Financial Education

Tessa Munt Excerpts

Thursday 15th December 2011 Commons Chamber

[Justin Tomlinson]

I thank my hon. Friend for that contribution. We considered a stand-alone subject and, in our utopian world, we would have loved to see a stand-alone financial education qualification, module or however it might have been, but we recognised that greater freedoms have been given to schools, so we thought it best to build such education, in the most relevant and rigorous way, into the subjects currently on offer.

[Tessa Munt (Wells) (LD)]

Does my hon. Friend not agree that such education is about understanding mathematical concepts in a practical way, so it does not need to displace any part of the curriculum? If one is looking at the cost of leasing the car, at whether to place a spread bet or whatever other type of bet, or at anything else, one needs to understand percentages, multiplication and all those things. They are lifetime examples that should be taken into the classroom.

[Justin Tomlinson]

I thank my hon. Friend for that, because it answers in part an earlier intervention.

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[Mrs Chapman]

The hon. Member for Wells (Tessa Munt) mentions spread betting, but will the hon. Gentleman confirm that we are not suggesting teaching primary school children gambling?

[Tessa Munt]

rose—

[Justin Tomlinson]

I am sure that was not the thrust of the earlier intervention.

[Tessa Munt]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. One intervention at a time. Is the hon. Gentleman giving way?

[Justin Tomlinson]

Yes.

[Tessa Munt]

I accept absolutely the point about not teaching primary school children spread betting, but young constituents of mine have made appalling errors due to the betting that is available online, and I complain constantly that on mainstream television there are 31 hours and 55 minutes of online betting shows late at night. Does my hon. Friend agree that, unless one understands the implications of what one is doing, one is in deep trouble?

[Justin Tomlinson]

I thank hon. Members for their interventions; I shall try to give one response to the three of them. In secondary schools, anything to do with betting or credit cards could be relevant. It is very important, however, that we as a society do not necessarily judge what is right and wrong for individuals. However, the PSHE side of things offers an opportunity to discuss the implications.

How much time should be spent on such education? I am conscious that I was called to speak ahead of my hon. Friend the Member for Brigg and Goole. I do not want to steal all his best lines, and he is keen to set that issue out in detail. However, in summary, I emphasise again that in primary schools the priority is to provide the building blocks for secondary schools, and that is very much on the mental arithmetic side—perhaps just an introduction to the concept of money.

In secondary schools, as has been pointed out, financial education should be integral. In many ways, some of that work already takes place. For example, we already expect students to do calculations in mathematics; we would like those calculations to be applied to real-life situations. Rather than asking what is 10% of 100, it might be better to ask how much a loan of £100 at 10% interest would cost someone. That is the same calculation, but the point is brought home.

There is another element to that. I am very supportive of mathematics; I studied it at A-level and I am a great believer that our success as a nation relies on our encouraging more young people to take up mathematics. One of the biggest challenges is that young people are put off the subject because they think that it is a lot harder than it really is, because they do not apply it to everyday life. When we ask young people whether when they look at different tariffs on mobile phone contracts they realise that they are carrying out a mathematical calculation, they find that they are interested in the subject. Such approaches can be used as an opportunity and a hook to encourage more people to go on to do the further maths that this country so needs.

In conclusion, I have been absolutely bombarded with statistics from supportive organisations; I met more than 100 of them before we even started looking into producing our report. They have been helpful with statistics. The one that stands out more than any other is that 91% of people who have got themselves into financial difficulty feel that if they had been better informed, they might well have taken a different path. Hindsight is wonderful. We all think, “If only I had done that”. But I certainly think that the principle of that statistic is right; so many people who get themselves into difficulty could have done otherwise. We have an absolute duty to equip the next generation of consumers to make informed decisions. Driving up standards in mathematics and PSHE goes hand in hand with our campaign for compulsory financial education. I urge the Government to embrace our positive and constructive report as part of the national curriculum review.

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[Tessa Munt]

Might one solution be to ensure that young people, as they pass through the curriculum stages from primary through to university education, have some form of examination—a module could be included in the examination process—that allows them to show some level of expertise in such life skills, which they will need to take forward? I have a passion for middle schools, so I suggest that that should happen when children are aged from nine to 13. In that way, whatever course they choose after the age of 13, be it vocational or academic, they will at least have proven that they have those life skills.

[Mr Gibb]

My hon. Friend makes an interesting point. Those are the kind of issues that the PSHE review will consider. We want to ensure that the quality of PSHE teaching in our schools improves. That is the key driver of the review.

The hon. Member for Darlington quoted Benjamin Franklin, but I shall quote Mr Micawber from Dickens’s “David Copperfield”:

“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

Those aphorisms are as true today as they were in the nineteenth century. Borrowing more than one can afford to repay is one of the most serious social problems facing the UK today. British consumers are considerably more indebted than those in continental Europe. Between 1999 and 2007, household debt increased by 125% while household income increased by only 40%. The Office for National Statistics estimates that around 10% of all households have problem arrears and are unable to make minimum payments in one or more of their financial commitments. The Government are serious about taking action to help people to manage their debts.

We want to ensure that individuals facing financial difficulty can get advice early rather than waiting until their problems become more difficult to resolve. The new Money Advice Service has a statutory function to enhance people’s understanding and knowledge of financial matters and their ability to manage their own financial affairs. It provides free and impartial information and advice. Those consumers who find themselves in high levels of debt will continue to need specialist debt advice, and the Money Advice Service, with its consumer financial education remit and national reach, is well placed to take a role in the co-ordination of debt advice services as part of its existing services.

I have another quote; this time it is from Shakespeare. As Polonius advised his son—

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[Kevin Brennan]

We have heard about those worrying statistics in the course of our deliberations, but my hon. Friend is absolutely correct to emphasise their importance and the need for urgent action by the Government.

We need to get to a point at which all children realise that by saving now they can be prepared for the future, but that is only possible if they get the right sort of financial education. In particular, we should not let children from neighbourhoods of lower socio-economic class suffer because their schools do not offer good financial education. The hon. Member for North Swindon quite correctly said that with the huge increases in tuition fees that young people going to university are facing, there is even more need to give serious thought to what will happen when our children go to university and have to deal with the debts they will incur as a result. In fact, Martin Lewis himself said that

“in the 20 years since student loans came in, we’ve educated our youth into debt when they go to university, but never about debt.”

It is extremely important that we do that.

[Tessa Munt]

Was it not also the case that Martin Lewis had a very robust session on the “Politics Show” about a month ago when he explained quite clearly that young people should not be afraid of going to university because under the current regime it is cheaper? If they understood the fact that the threshold was £21,000, not the £15,000 it was under the previous Government, the 9% calculation would allow them to be a lot wealthier under the new system than they would have been under the old.

[Kevin Brennan]

I am not sure they are going to be a lot wealthier, quite frankly, but it is absolutely right that the reality of the Government’s proposals should be explained and that there should not be scaremongering. I think we would absolutely agree about that. I agree that it is important that young people should consider applying to university because, ultimately, it is quite clear that that benefits them in the long term. We should be absolutely clear about it. Yes, the changes have reduced the payments but ultimately the fees being paid are much higher. The hon. Lady must accept that the reality is that the overall debt that they are incurring has increased greatly as a result of her party’s collaboration in the changes to student finance since the general election.

I want to make a couple more points before I conclude. The Consumer Financial Education Body previously funded the Personal Finance Education Group’s budget, but that has fallen by 80% since the spring and the staff has been cut since the CFEB became the Money Advice Service. So far, as I understand it, the MAS has declined to state how much of its £44 million budget was spent on school budgets. I think we would all welcome some clarity on that.

The survey from the all-party group found that in England the provision of personal finance education is ad hoc, with only 45% of teachers reporting that they have ever taught the subject. New research by HSBC has shown that 5.1 million savers under 25 do not know the interest rates on their savings account. If they had received good financial education while growing up, they would be more aware of interest rates. Furthermore, the survey found that a high percentage of people across all age groups had no saving goals.

We need greater financial education and this is a very good and thorough report from the all-party group, but we need the Government to show that they are genuinely committed to ensuring that every child is entitled to a good finance education. I think that is the ambition of the hon. Members who compiled the report we are considering today.