupils feel the same. We paid even more attention when people from outside school came in to talk about what they did, so I welcome the report’s recommendations about bringing in more outside experience.

We should not pretend that that would be a wholly new approach. Many of the best teachers, schools and colleges already employ such an approach to make their lessons relevant and engage their pupils. Tudor Grange academy in Worcester has forged strong links with local businesses, such as Worcester Bosch, and the Worcester college of technology has seen several hundred students take money management programmes as additional elements of their studies, showing that students want more financial education even when it is treated as an extra.

Many organisations, from banks and accountancy firms to the citizens advice bureaux, small businesses and entrepreneurs, already engage with schools to talk about the importance of financial knowledge, planning and budgeting. The Institute of Chartered Accountants runs a competition on financial knowledge for schools in Worcestershire. The best examples from among our schools, which include many schools in Worcestershire, would probably need to see no change if financial education were to be introduced as a statutory part of the curriculum, but the inclusion would make a real difference to the overall picture, allow better co-ordination and support those who are leading the way.

The inclusion of financial education in the curriculum would send a signal to all head teachers and all schools that it should be a core part of the teaching of maths and PSHE. It is one of the basic skills with which pupils need to emerge and from which they will benefit hugely. As the all-party group’s report clearly shows, the greatest reason for teachers saying that they do not currently provide financial education is the pressure on curriculum time. Giving it a place in the curriculum would therefore remove the greatest single bar to its successful delivery. I do not believe that would be onerous in any way and when I have discussed it with local heads, as I did at a recent meeting with a group of Worcester primary heads, I have received unanimous support for its inclusion.

I know that many hon. Members want to speak and that we are all anxious to get away today, so I will conclude by saying that financial education should be brought into the statutory curriculum as soon as possible. As a proud English member of the Select Committee on Welsh Affairs, I am pleased to see that Wales, like Scotland, has already taken that step. I believe this is an excellent example of how the UK Government can show their support for the respect agenda, respecting the devolved Assemblies and the students, teachers and heads who all tell us the benefits of financial education.