Note to Energy Minister: it’s not just laziness that stops switching

Many homes can make £250+ savings by switching energy, but a large proportion don’t do it. Energy Secretary, Chris Huhne’s been widely quoted as blaming public laziness. As I’ve been nagging, pushing, and trying to persuade people to switch for 10+ years, I thought it worth noting down what barriers I’ve noticed.

To be fair to Chris Huhne, his actual quote to the Times was:

“They do not bother, they frankly spend less time shopping around for a bill that’s on average more than £1,000 a year than they would shop around for a £25 toaster.

“If they got that in perspective and said, ‘OK, we are going to spend a little bit of time shopping around’ [they] could save very substantial amounts of money.”

Yet that’s just the start of it, he’s also discussed the many structural problems around the industry and set out some pretty decent steps to help address it (see Top ten energy ‘need to knows’ news story)

Seven reasons people don’t switch

The crucial issues I’ve come up against are …

  • Burnt by switching at wrong time in the pastPoliticians/regulators/comparison sites shouted ‘switch’ even when it’s not time.

    The blunt message ‘you will switch and save’ has left many who followed it burnt, and has tarnished switching’s reputation.

    This is because when you switch, is just as important as switching itself. The knee-jerk reaction after a big energy company puts its prices up is to try and find a cheaper supplier – yet often that’s wrong.

    Unfortunately in their well-meant ardour to encourage people to move politicians, the regulator and some comparison sites must shoulder some responsibility – as they’ve pumped out the ‘switch’ message whenever the opportunities arrived.

    In fact, energy companies are like sheep, when one moves the others follow (breaking that cartel is a blog for another day). So do a comparison the day after one of the big six energy providers puts prices up and you’ll inevitably move to a firm that itself will hoick prices a few weeks later.

    This has scarred many who then say ‘what’s the point?’. For years in our Cheap Gas & Electricity guide we’ve had a ‘time to switch’ traffic light indicating whether it’s a good time or not to try and avoid this.

    Sometimes we say ‘DON’T SWITCH’ as it simply isn’t a level playing field to compare (right now though, it’s perfect). In recent times it’s got even more sophisticated – such as ‘fix or stick’ as there were still cheap fixes available.

  • The apathy issue
    We must get across how big the savings are.
    Of course as Mr. Huhne says for some, a smaller number, there is some intransigence, people who can’t be bothered, or don’t realise the exact savings they could make.

    Even some who start then find their tariff name isn’t on the bill or they can’t work out how to do it – and fall at the first hurdle.

    Though I do worry that some of these people have heard others talking of bad experiences and don’t realise the difference it can make.

  • Confusion and complexity
    If you don’t intuitively understand the price, changing is scary. Energy companies have a myriad of different, similarly named tariffs, with complex price structures which make understanding the differences a nightmare.

    People often think about their supplier by firm – actually they need to think by tariff. One company can offer both the UK’s most expensive and cheapest deal, depending on the tariff you’re on.

    Of course, using a comparison site makes it easier, but the lack of the ability to intuitively understand the pricing model means people are reluctant to trust because they don’t understand.

    This is especially true for many elderly people – those for whom heating is most important. They come from an era of, you have your supplier, you pay the bill.

    The door knockers who’ve come over the years each promising “to save you money” hurt those elderly people who still trust what they’re told face to face.

  • Inability to switch, or switch and gain
    Those on prepay meters, without web access. Not everyone can switch and save. There are structural problems. Some are locked in due to past energy debts, others forced to stay on prepayment meters, while there is some competition (see the Prepay energy savings guide) the benefits can still be limited.

    Then there are those without the web who lack access to the cheap online tariffs and the comparison sites.

  • Nightmare switching experiences
    Timing, problems, and energy salesmen.There are of course those who’ve suffered a never ending hell after switching, when the transfer doesn’t take place properly. Or it does but it drags on for months. This has improved, but the institutional memory people have still leaves many put off by fear.

    Then of course there’s the door knockers and salesmen (see the I was told to read porn before selling energy news story). Not all are bad, but many have mis-directed and mis-sold and given the whole industry a bad rep.

  • Direct Debit and price confusion
    Again, people are burnt as their cost dropped but debit increased. Many people get confused between the cost of energy and the money coming out of their account each month. Energy companies set Direct Debits by estimating annual usage and dividing it by 12.

    Different companies use different estimates, so it’s common to hear people moving to a cheaper rate, but asked to shell out more each month. Of course, their overall cost will be less, but the psychology and impact on cash flow makes it feel a loss more than a gain.

  • You may be saving but what you pay increases
    In a rising market, you can switch and save but pay more.This is another of those ‘burnt in the past’ issues.  It’s a conceptual one that some struggle with. If prices are rising by 20% and you switch to a company that’s 15% cheaper, you’re still going to be paying roughly 5% more than before.

    People struggle with this as they feel like they should save. Of course, compared to what they would’ve paid there’s a reduction, but it feels like a rise – again negating the sentimental gain of switching.

Have I missed any? Let me know below.

We must stop thinking politicians are monsters from a different planet

Turn on a radio phone-in, read a web forum, listen to people talking in the pub, and politicians are often described in disparaging terms and are accused of not ‘living in the real world’. Yet most MPs I meet from all parties are decent people, caring about big issues and wrestling with tough concepts to try and decide how to do the right thing. It’s about time we gave them (a bit) more credit.

I was prompted to write this post after seeing the feedback on yesterday’s blog post – Shocking questions from a Lord and a Baroness. Many of the comments, predictably, went on to berate our law makers. I suspect this won’t be a popular blog, but someone has to stick up for them – as people often see them as self-serving.

I take some responsibility due to the deliberate hyperbole of that blog title, after all I doubt I could’ve got many interested in a financial regulation parliamentary evidence session without it.

Though in the blog itself I explained, ‘Before I get onto the two questions that shocked me, it’s important I point out that overall they were a knowledgeable, impressive and responsive bunch’ and that the questions may’ve just been asked to elicit on-the-record responses.

In fact, the peers and commoners were very receptive to the consumer perspective and points (you can read them in that blog).

We demonise our parliamentarians

I’ve picked out just a couple of comments from the many in the forum, on Twitter and Facebook and on the blog itself that seem to reflect the prevailing view…

They don’t live in the real world I’m afraid Martin, it’s all different rules for different people. If a Lady or Lord rings up the bank things get done, as no doubt they would have the actual number, whilst Mr and Mrs Smith have to ring a call centre in the back of beyond, only to be put on hold for an hour and then be told…no!”

ML: “I doubt this is true for many, often they will have to go through exactly the same rigmarole as everyone else – barring those who are extremely wealthy using private banks – which is far out of the reach of most back bench members of Parliament.”

I wonder how many people on the other side of your table would feel the pain that you are trying to protect people from. The people who can’t afford to lose a few thousand without serious life changes. I do think that MPs/Lords should have to spend some time living on an average wage, as they often have no idea what real life is like. (Alas, proper financial education would help that life.)”

ML: “But many MPs and peers lived in the ‘real world’ before entering the legislature – from postmen, policeman, teachers, lawyers, factory workers and more. I don’t think you need to be on an average wage to understand or empathise. It won’t be a surprise for people to hear I earn substantially above the average wage – yet that doesn’t stop listening, reading, engaging and ensuring you understand what’s going on out there. I do genuinely believe many parliamentarians do just that.”

The difficulty for politicians is they must balance competing interests

We need to be very careful about jumping on the ‘all politicians are out of touch’ bandwagon, when they say something that may not benefit consumers.

I often get people saying ‘we need people like you in politics’ and I’ve even won newspaper ‘fantasy chancellor’ contests. While flattering (or maybe people just want to hand me a poisoned chalice), it misses the fact that the decisions I would make if I was in politics would be by necessity, just as unpopular. In truth I suspect there are many ‘people like me’ in politics already but the view of them is coloured by the fact they’re politicians.

My job, being decidedly and solely consumer focused is much simpler than constantly trying to balance the interests of the economy, the poor, the rich, businesses, benefits recipients and pensioners – which are often diametrically opposed – if you help one, you hinder the other.

Take the work of this site. It extols people to be sensible with their finances, to reduce spending, to plan for the worst, to use vouchers, to haggle and more. It’s unambiguously pro consumer.  Sounds good – until you remember Keynes’ ‘Paradox of thrift’. If everyone is thrifty, it takes money out of the economy, reduces growth and we all feel the negative impact – what’s good for the consumer isn’t necessarily good for the economy; thankfully we don’t have to consider that.

On a simpler level, many businesses hate what we say about haggling – travel agents particularly. A politician has to be balanced – they cannot be single viewed in the way I can – and that means some of their views and decisions are influenced by factors the consumer may see as unpopular.

Most politicians I meet tend to be pretty well meaning

Whenever I meet politicians from any of the big parties, most (though I admit not all) tend to be concerned, empathetic individuals. Occasionally they’re a bit trapped in their own dogma and have to toe the party line, yet they often are trying to do the right thing.

What always illustrates this is often people who berate politicians, will say ‘except my local MP’, especially if they’ve been to the constituency surgery and got help.

There is a perception that these MPs and political Lords live a silver-spooned life, while of course most of them live like the average person and most are as far from Russian oligarchs as they can be. I know many new backbench MPs who are sharing flats to help cut costs and living fairly ordinary London commuter lives – far from poor, but far from rich too.

Of course there is still huge anger out there after the expenses scandal, but I think it’s time we tried to have some faith, whichever party you support. If we keep giving them such little credence, we may end up with a self-fulfilling prophecy where politicians are as bad as many think they are.

Any views?

A blog in support of stupid people’s rights (probably the most important blog I’ve ever written)

I’m receiving a growing creep of messages like, ‘if people are stupid enough to (insert issue) it’s their own fault’. But is it? If people are genuinely stupid, is it really their fault – should they not be protected too? And what about dyslexics, those with mental health issues, those suffering with senility, the blind and more – do they all get what they deserve too…?

Last night I was on Watchdog, while the majority of people were supportive of my piece, here’s two Tweets that weren’t…

Shove your ‘Mini-Armchair Revolution’ up your arse. People should pay attention to what they are doing. Idiots!”

“I’m sorry but if someone is stupid enough to sign up for something they don’t need then it’s their own fault!”

In fact it wasn’t about ‘signing up’ that was the point, it was on online travel companies who pre-select expensive travel insurance as added extras leaving many paying by default. This specifically contravenes EU auto-add on laws and leaves many paying twice, as they already have annual travel insurance.

More surprising though, were the comments that came through. On air I’d noted these schemes were cleverly designed to make you sign up and were especially dangerous to those unfamiliar with the web, dyslexics or dyscalculia sufferers.

The ‘mini armchair revolution’ bit is a phrase I used to encourage people to take any add on travel insurance issues to the Ombudsman to try and get a precedent ruling against the practice – see the MSE news story, Had travel insurance auto-added? Make a compensation claim.

This isn’t the first time I’ve had similar comments, it has plagued some of the biggest campaigns I’ve been involved in – for example when hearing about PPI reclaiming, I’ve had, ‘why do these people who were stupid enough to sign up get the payout? What do I get for not signing up?’

On bank charges, lots of people said, ‘anyone running up thousands of these penalties must be stupid’, even though the system is designed to entrap people in serious debt.

The list of ‘stupid’ people

So it’s worth thinking about just who these people being accused of stupidity really are. Below is my non-exhaustive list of those who struggle with all these various issues – and therefore according to those who message me are thus stupid and don’t deserve protecting.

  • Mental health suffers – 1 in 4 people in the UK suffer at least one mental health problem each year, and may therefore be temporarily incapable of making decisions.
  • The blind / partially sighted (when using sites not optimised for their needs).
  • Those who are Dyslexic
  • Those who are Dyscalculic
  • Non-English speakers – People who don’t have English as a first language.
  • The learning disabled
  • The functionally illiterate
  • First time web users
  • Alzheimer’s or senility sufferers
  • Sleep deprived parents of very young children
  • Those with short attention spans – Some people with medical conditions suffer from limited concentration.
  • Mental capacity issues
  • Financial phobics
  • First time consumers – Young people who are only just transacting for the first time.
  • People worried about other things – Minds can be distracted, perhaps due to stress, or maybe in the rush to book a flight to see a relative who’s only got a few days to live.
  • Those who don’t read every term and condition – Sometimes there are over 5,000 words of legalese, anyone who doesn’t check them…well – just stupid I suppose?
  • Those who trust banks – For example those who were told PPI was compulsory and therefore took it out as they thought they had to.

Of course the people in this list are far from stupid – and its offensive to call them that. Many are very bright, high achieving people – some aren’t. Yet all of whom may be caught out at one time or another. And that’s what I find so infuriating about the comments I receive. Its a bit like the quiz shows that say ‘its easy when you know the answer’. We all need to walk in other (wo)mens shoes before we throw such accusations of stupidity around.

I simply don’t get the venom of some who aren’t caught out towards those who have been. Thankfully I’ve never had a bank charge, didn’t get PPI, never has debt problems, and never been trapped by added insurance, but I don’t feel we should leave those who have to suffer.

Of course people must take responsibility for themselves

This isn’t about regulating for the lowest common denominator. My philosophy is still the ‘adversarial consumer society’ which says a company’s job is to make money from us, our job is to try to keep that cash.

So we can’t expect credit card lenders to police responsible borrowing, their job is to flog debt. Instead we must try and be responsible borrowers to protect ourselves. We can’t expect energy companies to keep us warm, their job is to make money for their shareholders, we need to ensure we’re on the best deals.

Yet who protects those who can’t take responsibility for themselves?

Perhaps where I’ve changed since I first started out with the purist view above, is having a growing realisation of the large number of people who permanently or temporarily aren’t capable of taking responsibility for themselves. At that point surely we must expect our politicians and regulators to ensure fair play and options for redress when people are taken advantage of?

Products must be transparent and fair. If I sign up for a holiday online and travel insurance isn’t automatically added, but it does ask me if I want it, then that’s fine. But that doesn’t mean every product needs to super simple. In our complex world sometimes products, especially financial ones, need to mirror that – yet then fair warnings and fair dealings must be mandated.

Of course drawing the line on this isn’t easy. I attended the energy summit earlier this week. The Government’s big call is to switch, as so many people are on the wrong tariff and overpaying their provider. So you could say ‘the energy companies must auto-switch everyone to the cheapest deal’, but for me that’s a tough call – is it too much interfering in competition?

Or the next step along, should we ban 0% credit cards due to the high ‘go to rate’ it jumps to afterwards? Here I’d say that’s a step too far and would damage those getting vastly reduced interest rates in the mean time (and not necessarily help others as they’d be on high rates anyway). Here what’s crucial is how it’s communicated and reminders should be sent before the 0% ends.

So, if I were to try and draw the line I’d perhaps say we must stop activities that entrap people into getting things they don’t want or aren’t aware of, by deliberate manipulation or confusion.

I’d love know your thoughts below.

Why I confidently predict this recession won’t be as ‘severe’ as the last

I normally say I don’t do predictions, so you may be surprised to see me putting my neck on the line in such a way. Yet I haven’t suddenly bought a crystal ball or grown cahoonas the size of an ox, this is a natural conclusion on the back of the political spin of recession maths…

A recession is strictly defined as two successive quarters of negative growth – in other words, the economy shrinking for half a year. Yesterday it was announced we’d had one quarter down 0.2%, so even though it’s down, unless we get another one – it’s not yet a recession – but the general feeling is it will be.

Yet just think about this definition for second. A ‘recession’ isn’t about how things feel, the perception of economic affairs, it’s about whether things are good or bad. Politicians can rightly say we’re not in recession even when many are feeling the pain.

Look at this table below – I’ve designed  a ridiculously extreme example of how the definition may not reflect the real picture:

  Technically not a recession year Technically a recession year
1st quarter Economy up 0.1% Economy up 10%
2nd quarter Massive crash – down 20% Things plateau – down 0.1%
3rd quarter Things stabilise – up 0.1% Slight downturn – down 0.4%
4th quarter Double dip – down 20% again Recovery – up 10%
Total annual growth Down 36% Up 20%

The definition of recession also explains why over the last couple of years even though the economy has been teetering, technically we’ve not been in recession. Back in 2008 I confidently predicted that – not out of any prescience, just due to the simple maths (see my Recession will end soon: the joy of maths blog).

Why this recession is unlikely to be as severe as last time

I’ve already seen one headline of “this recession won’t be as bad as 2007/8” and indeed it’s almost certainly accurate, but quite meaningless.

Our economy contracted substantially back then and has never recovered, we’re still in the mire, we’ve just had stagnant or minor growth for a few years. Thus we’re not going to fall much now as there isn’t that far too fall – unless we have catastrophic economic collapse (let’s hope not eh?).

The fact this recession won’t be as steep isn’t the same as saying it won’t be bad. Recession is all about momentum – which is how fast things are moving, and doesn’t factor in the overall economy.

Take a driving analogy, if you accelerate to 80 mph then slow to 79mph you may’ve slowed down but you’re still going fast.

Yet with our economy we were travelling at 70mph, in 2007 we slowed to 60mph and aren’t going much faster now, so if we drop to 58mph now, while we haven’t slowed down as much as in the last recession – we’re still going far slower than we were when this all started.

Not everybody is struggling

If you’re reading this as a doom and gloom blog, please don’t. In many ways the message is we’re already in it, so hopefully it won’t get much worse.

Yet even in a recession you can’t draw too many conclusions on what it means for individuals. I’ve corrected a good few interviewers in recent times who’ve asked me: “everyone is struggling, what should we do?”

Of course ‘everyone’ isn’t struggling, there are still many with good jobs, getting pay rises, with savings, no debts, and possibly low rate tracker mortgages. You only need to see this How much are you worth? 2012 poll result to see that.

The key to recession is ‘more people than usual are struggling’, with many feeling income squeezes, costs on the up, benefits dropping and worries about job security. It’s crucial to address those issues, but still we must be careful not to start seeing our economy as a blanket of individuals with a homogenised financial situation.

Related links

Prospective students no longer so scared of £9,000 fees

I got a bit stumped on Thursday on the weekly Consumer Panel hour I do on Radio 5. The subject was the new up to £9,000 fees for new student starters in 2012, on the back of applications closing Sunday (yesterday now). There were three prospective students on, so I was poised to rebut the usual misunderstandings but each when asked said something akin to: ‘No, I’m not worried about the fees, I was at first, but I’ve done the reading on them and it’s not as bad as I thought’.  

While it left me slightly stumped on what to say; it was music to my ears. This isn’t the first anecdotal indication that the message seems to be getting out there. Those who don’t religiously read this blog (tsk tsk ? ) may not know I head up the Independent Taskforce on Student Finance Information.

I was appointed to it not long after berating politicians that if they were going to change the system, they at least needed to explain to students how it worked (see taking on a taskforce blog). The group is independent of government and has Universities UK, UCAS and the National Union of Students, amongst others, on the core committee. The aim is to give apolitical info on how the new system will work.

With very limited resources our primary focus has been to explain how it works to potential students, their teachers and parents – rather than wider society.

And I do think some headway has been made. Many 6th formers (or equivalents), have a much better idea of how the system works (note we’re now switching to part time and mature students as their applications close later) and seem to be less panicked about it than society in general.

Free resources

To do this, as well as having a ‘student finance day’ in November, we’ve loads of resources out there…

  • The apps: The “Uni Fees 2012” app we have for iPhones and Android.
  • Info for teachers: We’ve sent a teachers’ guide to every school in the UK, and downloadable teaching lesson plans to help teachers work through the various issues with the students
  • 6th former guide: Deliberately written to target younger prospective students with less experience of finance, the 6th formers’ student finance guide has been hugely requested by schools (as well as downloaded a lot by parents).
  • Parents guide: Often it’s parents more than their off-spring who are more panicked, so there’s also a parents’ guide to student finance 2012, which runs through the important things parents need to know.
  • Student finance calculator: This student finance calculator was built by the MSE team to help try to answer the ‘how much will it cost me?’ question.
  • 20 things you need to know: The student finance 2012 guide is my original guide that the others are based on, and hopefully it covers everything that anyone else would want to ask too.

Of course we’re not the only ones doing this – there’s official info from the Government and the Student Loans Company too – though, biased as I am, I think ours is in a different league to the more constrained messages in those guides.  

Will applications fall?

What will be interesting now, will be to see the result on applications overall. Earlier in the year they were down double digits. I hope to see that drop lessened substantially when the actual figures come out on 30 January.

They will be down a few percent due to demographic changes and the fact some students rushed through the gates last year to beat the fee hike, but I hope and suspect it won’t be as drastic as was originally feared.

That’s not to say every student should go to university, just that they need to understand the true cost even with the much criticised hikes in fees, not the fear laden invective we’ve seen in some newspapers trying to grab headlines. After all, if you don’t understand the cost, how can you make a rational decision on the value?

Related past blogs

The bank deal that makes 5,000% APR payday loans look cheap


Payday loans at 5,000% APR rightly shock many people. Yet high street banks have a product so expensive many would save by taking a payday loan, even at ridiculously high rates, instead. But as banks needn’t phrase it as an APR, they get to offer this product without the nasty brand damage.

As for what this extortionate charge is – well it’s simple, common and famous. It’s a bank charge for going beyond your pre-agreed overdraft limit.

How expensive are bank charges in comparison?


Clydesdale Bank charges £25 per day for going beyond your limit. I tried to calculate this in Excel as an APR, based on someone getting a £25 charge a day for being £1 over. The resultant interest rate was TOO LARGE FOR EXCEL TO CALCUATE % APR – which means it’s a ‘figure with way more than 300 zeros after it’ percent.

So I had to take more standard charges like Nationwide’s £15 per item or Lloyds £5-10 per day depending on how overdrawn you are (see the Bank charges comparison guide for more).

But even here, if you got a charge for being £1 over, it was too large to calculate so I went for the following scenario…

Go £5 over your overdraft at Lloyds and get charged £5. Based on payday loan calculation rules this would be roughly: 7,500,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000% APR.

Or, to put it another way – compare the above costs to borrowing a range of amounts at an APR of 5,000%:

Amount
Day’s cost at 5,000% APR
£1
1p
£10
11p
£50
54p
£100
£1.08

As you can see, in comparison 5,000% APR is cheap.

So should everyone get payday loans to avoid bank charges?

Payday loans are a blight on society. The rates above rely on you only borrowing for a day – in reality that doesn’t happen with payday loans, they’re designed to be had for a week or a month, so you pay an upfront admin hit anyway.

While some could save by using a payday loan instead of getting hit by bank charges, (though not every time) what’s far better is to avoid the borrowing all together or use a host of other solutions (we’ve a full ‘what to do instead of getting payday loans’ guide coming soon).

Even expensive credit cards, often rightly thought of as bad guys, compared to payday loans or bank charges are relatively cheap. The problem with them though is the easy availability of credit which means the debts can snowball.

Banks have cleverly avoided having to phrase their charges in a nasty way

My real point here is the fact that we don’t have any form of playing field to compare. Payday loans must list themselves as APRs due to regulations – that’s not a particularly sensible system in my view (see the evidence given to the Business Select Committee to explain why) but at least it scares people off. Yet banks get away with levying relatively higher charges without the stigma.

Just image if Clydesdale had to write ‘Bank Charges APR too high to calculate’, or many others had to write ‘7,500,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000% APR’.

It wouldn’t exactly be good for their brand (and just think of the extra cost of advertising just to fit the figure in).

Are people going beyond their limit just taking cash that isn’t theirs?

This is an old chestnut whenever I talk about bank charges – and it’s nonsense. Banks have three limits within overdrafts:

  • The authorised overdraft – ie, no bank charges.
  • The unauthorised, paid overdraft – ie, there will be bank charges, but your cheques/DDs don’t bounce.
  • The unauthorised, unpaid overdraft – ie, there will be bank charges and your cheques/DDs do bounce.

These are just functions of a bank account – the banks don’t have to have a ‘paid’ overdraft, it was introduced to increase profitability and added over £3 billion a year to their coffers. Of course during the bank charges reclaiming height over a billion was paid back – and still now a few whose charges cause hardship can get some cash back. Yet overall it’s still immensely profitable.

Ps. Nerdy calculation note. Of course the APR calculation assumes that the charge would compound, which it doesn’t with bank charges – so the APR given is a farce. Yet it doesn’t with some payday lenders either – who don’t compound and cap the time – yet they must use the APR calculations that assume they do.

So I’m simply giving banks similar treatment in my calculations. What we need is a sensible clear measure for all – which is what I and many others have lobbied for.)

Related Past Blogs

The financial education debate – in full

Below is a cut and paste of the Hansard transcript of last week’s debate (source: Parliament). For those wanting a quick summary see my financial education debate – who said what blog, as the transcript below came from five hours of debate.

You can also watch a video of the session.

Financial education

Justin Tomlinson (North Swindon) (Con): I beg to move,

That this House notes that young people today grow up in an increasingly complex financial world requiring them to make difficult decisions for the future, often without the necessary level of financial literacy; believes that financial education will help address the national problem of irresponsible borrowing and personal insolvency and that teaching people about budgeting and personal finance will help equip the workforce with the necessary skills to succeed in business and drive forward economic growth; further believes that the country has a duty to equip its young people properly through education to make informed financial decisions; and calls on the Government to consider the provision of financial education as part of the current curriculum review.

First, I would like to thank the Backbench Business Committee for allowing us to have this excellent opportunity to raise the profile of our ongoing campaign calling for greater provision of financial education and to make it compulsory in the national curriculum. I also extend my thanks to Martin Lewis of MoneySavingExpert.com, whose e-petition secured the magic trigger of 100,000 signatories. It is only the fourth to have done so.

A number of people have asked me why this subject caught the public’s imagination. A couple of recent studies perhaps explain that. It was found that 94% of people agree that financial education is important; that 69% of parents feel that their children will get into debt; that fewer than a quarter of parents feel confident in educating their own children in money matters; and that 72% of parents do not believe that enough has been done to educate young children.

I am personally passionate about this subject because I believe society is changing. Here are some examples. This year was the first in which debit card usage exceeded cash usage. Only a few generations ago, people were paid weekly in cash. They often ran out of money, so were effectively forced to try to manage money in a controlled manner. Nowadays it is easy for the money to come in and flow out very quickly. We are seeing a greater prevalence of direct debits and standing orders, so if people get themselves into financial difficulty—the majority because of an unforeseen change of circumstances, such as the loss of a job, a bereavement or a family breakdown—they think that they will apply the financial brakes and not go out that weekend for a meal or to the cinema and that they will not spend any money, but the direct debits and standing orders are still flowing out of the account. People quickly become overwhelmed.

We are seeing ever more complicated marketing messages from different sectors, which are often misleading.

Mr Andrew Smith (Oxford East) (Lab): I am very grateful to the hon. Gentleman for giving way and I congratulate him on tabling this motion, which I strongly support. Does he agree that one of the big problems is that a lot of people, faced with the marketing to which he refers, simply do not understand the rate of interest they are being charged? That underlines the importance of basic mathematics in the curriculum alongside the financial education that he is rightly advocating.

Justin Tomlinson: The right hon. Gentleman is absolutely spot on with that point and I am just about to come on to it.

We have already had a number of debates in this Chamber on debt management companies, doorstep lending and payday loans. In fact, on annual percentage rates, we have already seen worrying evidence that consumers often think the higher the APR, the better. When people take out loans, they are not necessarily taking them out for a simple 12-month period. Most people could probably calculate 10% on a £100 loan, but it becomes complicated. Sometimes, the high-interest rate loans can be better than what people think is a safe bet. A good example of that is someone who wishes to borrow £100 for two days. They can borrow it from one of those well-known payday lenders who charge 4,635% plus £5.50 for the product fee, or they can go into their unauthorised overdraft facility at their local bank, which will charge them an understandable flat fee of £10 a day and a £2.50 fee for the privilege of using their debit card. Nearly everybody would accept the bank’s offer, because it is understandable.

Mrs Jenny Chapman (Darlington) (Lab): I feel obliged to intervene, given that my hon. Friend the Member for Walthamstow (Stella Creasy) is not here, but how many people does the hon. Gentleman believe sit and make the calculation when they are working out whether to take a loan from Wonga? How many of them does he think roll over their loans at the end of the borrowing term?

Justin Tomlinson: I thank the hon. Lady for that intervention and that is exactly the point. It is so complicated. In my example, the bank was not the right option, but on many other occasions, it would be the other way around. The majority of consumers cannot calculate the interest rates to make those informed decisions. The market benefits from that and targets its marketing to take advantage of the situation.

Dr Andrew Murrison (South West Wiltshire) (Con): I have a great deal of sympathy with my hon. Friend’s motion and I congratulate him on tabling it. Does he agree that the fundamental problem is not so much financial literacy and numeracy skills, although they are important, but that basic literacy and numeracy need to be improved, as evidenced by the unsatisfactory key stage 2 results that we saw in May?

Justin Tomlinson: I thank my hon. Friend for that intervention and I agree with him 100%. My speech and that of my hon. Friend the Member for Brigg and Goole (Andrew Percy) will cover those exact points.

To conclude this part of my speech, consumers too often take advantage of what they see as instant pay-free solutions without understanding the implications of what they are taking on.

Jim Dowd (Lewisham West and Penge) (Lab): Before the hon. Gentleman moves away from payday loans, does he not agree that anybody who finds themselves even contemplating taking one out—I accept his point that there are different ways of calculating the best way out of a situation—needs to address their whole financial position? It tends to be indicative of a problem, although

I would not necessarily say that it was systemic. Once someone starts robbing from next week, they will be short then and it will go on and on. They need at that very moment to get the most careful and wise advice on their personal finances.

Justin Tomlinson: I thank the hon. Gentleman for his contribution. Let me be clear. Everyone has individual circumstances, priorities and challenges, and what one member of the public thinks is the right thing to do might be different to what the next person thinks. For me, the driving force is the idea that we have a duty to equip people to make informed decisions so that they can understand the implications of what they are doing and therefore do the very best according to their own priorities and circumstances. As we find in our debates, however, all too often people are not in a position to do that. MPs often end up referring to our casework because time and again we see people who have made wrong decisions not necessarily through any fault of their own, but because they did not have the skills to make the right decisions. Indeed, Citizens Advice has highlighted that 60% of its work is finance-related.

We have a competitive market and the Government have been encouraging people to take advantage of competition within the energy market. We say to people, “Go and shop around and look at energy tariffs,” but the market is incredibly complex and people need to be clued up if they are to be savvy consumers. I recently attempted to look at energy tariffs, but they are not all like for like, so consumers need a good level of skills to unravel that complicated market and seek out the best deal.

Another reason why I am passionate about this subject is that my generation could be pretty rubbish at handling money. We could go to university, drum up huge amounts of debt, including expensive debt on credit cards, and then secure our first graduate jobs—in my time that was relatively easy to do—get on to the housing ladder with a 100% or 100%-plus mortgage and watch house prices increase. When we had learned the error of our ways, we could reconsolidate our mortgage, pay off all our expensive debts and carry on, but that option will not be available to the next generation. As things stand, it is very difficult to get into the housing market and there is no guarantee that house prices will rise so that one could take advantage of that should one get on to the housing ladder. It is harder for young people to get credit and harder for people to correct any mistakes they may have made.

Claire Perry (Devizes) (Con): I commend my hon. Friend, who is a near neighbour, and all the MPs involved in this issue—this is the House of Commons working at its best. Does he agree that this is a big issue for women and girls, who are often the particular target of very expensive consumer demands, such as, “You must have this big handbag,” or “You must buy these incredible clothes”? I think we do our young women and girls a real disservice in this area. Not only do we not educate them about finance but we encourage them to borrow and spend as much as possible.

Justin Tomlinson: I thank my hon. Friend for raising that point. This is part of the problem. We want people to be equipped to make informed choices and also to be savvy consumers who understand how to get the best for their money.

I want to say a little about how we got to today’s debate. Just over a year ago, I innocently asked a parliamentary question calling for greater financial education within our schools. I was then contacted by the national charity, the Personal Finance Education Group, which told me when we met that it had been campaigning on this subject for 10 years. Its representatives said, “That was a very good question? Would you like another 30 to ask?” for which I was very grateful. I submitted those questions, which made me look very intelligent. I was then contacted by Martin Lewis of MoneySavingExpert.com, who said, “Can I come and meet you? I’m very impressed by the 31 questions you’ve now asked on this subject. You sound very knowledgeable and I’d like to get behind you.” We decided between us that I alone could not champion this cause and that we should launch an all-party parliamentary group. Following a little gentle persuasion from the 6 million subscribers to MoneySavingExpert.com, MPs keenly queued into a very busy Jubilee room. We clocked up a staggering 225 Members from different parties, making us the largest such group.

At that point, we were tempted to go and knock on the Minister’s door, offer him a cup of tea and some biscuits and talk about how overwhelmingly we were supported by people, but we knew that the Minister is often contacted by people championing worthy causes. I have called for basic cookery and life-saving skills to be taught in schools so I have been guilty of making lots of requests of the national curriculum. We thought that instead we would be patient and launch a constructive and positive eight-month inquiry so that when we met the Minister and said, “This is our worthy cause,” we would have answers to all the questions that could be raised.

The inquiry was chaired by my hon. Friend the Member for Brigg and Goole who, despite having been called a supply teacher by the Prime Minister, has an extensive knowledge of a variety of roles within schools. We conducted a significant amount of research. More than 900 teachers responded, telling us what is happening, and what they think could and should happen. More than 50 relevant organisations met us, face to face, in oral sessions. We set ourselves up as a mini-Select Committee. We heard from organisations from the banking sector, financial institutions, teachers unions, financial education providers, the Financial Services Authority and the Money Advice Service. We heard from mathematicians so intelligent that the lights in the room started to flicker. We are extremely grateful for the support given by Carol Vorderman, who had previously been commissioned by the Conservative party when it was in opposition to look into mathematics standards. She was ably supported by Roger Porkess and Stella Dudzic, who wrote the mathematical example questions in our report.

We met representatives of the personal, social and health education sector, and we also talked to young people themselves because if we championed this cause but young people did not wish to engage, it would be a flawed campaign. We were overwhelmed by their support. In particular, I thank Katie Emms and Alex Harman, who took part in the oral sessions, but who on Monday, promoting our launch, got banned by Twitter for tweeting rather too enthusiastically about how good our 52-page report is.

Diana Johnson (Kingston upon Hull North) (Lab): Has the hon. Gentleman had an opportunity to look at the evidence presented to the Education Bill Committee at the end of the last Parliament? An attempt to get PSHE, including economic education, on to a statutory footing in the national curriculum was debated at length, but unfortunately his party prevented that from going through in the wash-up. A lot of very good evidence was presented to that Committee.

Justin Tomlinson: I thank the hon. Lady for that intervention. That was part of the evidence that we considered, but that was a rather simplistic description of what happened in the wash-up. That was not a stand-alone issue, and we referred to that in the report.

Andrew Percy (Brigg and Goole) (Con): We did indeed look at that issue but was it not the case that we were not convinced from the start about simply putting financial education into PSHE? We wanted to discuss examinations and mathematics and all the rest of it, which is why we have come up with a solution that I think is much better than that offered before the election.

Justin Tomlinson: Absolutely. It was important to include that as part of the evidence, but as we are about to set out in our recommendations, it was not the conclusion that we came to.

Kevin Brennan (Cardiff West) (Lab): I commend the hon. Gentleman on his work and on the report that he has produced. Does he not accept that if his Front-Bench colleagues had not taken that position, compulsory financial education would have been delivered through PSHE in secondary schools since last September?

Justin Tomlinson: I thank the shadow Minister for his intervention. We are trying to reach consensus on the very best way to deliver that education. We considered that approach as part of our report and concluded that it was not the right way to go. I am about to set out what we feel should be done. I am aware that a number of other Members will also go into detail to explain why we came to that conclusion.

I am going to whizz over the key recommendations. My hon. Friend the Member for Brigg and Goole will explain the mechanics behind them because he chaired the inquiry. We believe that the Government should promote the provision of high-quality financial education in schools in England. They should do that by acting on, or supporting, the following recommendations. I hope that the Minister’s pen is poised.

With regard to national provision, personal financial education should be a compulsory part of every school’s curriculum. Resources produced by outside organisations and visits of providers to schools should be available and accessible if considered helpful by teachers and quality-marked by a trusted body. There are many and varied examples of volunteers and financial institutions that already go into schools to do a good job. There is also evidence that some people felt that that was sometimes a marketing exercise.

It was also clear that provision was very patchy. We saw lots of evidence that if a school governor happened to have a connection to a particular financial institution, their school was more likely to have that opportunity than others. That said, those institutions can play an important role as long as the teachers lead. For example, a PE teacher providing a wide variety of sports may be particularly competent in football and rugby, but if his students want to take part in, say, trampolining, he may invite the local trampolining club to come in and give a lesson. That should be under the control of the teacher and be quality-marked so that we can be sure that it is not a marketing exercise.

Mr Robert Buckland (South Swindon) (Con): My hon. Friend is absolutely right to say that such lessons should be teacher-led. I had the pleasure of seeing a teacher-led money management workshop run by the charity Credit Action at St. Joseph’s college in my constituency a week or so ago. The year 8 group were really engaged. I could see that there was strong merit in the approach that was being taken in that lesson. I am delighted to support my hon. Friend and congratulate him on all the hard work he is doing.

Justin Tomlinson: I thank my hon. Friend for that important intervention. A number of members of the all-party group, including several who took part in the inquiry, visited local schools to see at first hand the enjoyment and fulfilment of young children who had such an opportunity. If we ask them whether they are interested in mobile phone contracts, the cost of driving lessons or the fact that ultimately they will have access to credit cards and loans, we see that they are enthused by money and buy into financial education.

The report recommends that: “Primary teachers should build upon their teaching of basic money and mathematics skills from an early age across the curriculum in preparation for secondary education.”

On that point, I welcome the Minister’s decision to restrict the use of calculators in primary schools, because it is clear that the ability to do mental arithmetic makes a huge difference when it come to providing the building blocks of the good mathematical skills that are essential to become an informed and savvy consumer. My hon. Friend the Member for South West Norfolk (Elizabeth Truss) championed that in a Westminster Hall debate in which I had the pleasure of offering my support. I know from my experience of learning maths in school, and being reasonably savvy when it comes to financial matters, that such skills are built on the ability to do mental arithmetic.

The report continues:

“We welcome the Government’s current proposal to increase the minimum requirement of mathematics GCSE to grade B for primary school teachers and encourage that it should be adopted. It would be advantageous to use the opportunity of training days to refresh the mathematics skills of primary school teachers, although we respect the right of the schools to provide training in a way they feel is appropriate.”

On secondary schools, the report recommends:

“Personal finance education should be taught cross-curricular in mathematics and Personal, Social, Health and Economic (PSHE) education with the financial numeracy aspect of personal finance education situated in mathematics and subjective aspects taught in PSHE education. It should be packaged in an obvious and clear way to young people.”

Elizabeth Truss (South West Norfolk) (Con): I congratulate my hon. Friend on securing the debate and on all the work he has done on this subject. Does he agree that financial education needs to be embedded in mathematics rigorously and that it should be seen as one of the forms of applied mathematics in the way that mechanics has been historically? We should see finance as another means of doing that as well. Does he agree that it is particularly concerning that girls perform worse in GCSE maths than boys, despite the fact that they do much better in other subjects?

Justin Tomlinson: I thank my hon. Friend for her intervention. I could not agree more. That point is right behind our findings. I will set out the split that explains that. The report states: “Personal finance elements of maths should be clearly highlighted to emphasise how they relate to real life decisions. If viable, the Government should implement the Smith Report and Maths Review’s recommendation for the twin GCSEs: ‘Application of Mathematics’ and ‘Methods in Mathematics’ to improve financial numeracy and ensure it is examined.”

Crucially, we saw that in the evidence on the factual side, such as calculating the cost of a loan. We set out some examples in the report that covered the cost of standard loans, calculating exchange rates, credit cards, savings, taxation, compound interest rates and APR, which was referred to earlier. Those are factual question with factual answers that are right or wrong and should be properly examined. We think that that would drive up standards.

Oliver Heald (North East Hertfordshire) (Con): May I say what a fantastic job my hon. Friend and the all-party parliamentary group are doing? Does he agree that these issues also come up with pensions? One of the great concerns with auto-enrolment is that people who have not previously saved will need to understand the products, so this sort of education will be very valuable.

Justin Tomlinson: That came through in the evidence. If we go into primary schools and start talking about pensions, we might not necessary engage, but one thing leads to another, and if young people have the basic skills, they can go on to use them later in life.

Simon Hughes (Bermondsey and Old Southwark) (LD): When I was going around the country earlier this year doing some work for the Government, I talked with young people not about pensions, but about paying for life after leaving school at 16. The overwhelming message I heard was that they wanted financial education not for the long or even medium term, but for dealing with their questions on where to study, how much it will cost, what about apprenticeships and what the impact on the family income of those choices will be. That is really urgent, really important and universally supported.

Justin Tomlinson: I thank my right hon. Friend for that intervention and echo those comments. We have seen that response as we have made our visits. Personal, social and health education should be clearly defined as four separate strands, one of which should be personal finance. By reworking the PSHE syllabus, more focused training and assessment can be developed, and individuals would have an opportunity to learn about the implications of their decisions.

Earlier, I pointed out that we are all individuals, with our own individual challenges, priorities and things that we consider important, so there is not necessarily a right answer in this area of education. I shall use yet another example from Martin Lewis to illustrate that point. An individual has been unable for 12 months to find a job; they have been offered a job in a neighbouring town but with only a three-month guaranteed contract; and the only way in which they can get to the town is if they take out an expensive car loan. Does that individual take out the loan? There is not necessarily a right or wrong answer. Are they confident that they will be so good in their job that they will last beyond three months? That is probably the determining factor, but such examples offer young people the opportunity to talk through the day-to-day, real-life challenges that they may face when they enter the big, bad world.

Kevin Brennan: The first key recommendation of the hon. Gentleman’s committee is that personal finance education should be part of every school’s curriculum. Is he including academies and free schools?

Justin Tomlinson: That is exactly the sort of question that, in setting out the mechanics of the recommendations, my hon. Friend the Member for Brigg and Goole will cover—if the shadow Minister could just be ever so slightly patient.

We also call for a school co-ordinator or champion to be appointed to each school, preferably from the senior leadership team. They should be given responsibility for ensuring that outcomes are achieved in maths and PSHE; for ensuring that there is a clear link between the elements of personal finance taught in mathematics and PSHE; and for sourcing resources. We make it clear that such education should be cross-curriculum, so there should be a point of contact who can champion it.

Dr Murrison: Teachers will argue that there is huge pressure on the curriculum, and I have a lot of sympathy with that, so how much time will it be necessary to carve out of an already pressurised curriculum to deal with the issue? I assume my hon. Friend is suggesting that primary children should be taught not about gilts and derivatives but about fairly basic stuff, so how much time will be required to bring them up to the acceptable level of numeracy which he envisages?

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 have seen 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.

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.

Diana Johnson (Kingston upon Hull North) (Lab): On a point of order, Madam Deputy Speaker. I apologise to the hon. Member for Darlington (Mrs Chapman) who is due to speak in a moment, but I would like to raise an important matter with you. Written ministerial statement No. 11, which relates to the Olympics, security and the Ministry of Defence, is supposed to have been published this morning. It is still not with the House. During Department for Culture, Media and Sport questions this morning, Members were given an opportunity to ask questions about the Olympics. Like my hon. Friend the Member for West Ham (Lyn Brown), I am concerned that the media are trailing several stories about warships and several thousand military personnel being in east London during the Olympic games. Could you use your offices, Madam Deputy Speaker, to see whether the statement could be made available forthwith?

Madam Deputy Speaker (Dawn Primarolo): I am grateful to the hon. Lady for giving me notice of her point of order. Notice was given this morning of a ministerial statement on this matter. I have made inquiries and it still has not arrived. I notice that the Leader of the House and Deputy Leader of the House are in the Chamber. I am sure that they have taken note of the comments that the hon. Lady has made. Perhaps they could make inquiries about this matter. Let us return to the debate. I call Jenny Chapman.

Mrs Jenny Chapman (Darlington) (Lab): It is a pleasure to speak in this debate. I congratulate the hon. Members for North Swindon (Justin Tomlinson) and for Brigg and Goole (Andrew Percy) on the work that they put into the report. However, before this turns into a complete love-in in which we all congratulate each other on our efforts, I should observe that I see financial education as being about 20% of the solution to the problem with debt in this country. We also need to look carefully and quite quickly at regulating certain parts of the industry, especially payday loans and the high-cost lending sector. I would also like to improve advice services and secure advice services that are under threat at the moment. I would look at advertising, too. I think that it is at the root of some of the severe problems that people get themselves into with debt. On loans, some very dodgy products are made to look commonplace, and young people are encouraged to take out short-term loans for things such as going to a music festival, which sends completely the wrong message. We need to do something about that fairly urgently.

As a nation, many of us lack the knowledge we need to properly manage our finances. About two thirds of people in the UK say that they feel too confused to make the right choices about their money and more than a third say that they do not have the right skills to properly manage their cash. Only 36% of people understand that the term APR relates to payments. Within families, about 19% of parents have never discussed how to spend money with their teenagers and 32% have yet to discuss how to budget or even describe what one is. Research has shown that 43% of parents do not know what basic financial terms such as APR or PPI mean. On Tuesday, I was in a financial education class in a women’s prison and I was quite impressed by how well informed some of the inmates were, but there was quite a long discussion about PPI, which seems to be a huge issue on which many people feel they have been misled. They say they would have benefited from clear information at a young age.

Frighteningly, about three quarters of us say that a lack of basic financial understanding is to blame for our debts. The gaps in our national financial knowledge are worrying but are made all the more troubling in these times of austerity. The citizens advice bureau in my constituency tells me that in the past 12 months it has dealt with just under £9.5 million of debt. Between 2004 and 2010, individual insolvency levels rose sharply. Apparently, in the 12 months ending in quarter 3 of 2011, about one in 361 people became insolvent, which is significantly higher than the annual average of one in 1,655.

Lyn Brown (West Ham) (Lab): Has my hon. Friend noticed, as I have, even more people coming to her surgery with financial issues than previously? Is she as worried as I am that they are coming to us at a time when even less independent financial advice is available for them to access?

Mrs Chapman: My hon. Friend makes a good point. She tempts me to break a promise that I made to myself when I came into the debate not to have a rant about the economy and make a wider political point, because I thought that that probably would not be what this occasion demanded. However, she makes that point for me and I thank her for it.

Education is the armour against being misled and I believe that advertising is misleading us. I refer the House to my ten-minute rule Bill of about a year ago, which I am sure all hon. Members have followed closely, which would curb some of the advertising on financial products. Financial education provides protection against some of the most traumatic circumstances a person can find themselves in, from paying an additional fee on an unauthorised overdraft because one is not aware of how the charges work, to losing one’s home or having one’s belongings repossessed and being declared bankrupt. Many of us have been able to learn from our mistakes because either the economy has been in a good state or we have been able to rely on family or friends. We have been lucky but young people now, as the hon. Member for North Swindon said, are in danger of financial mismanagement having a much longer-term effect on their lives. On finishing education, young people immediately face tough monetary decisions. At 17, they are already in debt and tied into contracts that they did not fully understand for things such as mobile phones. I take the slack given to me by the hon. Member for Wells (Tessa Munt) who made a good point about gambling. If that is an issue at primary level, which I had not appreciated, it is right that that be included in the curriculum. Therefore, we need to be properly prepared to deal with these decisions. Put simply, an informed borrower is a safer borrower.

Damian Hinds (East Hampshire) (Con): I appreciate the hon. Lady’s point, but does she not agree that if we have a problem with children under the age of 11 gambling, the most important place to start is not the curriculum, but access to online gambling?

Mrs Chapman: I agree completely. That goes back to the first point that I made about financial education being one of four strands of the solution, the others being debt advice, advertising and regulation. The hon. Gentleman is right to point that out.

In schools across England, the provision of personal financial education is ad hoc. We saw some good examples when writing this report. I took it upon myself to visit schools in my constituency and I was impressed with what I found. There is little teacher training on personal financial education and there is therefore limited subject knowledge and confidence among some teaching staff. It is stating the obvious to say that schools face significant barriers to teaching financial education, such as curriculum time, the absence of a statutory mandate and the lack of awareness of suitable resources.

Elizabeth Truss: Does the hon. Lady agree that the current requirement of a grade C in mathematics to teach in primary schools may need to be amended? Is she concerned, as I am, that we have the smallest proportion of students studying maths from 16 to 18 of any country in the OECD? We therefore do not necessarily have people moving through the system with the right mathematical understanding.

Mrs Chapman: I agree with that to a point. I have A-level maths and I am very glad that I studied that. One does not have to be a maths expert to deliver good financial education, but one does need to have confidence in the subject, have a good grasp of the knowledge and be a good teacher. A good teacher who can get the ideas across can probably teach the things that we discuss in the report quite well.

Lyn Brown: Given that I could not tempt my hon. Friend to have a rant on the economy, perhaps I can tempt her one more time to deviate on to the Government’s record on this matter. In November 2011, applications for training courses for secondary maths teachers fell by more than a quarter on last year. Is she as concerned as I am about the implications of that?

Mrs Chapman: I am very concerned about that. I am not only concerned about mathematics. My region has seen a drop of about 20% in higher education applications.

We are assured that there will be a last-minute surge in applications. If that is not the case, I fear that we will face a serious problem.

Oliver Heald: Does the hon. Lady agree that there is also an important issue about an entrepreneurial society? If we do not have enough basic financial information and knowledge in our community, it is a brake on innovation and entrepreneurialism. It also means that people who do set up a business often cannot prepare a decent business case and that their business does not sustain itself. That is important to our economy, as are the matters that she is raising.

Mrs Chapman: I do agree with that. There are plenty of examples of entrepreneurs who have done incredibly well with little formal education. I do not know this for sure, but I do not think I am pushing the boat out too much to suggest that Duncan Bannatyne, who has his head office in my constituency, does not have a maths degree. Such exceptions aside, most people would benefit from having this sort of knowledge. I think that it would assist in the way that the hon. Gentleman indicates.

I will conclude because much of what I was going to say has already been said, and probably much more eloquently, by the hon. Member for North Swindon. [Interruption.] I was not expecting a response to that. On the advice of teachers, the all-party group on financial education for young people felt that it was necessary to have a champion for personal finance in each school. I had my doubts about that when the report was drafted, because I was not sure that schools would welcome having that burden loaded on to them. However, it was pointed out to me that teachers had argued strongly for that recommendation to be included. With that in mind, I am happy to support it.

The all-party group also believes that the subject should be examined, and I agree. Ofsted has stated that courses leading to formal accreditation have inspired “a more coherent curriculum and sharper focus on the learning outcomes students were expected to achieve”.

As one head teacher has explained: “Unless you test it, it will not happen”.

The introduction of dual mathematics GCSEs would promote the right objective and ensure that the subject is properly examined and taught. I urge the House to examine the matter closely, take it seriously and include it in what I hope will be a package of measures that will help address the serious problem that we have not just with the lack of financial education but with debt more broadly. I hope that we will consider matters such as advertising, the provision of advice and the regulation of the high-cost lending market.

I wish to conclude with a lovely quotation that I have found, which I could not help but try to give at some point. Benjamin Franklin said: “An investment in knowledge pays the best interest.” I think that is quite a nice way to end.

The Parliamentary Secretary, Office of the Leader of the House of Commons (Mr David Heath): On a point of order, Madam Deputy Speaker. The hon. Member for Kingston upon Hull North (Diana Johnson) raised a point of order a short time ago about the availability of a written ministerial statement from the Ministry of Defence about the London 2012 Olympics. I have since had the opportunity to look into its whereabouts. It was, in fact, issued just after 1.30 pm today, but for some reason the IT did not allow it to get through to the Vote Office. That has now been corrected, and it is now available in the Vote Office. I hope that if the hon. Lady goes to either the Vote Office or the Library, she will get a copy, but I have a further copy here if she would like it.

Madam Deputy Speaker (Dawn Primarolo): I am grateful to the Deputy Leader of the House for that. I am sure that he agrees that, notice having been given by a Department of a written ministerial statement, it should have been here a considerable time before 1.30 pm. However, we are grateful to him for his prompt action and for the fact that Members will now be able to look at the statement.

The Minister of State, Department for Education (Mr Nick Gibb): May I start by apologising for having been a couple of minutes late to the debate?

It is a pleasure to follow the hon. Member for Darlington (Mrs Chapman). She is right that an investment in knowledge pays the best interest—certainly better than the interest that some of my retired constituents are receiving on their bank balances at the moment. She made an important point, and I hope that the national curriculum review will ensure that our new national curriculum increases the amount of knowledge that children receive.

I congratulate my hon. Friend the Member for North Swindon (Justin Tomlinson) not only on his balanced and passionate speech but on his leadership, along with my hon. Friend the Member for Brigg and Goole (Andrew Percy), of the all-party group on financial education for young people. I thank the all-party group for its report on financial education in the curriculum. Both have been powerful advocates of the cause, and together with Martin Lewis have managed a powerful and effective campaign. I look forward to hearing from my hon. Friend the Member for Brigg and Goole later if he catches your eye, Madam Deputy Speaker.

Martin Lewis is an energetic and highly effective campaigner for financial education in schools, the result of which has been an e-petition with more than 100,000 signatures. From meeting Martin Lewis recently, it is clear to me how passionately he believes in the importance of financial education for young people to help them deal with the complexities and dangers of money and debt management. I know that the all-party group has also been well supported by the Personal Finance Education Group, which has worked for a number of years to promote and develop finance education in schools.

The Government are currently conducting two reviews—that of the national curriculum, which of course includes the core subject of mathematics, which is a cause about which my hon. Friend the Member for South West Norfolk (Elizabeth Truss) is passionate, and that of personal, social, health and economic education, which includes financial capability. The all-party group’s report provides important insights and recommendations to both reviews, and the Government are grateful to it for its thorough and high-quality report. We will examine it very carefully indeed.

I know that we all agree about the importance of good-quality personal finance education and the critical role played by a sound grasp of basic mathematical skills. Support from the finance industry and a range of good resources play their part in supporting schools to teach pupils how to manage their money well.

It is true that young people are growing up in a materialistic world for which they are often not fully prepared. As my hon. Friend the Member for Devizes (Claire Perry) said, the “Got to have it now” culture means that young people have high aspirations for branded or designer goods, often without the means to pay for them. They have unrealistic expectations about the lifestyle that they can afford, which are fuelled by the glittering trappings of celebrity.

My hon. Friend the Member for North Swindon made the important point that our generation—I like to associate myself with his generation—was cushioned from its financial mistakes by rising house prices, which provided equity to pay off consumer debts. That is not available to the current generation.

We all have a job to do in moving young people’s aspirations away from that empty and often destructive perception of what success means. Our determination to raise academic standards in all schools and for all young people, regardless of their background, is about high achievement and stretching aspirations. Developing children’s intellectual capabilities and interests is a direct antidote to materialism. Alongside that, young people must acquire a sense of responsibility. They need to contribute to society as responsible citizens and not take wild risks. They need to learn to live within their means.

Kevin Brennan: I understand why the Minister will not today give us the conclusions of the curriculum review that is under way, but does the first key recommendation of the report—that personal financial education should be a compulsory part of every school’s curriculum, which I take to mean all taxpayer-funded schools, including free schools and academies—fall within the terms or the remit of the curriculum review and the review of PSHE?

Mr Gibb: We made it very clear when we announced the review of PSHE education in schools that it is not possible for PSHE to become a statutory element of the national curriculum. However, it is in the remit of the review to recommend that elements of PSHE should be compulsory if it believes that strongly.

Kevin Brennan: Just to be clear, does that include making those elements compulsory in free schools and academies?

Mr Gibb: The national curriculum applies only to maintained schools. The rules that apply to academies go through their funding agreements. The review will consider that issue. The extent to which those elements will apply to academies depends on the funding agreements, which maintains the approach to academies taken by the previous Government.

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—

Kevin Brennan: Neither a borrower nor a lender be.

Mr Gibb: The hon. Gentleman has said it for me. “Neither a borrower nor a lender be.” Can he carry on? “For loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.”

I will give way to the hon. Gentleman.

Kevin Brennan: It is good advice from Polonius, but we must remember that he is widely regarded as an old hypocrite. Perhaps he is not the best person to quote. He was a silly old fool.

Mr Gibb: It was good advice to his son.

Kevin Brennan: Perhaps Iago might be more appropriate. “Who steals my purse steals trash; ‘tis something, nothing; ‘Twas mine, ‘tis his, and has been slave to thousands; But he that filches from me my good name Robs me of that which not enriches him, And makes me poor indeed.”

Mr Gibb: Very good indeed. The green-eyed monster is there as well. The hon. Gentleman also makes the case for rote learning of English literature. That is missing from our schools. The more poems we can recite in our early years, the better. The hon. Gentleman must have learned that passage many years ago.

To be successful and to achieve aspirations, young people need to be able to stand on their own two feet. They must organise themselves, prioritise, manage money and work independently. That needs to start from an early age. Primary schools must lay the foundations by raising standards of arithmetic and securing a confident progression on to secondary schools. I am also mindful of the many reports of young people leaving school without the most basic knowledge of mathematics. We are committed to improving attainment levels in maths and to ensuring that all children leave primary school fluent and confident in arithmetic. We are studying evidence on the most effective ways of teaching arithmetic in primary schools and we have read the reports and listened to the speeches of my hon. Friend the Member for South West Norfolk.

In the current secondary mathematics curriculum, pupils must achieve fluency and confidence in a range of mathematical techniques and processes that can be applied in a wide range of circumstances, including managing money. The kinds of calculations that people should be able to do are set out in the report, “Financial Education and the Curriculum” by the all-party parliamentary group. There is a suggested example of a GCSE question. It asks what Sophie should do with £4,300 that was left to her by her grandfather. She has a choice of two accounts. The first pays 3.1% on a monthly basis and the second pays 3.25% annually. The formula on page 41 is “AER=100[(1 + r/100n)(n) – 1]”. If one can master that, one knows all one needs to know about how to calculate compound interest.

Young people need to be confident and competent consumers. They need to be able to work out when a supermarket deal is not what it seems. For example, when supermarkets offer a deal on buying two small packs of something, they need to work out whether it is really cheaper per litre or per kilogram than buying one larger pack. In fact, I have found in some supermarkets that it is more expensive to buy one larger pack than to buy two smaller ones.

The Government are currently reviewing the national curriculum, including the curriculum for maths. The all-party report on financial education and the curriculum will feed into the review, and the review will ultimately ensure that the GCSE reflects its conclusions. We will consult widely on the number of maths GCSEs in the light of the review, and will consider evidence from the pilot of the pair of maths GCSEs referred to by my hon. Friend the Member for South West Norfolk. Application of mathematics and methods in mathematics will also inform decisions. We will look carefully at the evaluation of the pilot.

Kevin Brennan: What have not been mentioned so far, but have been endorsed by the hon. Member for North Swindon (Justin Tomlinson), are the qualifications in personal finance offered by the Institute for Fiscal Studies. Has the Minister had a chance to examine them and form a view on how suitable they are for pupils?

Mr Gibb: We will examine them as part of the curriculum review, but our first priority is to establish what knowledge children need. That will then feed into the qualifications. We have also benefited from Alison Wolf’s review of qualifications in schools. A process is under way to ensure that every qualification offered by schools is of sufficient size and quality, and commands respect in the real world among employers and further and higher education institutions. Those are the factors that will determine whether a qualification continues to be recognised in performance tables.

Simon Hughes: The Minister rightly concentrates mostly on primary and secondary schools, for which he is directly responsible, but does he accept that it is also important for young people to receive financial education elsewhere, for instance through the youth services? After all, they spend much more time outside school than at school. Will there be, as it were, a draft proposal for consultation after the Government have formed a view but before they finalise their proposals? I realise that this is controversial, but it seems to me that it would be wise for the Government to say “This is our thinking now that we have taken all the evidence, but before we form a final view there will be a debate in the House and a short time in which the public can respond.”

Mr Gibb: My right hon. Friend has made a legitimate point, with which I agree. Our intention is to consult widely on the curriculum review. There is an important set of decisions to be made. We have received nearly 6,000 responses to the call for evidence, and we will report on them shortly. The draft programmes of study will be published during the next year and beyond, and there will be wide consultation on them. Even before they have been published, there will be a great deal of consultation with stakeholders and subject specialists. We want to establish a consensus in the country about what we want children to be taught. However, we must slim down the curriculum and differentiate it from the school curriculum in order to identify a body of knowledge that we want all children to have acquired. How it is taught is a matter for teachers, and will depend on their professionalism.

Financial education is also an important strand of personal, social, health and economic education. We know from the Ofted report “PSHE in Schools”, which was published in July 2010, that provision for financial education is patchy. Some schools have not yet got to grips with the economic well-being and financial capability strand of PSHE, which was introduced in secondary schools in 2008. The aim of the review is to determine how we can help schools to improve the quality of PSHE teaching, while giving teachers enough flexibility to enable them to judge for themselves how best to deliver PSHE. We have finished collecting evidence, and will publish proposals for public consultation next year. The financial education curriculum report will play an important part in helping us to draw conclusions for the purpose of the PSHE review.

Good-quality teaching is also fundamental. If we want an education system that ranks with the best in the world, we need to attract the best people and give them outstanding training. There is strong evidence that links teacher quality, above all other factors, with pupils’ attainment. Our plans for initial teacher training show the Government’s commitment to recruiting the very best graduates into teaching, securing better value for money from ITT and reforming training. There is a focus, then, on the most important elements of being a teacher.

In 2012-13, we will prioritise places on primary ITT courses offering a specialism in mathematics and science, and in 2013-14 we expect to adjust financial incentives to favour trainees on specialist primary courses with a good A-level in mathematics, science or language over those on generalist courses. For serving teachers, the mathematics specialist teacher programme aims to improve the practice of primary maths teaching by improving mathematical subject knowledge and pedagogical approach and by developing teachers’ expertise to provide effective professional development. More than 3,200 teachers are currently on that programme.

The all-party group’s report on financial education and the curriculum is an important report. It is grounded in solid research and data, with practical solutions and a commitment to ensuring that young people receive the education that they need to become confident consumers. Much can be achieved by supporting finance education, working with those in the finance sector, finance education experts and schools. There is huge enthusiasm among teachers and young people, and we will give careful consideration to the report and all its recommendations.

Kevin Brennan (Cardiff West) (Lab): May I first apologise to House as I may need to leave before the debate’s conclusion, depending on how long we run on for?

I congratulate the all-party group on financial education for young people on producing its report, and I pay tribute to the hon. Members for North Swindon (Justin Tomlinson) and for Brigg and Goole (Andrew Percy) and my hon. Friend the Member for Darlington (Mrs Chapman) for the work that they put into it. [Interruption.] Did I miss somebody out? I beg the pardon of the hon. Member for Wyre Forest (Mark Garnier). Does anyone else want a mention while I am on my feet? I pay tribute to everyone who has been involved in the report. It is very thorough and much work went into taking the evidence. It is of the standard of a Select Committee report—perhaps even better than some Select Committee reports.

I also congratulate Members on getting Martin Lewis to help with the report, although it sounded as though that was not too difficult for the hon. Member for North Swindon, and on getting 100,000 people to petition for today’s debate. More broadly, I pay tribute to the role that Martin Lewis has played in improving public awareness of finance issues through his website and other media. When I was a Minister with responsibility for consumer issues, he was very supportive of a reform that I introduced and from which I hope some Members here might have benefited. I refer to the measure on 0% credit card offers under which repayments by consumers henceforth went on the most expensive debt first—exactly the opposite of what used to happen, when credit card companies would pay off the 0% debt first and leave people with a very high rate of interest on any remaining balances. That is the kind of understanding that consumers need to have when taking up so-called 0% credit card offers, including on arrangement fees.

Knowing how to manage money and be a savvy consumer are vital life skills in an increasingly complex world, but why do more young people not start learning this at school? That is the question at the heart of today’s report. As a former head of economics in a Cardiff comprehensive school, I am well aware that this issue has been on the agenda for many decades. I can remember some of the earlier initiatives on improving financial education in schools, including the early days of school banks, when young people were encouraged to make deposits in the school bank, often supported by the local branch of their bank or building society.

Education is about giving young people the skills and knowledge that they need to get on in life, which is why every child should learn not only the three R’s at school but about pensions, saving, borrowing and mortgages. As the report shows, despite many of these initiatives down the years, the provision of financial education across the country is still extremely patchy, as the Minister acknowledged when he referred to the Ofsted report. That is why we would have had compulsory financial education in every school last September, through personal, social and health education, under plans that the previous Government set in train in the then Department for Children, Schools and Families before the last general election, again with the help and support of Martin Lewis from MoneySavingExpert.com.

We said that financial education should be a compulsory part of the curriculum, as part of PSHE, with improved training and tools to give teachers the confidence to teach it. The law to make that happen was going through Parliament when the general election was called last year. However, as we heard earlier, those on the Conservative Front Bench, including the current Schools Minister, refused to support it—probably for other reasons, to do with their objection to the sex education provision in PHSE—and so the plans were scrapped.

There have been 18 months in which no progress has been made, which is why the report is so welcome. It gives us an opportunity to try to find a way forward, and perhaps a cross-party consensus, on a vital issue for the long-term good of our country. I am therefore pleased that the e-petition calling for financial education to become a compulsory part of the curriculum has been a success and that it has sparked today’s debate. The report is also timely, as there is a review of the curriculum under way, as the Minister said, which gives the Government a perfect opportunity to listen to the thousands of people who are backing the campaign. As I said, every child should learn how to manage their money. It will set them up for the rest of their lives, and financial education lessons might also enable them to teach their parents a thing or two.

Indeed, my hon. Friend the Member for Makerfield (Yvonne Fovargue)—who is on the Front Bench, in the Whips’ corner—sent me an e-mail yesterday after we talked about this issue. Hon. Members will be aware that the Prime Minister praised her yesterday for her work with citizens advice bureaux. She said: “One of the side effects of the project I managed delivering to schools/colleges was a rise in demand for debt advice from the parents…They talked to their children and realised there was a problem.”

She continued: “There has to be sufficient quality free debt advice available to cope with this demand in the local area—and the signposting needs to be sensitive and appropriate too. Teachers need to think about how they would deal with the issue—perhaps a session from the local CAB?”

To which she adds: “if it’s still around that is!”

This is therefore a timely moment for a debate on financial education, with the review of the curriculum under way. We in the Opposition will be looking carefully at what the Government come up with when they conclude their review.

However, I think there is a paradox and perhaps some confusion at the centre of the Government about the curriculum. As I understand it, the Schools Minister and the Secretary of State are driven in their review of the curriculum in part by a desire to give more freedom to teachers, head teachers and schools to teach as they think appropriate for their local communities, with more autonomy for schools and head teachers. However, at the same time, Ministers—driven perhaps by the desire to generate the right kind of headlines—continually demand a specific approach to teaching all sorts of subjects, including history, as favoured by the Schools Minister and the Secretary of State. At the same time, there is a big push, backed by money, for more and more schools to convert to academy status or become free schools, thereby no longer being required to teach the national curriculum. On the one hand, therefore, the Government’s policy seems to be to exempt most schools over time—if their current plans continue—from teaching the national curriculum, while on the other hand they are revising the national curriculum to ensure that schools teach more closely what they want them to teach. At some point, some genius in the Department for Education will have to square that circle and explain how those two things will be delivered.

It is paradoxical, and perhaps even absurd, that if the Government get their way, we will have a national curriculum that the vast majority of schools will not have to teach. It will not matter what anyone recommends in a report should be made compulsory: it will not be deliverable unless there is some stick in the system. The Government cannot decentralise and at the same time dictate from the top, because ultimately the whole project will collapse in on itself.

Elizabeth Truss (South West Norfolk) (Con) rose—

Kevin Brennan: I can see that the hon. Lady is itching to intervene.

Elizabeth Truss: Is it not about leadership, as the reality is that many academies and, indeed, private schools follow or tack along with the national curriculum? It is the role of the Education Secretary and the Department to indicate what kind of things students should know when they leave school.

Kevin Brennan: I am sure the hon. Lady is right; she thinks deeply about these subjects and makes intelligent contributions. The report, however, states: “Personal finance education should be a compulsory part of every school’s curriculum.”

If that is going to be delivered, there must be some transmission mechanism. I am afraid that history teaches us, and future events will teach us, that exhortations from Secretaries of State—no matter how talented or eloquent they be—are not sufficient to make things a reality on the ground. As I say, there has to be a mechanism to make it happen.

In thinking about this issue, the Minister will need to clarify what the role of the national curriculum will be in a schools landscape where most institutions will not be required to follow it. How will that fit in with the original vision of a national curriculum to be taught by all schools across the country, as introduced by Kenneth Baker, now Lord Baker, who was the Secretary of State when I was a teacher back in the 1980s? How can the Minister ensure adequate teaching of financial education if most schools will ultimately be free to follow their own path?

Damian Hinds: The shadow Minister says that a transmission mechanism is required. Does he agree with me that if practical maths were made part of the GCSE syllabus for each of the main awarding bodies, such a transmission mechanism would exist?

Kevin Brennan: That is for 14 to 16-year-olds. If GCSE maths is taken between the ages of 14 and 16, young people would indeed receive some of this provision. The hon. Gentleman is correct about that, but the report goes much further in its recommendations for making financial education compulsory across all ages in the curriculum.

Damian Hinds rose—

Kevin Brennan: I will give way again in a moment if the hon. Gentleman is dead keen. All right; I will carry on.

The Government are correct in their desire for people to take responsibility for their finances in order to reduce unaffordable debt, but they have to get the ball rolling, which means that they need to find some way of getting this going in our schools.

Julie Hilling (Bolton West) (Lab): Does my hon. Friend agree that although we might want to teach many subjects as part of the curriculum, unless we specify them, there is always the risk that they will not be taught? Practical maths has been mentioned, but different parts of the subject might be taught. Some subjects—I would include emergency life support skills among them—are so important that we must specify that they have to be taught.

Kevin Brennan: I have sympathy with the Minister over the difficulty created by having more and more subjects shoved and squashed into the curriculum. Education Ministers of all parties will know that it is a difficult task as they come under pressure to include all sorts of subjects in the curriculum. My point is that we need to be absolutely clear what we are talking about. If the Government accept the report, they will have to go a lot further than simply including some practical questions in GCSE maths papers. What my hon. Friend the Member for Bolton West (Julie Hilling) said is absolutely correct.

There are examples of good practice out there. I shall not go into them in too much detail, but some schools around the country could link up with local credit unions. This has not been mentioned much in the debate, but it is a great way to encourage responsible saving in community-based organisations and to teach young people about the responsible use of money and about saving.

Yasmin Qureshi (Bolton South East) (Lab): My hon. Friend touches on the matter of teaching. Does he agree that, as statistics from the Graduate Teaching Training Registry obtained by The Times Educational Supplement show, from November 2011 overall applications for training courses for secondary maths teaching fell by more than a quarter? Bearing in mind that the teaching of personal financial education is going to require an element of teaching maths, does he agree that the Government should encourage more teachers to apply to teach the subject?

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.

Andrew Percy (Brigg and Goole) (Con): It is a pleasure to speak in this important debate and I am pleased to see that so many Members have attended, particularly on the Government side of the Chamber, and especially on a day on which there is a one-line Whip and, apparently, a by-election. It is good to have so many people here to debate this important issue. I am also pleased to follow both the Minister and the shadow Minister. I thank the Minister, in particular, for his warm words about our report and for the assurances he has given us about the role it will play in the curriculum review. I also thank the shadow Minister for his warm words, although I think he was trying to push at the edges of political point-scoring—

Kevin Brennan: It is my job.

Andrew Percy: Alas, perhaps it is. I must say, however, that I will not be able to match the exchange of Shakespearian quotes between the two Front Benchers—

Andrew Bingham (High Peak) (Con): The bard from Brigg.

Andrew Percy: I am certainly not, as my hon. Friend interjects, the bard from Brigg. It is not going to happen, alas.

To return to the report, I thank the Minister for meeting me and my hon. Friend the Member for North Swindon (Justin Tomlinson) shortly before its publication. The Minister will recall that I said that if the Government did not take it seriously, I might well end up dousing myself in petrol and setting myself on fire, but I will not have to make that protest any more, not least because I cannot afford the petrol at the current prices and because we have had a positive response.

I thank all my friends on both sides of the House who sat on our inquiry. They included my hon. Friends the Members for Congleton (Fiona Bruce), for Wyre Forest (Mark Garnier), for Newton Abbot (Anne Marie Morris) and for Lancaster and Fleetwood (Eric Ollerenshaw) and the hon. Member for Darlington (Mrs Chapman), as well as myself and my hon. Friend the Member for North Swindon. It was a thoroughly valuable experience and I think we all enjoyed taking part in a cross-party inquiry on such an important issue. Because we conducted it in the way we did, on Select Committee terms and by hearing evidence, I think we all felt that the hours we spent doing that were probably some of our most valuable since getting elected. One can wonder whether a lot that goes on in here is having any impact or making any difference, particularly in some people’s cases, but on this issue we all felt that the experience was valuable and that we were engaged in something important.

Some hon. Members will have read our report, which is very comprehensive. I am not allowed to use props so I shall not hold it up. As can be seen from the executive summary, we have recommended that this subject should form part of the national curriculum. We want it to be compulsory across schools, and I shall say something about the mechanics of that in a moment. It is important to get some statistics into the debate about why this is so important. As people who have read our executive summary will have seen, it states that, according to a learndirect study: “Two-thirds of people in the UK feel too confused to make the right choices about their money and more than a third say they don’t have the right skills to properly manage their cash.”

Sadly, we have seen higher and higher levels of insolvency in recent years, and we know that personal debt levels have exploded in the past 10 or 15 years.

I am not part of the generation about whom my hon. Friend the Member for North Swindon spoke. I am part of the generation after, having got on the housing market only last year but with considerable debts, which I have spoken about before. I am not one of those who will see the big increases in house prices that will take care of all those nasty credit card debts.

Let me explain why I got involved in all this. It has been a good partnership with my hon. Friend the Member for North Swindon because he is extremely financially competent, as anyone who knows him will know. Having shared a flat with him, along with another of our hon. Friends, I can certainly attest to his competency in all things financial—and perhaps to his being frugal as well. I am the antithesis of that, having made some incredibly bad financial decisions when I left school and went to university, including getting on the conveyor belt of credit card debt while at university and getting student loans even though that was the year before tuition fees came in. So I left university with an awful lot of debt and then did two years of postgraduate study, which I funded myself, which meant getting into even more debt. I am still paying off those debts today, and I do not mind the education side of them—it is all those other lifestyle debts that one builds up on credit cards that I am still lumbered with to this day.

It has been good to have a partnership of two people with different experiences of managing their debt looking at this issue. I was proud to be in the top set of my comprehensive school in Hull. I was quite bright and managed to get a GCSE in maths at grade C although I have always struggled with maths. I got good A-levels, a degree and postgraduate qualifications but I am still completely and utterly incapable of working out interest payments, APR and all the rest of it. I could not tell you what I pay in mortgage interest, Mr Deputy Speaker—I just pay up every month. I suppose I am an example of the people we have talked about and at whom the report is aimed. This is not moralising about debt. We have been very clear in saying that this is not about saying that people should not get into debt or about educating people never to get into debt. It is about providing people with appropriate skills.

Kevin Brennan: Is the hon. Gentleman at all worried that he has put his name to a report that includes a recommendation that would bar him from teaching in a primary school?

Andrew Percy: I understand that that would not be applied retrospectively—and a very sound recommendation it is on those terms. I shall come on to that in a moment, because I taught in a primary school the year before I was elected, and I had to teach maths. That experience has led me to the conclusion that we should absolutely ensure that primary school teachers have better maths qualifications. Although I did not do them a disservice, the children I taught would have benefited from being taught by somebody who had not struggled with maths as I did. I managed to scrape a GCSE C grade. That is why we have supported the minimum grade of B for primary school teachers.

My hon. Friend the Member for North Swindon outlined most of our recommendations and stole quite a lot of my speech in the process. He also talked about the inquiry process and stole my three bullet points on that too. I have been left with something to say, however. It is important to remind ourselves why this subject is so important. A lot of the research that we looked at in preparing the report was quite frightening. The situation out there is even worse than I expected. Research by EdComs in June 2009 found that by the time children reach the age of 17, more than half of them are or have already been in debt. A YouGov survey in 2008 found that 70% of 18 to 24-year-olds were already in debt. As we have heard, with tuition fees and the way life is today, that figure will not go down any time soon.

A survey by M&S Money found that some 14 to 18-year-olds are given no help with basic money matters by their parents. Indeed, 19% of parents have never discussed with teenagers how to spend money, and 32% have yet to discuss how to budget or even describe what a budget is. Most telling of all is the report compiled in March this year by Credit Action which found that a lack of financial education has cost Brits nearly £250 million in bank charges and penalties alone. I know that we are all grateful to Martin Lewis for helping us to get our money back in those matters.

The lack of financial education is a growing problem. We seem to be sending young people out into the world, which is increasingly financially complex, without providing them with the skills they need. I support the Government’s drive to reduce burdens on schools, to slim down the curriculum and to mandate less to schools, but in that process we must never allow ourselves to scale down to the extent that we remove the basic capabilities that we expect our young people to have when they leave school. Our view is that the financial education component should be a key measure.

I listened to the shadow Minister’s comments about PSHE. We gave some consideration to that. One of the big fights in our inquiry, not only between panel members but between those who gave evidence to us, was about whether financial education should just sit in PSHE. As a former practitioner who was expected to deliver PSHE, I felt strongly that it was not suitable, not least because it is not examined. As the hon. Gentleman, as a former teacher, will know, and indeed as head teachers told us during the inquiry, if a subject is not examined, schools do not necessarily accord it the importance they should.

For three years, I taught in a very difficult school in Hull, in one of the most deprived catchments in the country. I had to deliver PSHE, but we had so many other pressures on us to raise standards, such as working with grade C-D borderline kids so that in the next year’s league tables we would do a little better and would not be picked out by the local media as the worst-performing school. In better-performing—dare I say it?—more middle-class schools, teachers may be able to indulge themselves a little more in developing the PSHE curriculum because they do not have quite the same pressures on them. However, I am afraid that in a lot of schools, despite the professionalism of teachers, the subject often takes a back seat. When the Arun Youth Council and My Money Young Advisers came to give evidence, I asked one young person, “What do you think of PSHE?” His response was, “Well, it’s a bit of a doss.” Sadly, that is the situation in a lot of schools. Some fantastic work is being done across the country in PSHE, and we were provided with evidence of that and told about it by other young people. Although PSHE is important and must be part of the solution, we concluded that financial education had to be examined so that schools place the necessary emphasis on it.

We made it clear that there should be a financial education element within maths that can be clearly defined and packaged to young people. It is not simply a case of putting in a few questions that look like they are about financial education, as the shadow Minister said. It is about packaging a lot of the education and skills that are already there and saying clearly to young people, “This is financial education, and this is why we are doing it.” We can also help to improve the importance placed on PSHE, which is already taught in schools, because it will be used to support the drive for standards in mathematics. I think that that provides a real opportunity to raise the profile and importance of PSHE across the country.

I will give a couple of examples from our report to demonstrate this. As my hon. Friend the Member for North Swindon said, we did not want to come up with a wishy-washy report that said it would be easy to have financial education, knock on the Minister’s door and have him say, “Thank you very much. It looks lovely, but I am afraid that it’s not going to happen.” Therefore, we have tried to work in the direction of Government policy and to provide practical solutions.

Members who have looked at the report will have seen that on page 38 we demonstrate clearly where in the maths curriculum the financial education elements can fit nicely—we are grateful for the help we had from mathematicians. Those have been split into three headings: money and transactions; risk and reward; and financial landscape. The money and transactions elements includes being able to do compound interest calculations with a calculator or spreadsheet, to set up a spreadsheet to do calculations involving percentages and to use foreign exchange rate information to make calculations. For financial landscape, the competencies include the ability to do reverse percentage calculations and to work out an inflation rate for a given time period, which is very important and we hear a lot about. That involves real maths skills, not wishy-washy stuff at all.

That can be supported over in the PSHE curriculum by talking to young people about the products that they might have to make choices about. For example, we can talk to them about managing money, budgeting, the subjective issues of risk and reward and what is right for them in particular situations. That is not something we felt could fit easily into one or other area, which is why the solution we have come up with is deliverable within the current curriculum without putting extra pressures on schools.

One of the recommendations that has been referred to is that of having a co-ordinator on this in schools, and that should be someone from the senior leadership team within the school. That is important, because one of the big drivers when I first started teaching in the early 2000s was the drive towards more cross-curricular working, and it happened for a bit and then we lost focus on it. Having someone at a sufficiently senior level within the school to drive that cross-curricular agenda and link the two subjects is important, and the educational professionals who came to speak to us were very supportive of that approach.

Nick de Bois (Enfield North) (Con): My hon. Friend raises an important point about the leadership coming from within schools, but does he agree that there might also be a role for the private sector and financial institutions to lend their support to make pragmatic advice available?

Andrew Percy: My hon. Friend must have been reading my notes over my shoulder, because that is exactly the point I was about to move on to. I will be brief, because I know that other Members wish to speak. We took a lot of evidence from financial institutions and banks, and one of the challenges we set out for them in the report relates to training. It would be pointless if I went in to deliver financial education to any of my pupils, because I am not financially competent, so there is an issue of training. But we have identified that role as one that financial institutions could work on more closely. They do a lot already, and anybody who knows Barclays will have seen its money skills programme. I visited Barclays in my constituency recently, and through the fantastic Sobriety Project it was doing some excellent work with Goole high school students who are at risk of exclusion and with vulnerable young people in the town.

Nationwide has a programme, and so does Capital One. I do not want to risk missing out any institutions, but many are already engaged in financial education, so we have set them the challenge of coming together, getting their resources kitemarked and perhaps being co-ordinated by a charity. Financial institutions have a real role to play in supporting such education in the curriculum, and in helping to develop the training to which my hon. Friend refers.

I am aware that many other Members wish to speak, but I shall just mention a couple of other organisations that support our proposal, as they should be read into the record if nothing else. First, and most importantly, there is one in my constituency. After the report came out, I was inundated with e-mails from various organisations, one of which I received from one of the two credit unions in my constituency, Hull and East Yorkshire Credit Union, to which I think the shadow Minister referred. It informs me that it would very much like to support our campaign on financial education, because it is very much in line with the ethics and objects of its movement.

Nationwide contacted us to say that “the report looks very comprehensive and is something Nationwide very much welcomes.”

The Money Advice Service issued a statement to “welcome the APPG on Financial Education & Young People’s report on Financial Education and the Curriculum.”

We were congratulated by the Scout Association, which also has an interest in the area, and the Institute of Chartered Accountants in England and Wales “call on MPs to back the introduction of mandatory financial education during Thursday’s debate.”

So there is a lot of support from a range of institutions and organisations.Finally, I emphasise again that our proposal is not about watering down the curriculum, nor is it a wishy-washy thing with which to moralise about debt. It is about real maths skills; about using real-life experiences such as phone contracts, student tuition fees, mortgages or whatever to support the drive for standards, about which we are all passionate and we know the Minister is absolutely passionate; and it is about ensuring that young people enter this complex financial world with the skills to make better decisions than I, and many other people who have gone before them, have made.

Several hon. Membersrose—

Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I do not want to introduce a time limit, but I am very concerned about the amount of time being taken. At this rate, we are not going to get everybody in, so we need a little discipline, because the winding-up speeches will have to start at about quarter to 6. We should bear in mind that, if people are going to speak for 19 minutes each, other people will not get in, and I want to ensure that everybody gets in, so self-discipline will be very helpful if we are to look after each other.

Yvonne Fovargue (Makerfield) (Lab): Thank you, Mr Deputy Speaker. I can promise that I will not take too long over my speech.

It is always a pleasure to follow the hon. Member for Brigg and Goole (Andrew Percy), and I congratulate the hon. Member for North Swindon (Justin Tomlinson) on the all-party group and all Members who have contributed to the report.

I was lucky enough to be involved with a financial education project for 10 years when I worked for Citizens Advice in St Helens, and we started from a very low base, with schools that had never before thought of having such a project. We also worked with tenants’ and residents’ groups and with a wide range of organisations, and I was fortunate to employ a passionate member of staff who gained the first-ever teaching qualification in financial education. That was vital in moving our project forward into schools, because we found that teachers were not confident about teaching the subject. They understood that it needed to be taught, but they did not have the confidence to include it in the curriculum.

I therefore totally support the idea of a financial education champion in schools, because in our work we found that the maths department was not always the one that came forward. In one school in which we worked, the drama department was keen on the idea, and an excellent play, which I think is on a website somewhere, was written about the three little pigs living in their houses. We also offered qualifications, including the ASDAN qualification and open college network qualifications, so schools and organisations involved in the Work programme, with which we also worked, could offer qualifications to young people. That was important in making teachers realise that financial education was an actual subject. It was not an add-on; it was an important part of the curriculum.

However, as my hon. Friend the Member for Cardiff West (Kevin Brennan) mentioned, there was an unexpected side-effect; we had not anticipated the rise in the number of parents coming to us with their debt problems. Students would go home and say, “Today I learned all about annual percentage rates. Let’s have a look at our household finances as an example.” The parents would sit there and think, “We’re beginning to hit a problem here. We are noticing that we cannot pay all our bills and that we’re borrowing off one credit card to pay off another.”

There absolutely needs to be a referral mechanism for advice about debt. It has to be sensitive and local. As my hon. Friend also mentioned, it could be the local citizens advice bureau. We were fortunate; somebody from the CAB delivered the financial education classes and they could talk to the parents and refer them to a specialist money adviser.

The only thing that I would like to take issue with is the part of the motion that mentions “irresponsible” debt. I can honestly say that in 24 years of working for a citizens advice bureau, I never saw anyone who had aimed to get into debt. Debt was often caused by irresponsible lending; innumerable people came to us with debt, cut up their credit cards, sent them back and were immediately sent a new credit card. Now, obviously, there is also the rise of the payday lenders, who will roll over debts when people say that they cannot pay them. I really feel that there needs to be regulation on that.

Most people take out loans intending to pay them back, whatever the level of interest. However, anyone’s circumstances can change. One of the most distressing cases that I ever saw involved somebody whose child was born with a disability. They had taken out an awful lot of loans to pay for the conversion of their property and were relying on the disability benefits for the child, who died unexpectedly. They were left with a mountain of debt. That was responsible, not irresponsible, borrowing. We need to look at the causes of debt. I agree with the hon. Member for Brigg and Goole—we should not be moralising. Debt happens. It could happen to any of us. If a person walks down the street and gets hit by a car, they are likely to end up not being able to pay their bills.

I also agree with my hon. Friend the Member for Darlington (Mrs Chapman), who is not in her place, that education is only 25% of the solution. Debt advice has to be available and there has to be regulation on the advertising by payday lenders and debt management companies, which offer to get people out of debt but often push them further into it, to make sure that they do not make a bad problem even worse.

Lyn Brown: May I ask my hon. Friend the question that I asked our hon. Friend the Member for Darlington (Mrs Chapman)? Does she, like me, see more such cases in her surgery week by week? Are there fewer people offering good-quality and independent advice who we can refer constituents to? Is that not the biggest problem that many of our people face at the moment?

Yvonne Fovargue: I completely agree. I am extremely concerned for the future, when the transition fund ends. To be honest, I do not know where the advice agencies are transitioning to—some are transitioning to oblivion. There is also the ending of legal aid for debt. The Minister mentioned the importance of early advice. Much of the funding for early advice is going, because legal aid funding is now for advice only at the point of eviction, which is absolutely not cost-effective.

Yes, I totally support the idea of compulsory financial education in school, but it has to be part of a package. Part of the package should be to ensure that people do not get into debt with payday lenders, do not go to the fee-charging debt management agencies but do have access to early advice to help them when they realise that they are getting into debt. They need to be able to realise when the debt is becoming a problem.

Mr Barry Sheerman (Huddersfield) (Lab/Co-op): I have been in another debate in another place, so forgive me for intervening, but when I was Chair of the Select Committee on Education and Skills, we did a lot of work on the issue. We found that many financial institutions put money into CABs. Would my hon. Friend encourage the private sector to carry on with that? There are many demands on its time, but Nationwide particularly was putting money straight into the CAB.

Yvonne Fovargue: I would certainly encourage that, but I would like to see a more strategic approach to debt. I would hope that the Money Advice Service provides that. However, it would have to have the money to be able to provide such a service. There is no use having a strategy but no money to give to the organisation. It is no use putting money into debt advice if the generalist advice to support it is not there. The agency depends on all levels of funding and a lot of it is going.

I support the motion and hope that we can look at a package of measures to tackle the rising problem of debt and personal insolvency.

Duncan Hames (Chippenham) (LD): I add my congratulations to subscribers to MoneySavingExpert.com on petitioning us for this debate. I also congratulate my hon. Friend the Member for North Swindon (Justin Tomlinson) not just on securing the debate but on his work in steering the all-party group on financial education for young people, on which I am pleased to serve as vice-chair. The group’s report is a credit to my hon. Friend the Member for Brigg and Goole (Andrew Percy), who has led the inquiry.

I have been leading a strand of the group looking at financial education in further education, so my remarks will draw on the relevant insights of that inquiry, which will issue its full report in the new year. I have been joined in that inquiry by the hon. Member for Scunthorpe (Nic Dakin) and I extend my thanks and appreciation for his involvement and expertise and that of my hon. Friend the Member for Wyre Forest (Mark Garnier), who also participated in our inquiry.

Like all hon. Members, I am particularly fortunate when my own constituents contribute to my work, and it would be appropriate to make particular mention of two who have been in touch with me about the issue: Caroline Stephens and Trisha Snowling. Caroline is a maths and personal finance teacher who has campaigned tirelessly to promote the cause, not just through her work but by writing to councillors and MPs to alert them to current developments from a practitioner’s point of view. Trisha has a breadth of experience in financial careers and has been an articulate correspondent on the issue in recent months. She summarised to me neatly the consequences of a lack of financial literacy for people’s ability to spot a bad deal in later life: “They don’t bother to read the small print on a finance agreement—why would they? It’ll be in a language they didn’t study at school.”

Our inquiry set out to look at the response to the issue in further education to identify what distinguishes the experience in that sector from that in schools. Since there had been little assessment or co-ordination of colleges’ approach to personal financial education, the group began by conducting a nationwide survey of current practice in colleges. An overwhelming majority of survey respondents—nearly 97%—thought that financial education should also be provided in further education institutions and 84% of responding colleges believed that students’ inability to manage their finances was a cause of failure to complete their courses, which should worry all of us who want young people to have the best possible chance to equip themselves for working life.

We supplemented the survey with oral evidence sessions to test those initial findings against the experience and expertise of college principals, student service managers and students themselves. An oral evidence session a fortnight ago bore out many of the survey’s emerging conclusions about students’ financial awareness. We welcomed an impressive group of students from two colleges in London to hear their perspective on both the financial education they had received so far and their attitudes to money more generally. The students we met were of course those who have really engaged with this learning opportunity. However, I was most struck by the fact that, although they understood about saving, they themselves identified that they did not know much about borrowing or debt. They also emphasised the importance of their family background and home environment, not necessarily to the specifics that they had learned, but to their underlying attitudes to money and their confidence in dealing with it.

A dominant theme of the inquiry’s evidence so far is that there is good financial education provision in a number of colleges around the country, but that it does not reach anything like the majority of students, even in the colleges that are leading the way. The reduction of entitlement funding, which some colleges were using to deliver their personal financial education through tutorial time, has had an effect on the sector’s ability to deliver such education. However, the evidence that we have received suggests that provision was sporadic even before that funding change. It seems that some colleges may have considered that modest provision within tutorial time as sufficient.

We heard some compelling accounts of quite sophisticated offers of financial education from City college Norwich and New college Swindon. However, even such colleges that are heavily geared towards financial literacy and business education are enticing only some of their students to take up their financial education offer.

What we have seen so far is that financial education is most effectively delivered when it falls naturally within a student’s chosen core curriculum. In further education, there is a wide array of opportunities to provide that. Where that is not the case, there are many challenges in achieving the required coverage of financial education in a student’s programme.

Mr Sheerman: I am impressed by what the hon. Gentleman is saying about his research. Has there been any indication of what are the most successful online tools? Just as the Government are keen on using online facilities for careers education, does he think that that would be a good way to learn about debt and credit?

Duncan Hames: We were made aware of online resources that students could use to supplement lectures that were available as part of their further education college’s provision. I think that it was at New college Swindon where students could register for an additional qualification to supplement the choices that they were already making and their normal lectures, which was largely learned independently and had testing arrangements which allowed them to study at their own pace. I offer that as one example in answer to the hon. Gentleman’s question.

The inquiry’s forthcoming written report will go into greater detail about the nature of the challenges that we saw in further education and the means that we suggest to address them.

I will end with a few remarks about what the inquiry has told us about financial education in schools. The evidence shows that further education as a sector is defined by choice and provision for a diverse range of student needs, from basic literacy and numeracy to running a business or preparing to attend university. That means that the starting position of college students reveals the results of their previous education, which might not have equipped them with the capability to deal with the challenges that students increasingly face, including their financial responsibilities.

I therefore argue that financial education in schools needs to lay a universal foundation or baseline in financial literacy for every student. Students who go on to further education will be able to build on that by using qualification-based study, which further education colleges are in a good position to deliver in a wide range of curriculum choices. That would allow those who have benefited from financial education in the school curriculum to progress later in their education. It would also limit the extent to which further education colleges have to, in the words of one witness, “play catch-up” and help students to retread what they missed in their school years.

I know that time is short, so I will conclude by encouraging Members to look out for the APPG’s second report in the new year and by urging them to support the motion.

Mark Garnier (Wyre Forest) (Con): It is a great pleasure to follow the hon. Member for Chippenham (Duncan Hames), who is doing a lot of work on the further education part of the all-party group’s inquiry. I have had the pleasure of being in a couple of his inquiry sessions. I extend my appreciation also to my hon. Friend the Member for Brigg and Goole (Andrew Percy), who has done a fantastic job of chairing the evidence sessions that have resulted in the group’s report, and to my hon. Friend the Member for North Swindon (Justin Tomlinson), who has done a really outstanding job in putting the group together. As we have heard, it has had record membership right from the start. It would be wrong of me to start my speech without also expressing my appreciation of Martin Lewis, whom I met when he first came before the Treasury Committee. He was not only an extraordinarily fine witness but quite an inspirational one.

I come to the subject from the point of view of being a member of the Treasury Committee. The House has heard a lot from teachers and from Members with constituency experience, but I consider the matter with regard to how we run the economy of our country and deal with the crisis that faces us.

When we as a society send children to school, we do our very best to equip them to face life and give them the best opportunity possible to have a successful life and career. We teach them basic subjects such as maths, reading and writing, computer skills, sex and relationships education and how to be good citizens. That is all extremely good and important, but we signally fail to equip people to be financially literate. The evidence of that is all around us. We are one of the most personally indebted nations on the planet, with a staggering £1.5 trillion of personal debt. That is about £25,000 for every man, woman and child. To put that into the context of more meaningful numbers, this country has about 10% or 11% of the population of the EU, yet we have 50% of the personal debt. That is quite a frightening statistic.

As constituency MPs, we see on an all too frequent basis people coming to us with financial problems, and as we have heard, Citizens Advice is seeing a ballooning of debt problems. We are in the midst of a financial crisis, and the banks are accused on a daily basis of causing it. They are quite rightly accused of making irresponsible loans to customers in the housing market, yet we all too frequently gloss over the elephant in the room. For a bank to make an irresponsible loan, it needs an irresponsible consumer to take on that debt. Our response to that situation is to increase the regulation of the financial system, and in so doing increase the cost of financial services to consumers.

It is absolutely right that we examine the regulatory system carefully and do our very best to ensure that we neither have a repeat of the financial crisis nor walk into the next, as yet unidentified, financial crisis. However, part of the solution to the current problems has to be greater financial literacy. We would not have irresponsible borrowers taking out irresponsible loans if they knew what they were doing.

Another topic that we have heard about this afternoon is payday loans. We know that as many as 3 million people will take advantage of that service in the next year, and in some cases they will pay annual percentage rates in the thousands. Yet someone could easily pay a higher rate of interest on a small, unauthorised overdraft, by the time the cost of the levy from the bank, the interest and the penalty charge has been taken into account. However, our response is to consider harder regulation of payday loans. Surely the answer is greater financial literacy, so that an individual is less likely to need any sort of loan.

Kevin Brennan: Would not another possible answer be regulating unauthorised bank overdrafts with more rigour?

Mark Garnier: I want to get away from the need to regulate everything. We need to ensure that people are in a stronger position to manage their own money and accounts properly, so that they do not get into that problem in the first place. If they did get in trouble, they would be in a far better position to evaluate the best solution.

Kevin Brennan: I accept the hon. Gentleman’s point of view on deregulation, but does he not see the paradox in supporting the all-party group’s report, whose first key recommendation is that personal financial education should be a compulsory part of every school’s curriculum, while also supporting the deregulation of the schools system, which would ensure that schools did not have to teach anything of that kind compulsorily?

Mark Garnier: That is a neatly and well made point, but the hon. Gentleman will remember my hon. Friend the Member for South West Norfolk (Elizabeth Truss) making the point that, by having financial education in the curriculum, we would not just provide for directly funded schools but provide a lead for other schools to follow. That is an incredibly important point.

The Money Advice Service is part of the solution. It announced earlier this week the start of a new strategic oversight function for financial education. I shall quote from its press release, because it is always very good to hear such excellent civil service-speak. It says that the review is “to inform and improve the provision of financial education for young people in the UK. Firstly, mapping the range of education initiatives funded by the financial services industry, to create a single view of the landscape; secondly, commissioning new research into education and behaviour change – to both identify global best-practice in the field of financial education; and examine whether successful types of intervention in other fields, for example health or drug education, can be applied to the area of money.”

That sounds fantastic, but there is a simple solution, which we keep repeating: we should put financial education on the curriculum in schools. We should get the Money Advice Service to concentrate on those adults who have not had the chance to get a financial education so far, and who are in desperate need of it to help them to deal with the problems that they face as a result of being financially illiterate.

As part of the all-party group inquiry team, I heard a great deal of interesting comments. I think I went to almost every single meeting, although I might have missed a couple. As we have heard, help is out there. Financial institutions go into schools to assist with financial education, but many teachers feel intimidated by the subject, presumably because they in turn did not receive a financial education. We have also heard that provision is sporadic: sometimes financial education is very good, but sometimes there is none at all. One member of the Arun youth council said that his school spent more time teaching him how to put on condoms than they spent teaching him about money. It was a thin day for bananas that day at his school.

The question is: how do we get financial education into the curriculum and where do we put it? Of course, there is a maths element—frankly, financial education is the type of thing that could enhance maths teaching. Teaching a child about compound rates of interest is not an exciting subject, but teaching a child that buying a pair of football boots for £125 on a credit card with an APR of 26% and paying that over six months will cost him a lot more than if he paid cash gives that child both a good example of how maths works and a lesson in financial facts.

If I were Martin Lewis, I would be able to work out in my head what that compound rate of interest would mean, but I was an investment banker and I am afraid I am completely unqualified to do so, as I would be if I were a footballer. However, to limit financial education to maths would be a huge mistake. Although maths can handle the quantitative side of things, it can do nothing about the qualitative side. We need people to make solid, judgment-based decisions. Maths will give people the skill to answer the question of whether they can afford something, but the question of whether they should buy something is just as relevant.

If I live in the centre of a city, the question of whether I should buy a car is a relatively simple one—there is plenty of public transport so I might not use it, parking might be a problem and so on. However, for an unemployed person living in the country with just a few hundred pounds to their name, the question of whether they should spend their last savings on a car so that they can find a job and make themselves more employable or keep the money to live on is much more difficult to answer. Many people are simply not equipped to make such a subjective evaluation.

Mr John Redwood (Wokingham) (Con): Three constituents have written to me to congratulate my hon. Friend and colleagues on the work they have done on this matter. They said how important their work is and hope that it results in some improvement.

Mark Garnier: I am incredibly grateful for that intervention and thank my right hon. Friend very much indeed.

To continue my point, if we equip the next generation to answer the supplementary question to the one I just described—should I set up a business with my last few hundred quid?—we will begin not only to address the financial independence of our citizens, but to find the key to unlocking economic growth in future.

The fact that we are questioning whether financial education should be on the curriculum is a mistake. I fail to understand why it has not been on the curriculum for years. As we have discussed, the APPG has just published its report. The Minister has shown great interest in it and has read through it. We will keep pressing to ensure not only that he reads it again and again, but that he initiates its recommendations.

I shall conclude by mentioning the work of organisations such as PFEG, which we talked about earlier. Its work is incredibly important—it does a valuable job promoting financial education and co-ordinating the efforts of the financial services industry to get expertise into schools—but we must recognise its efforts by delivering the ultimate goal: a curriculum-based financial education which addresses not just maths and the quantitative elements of money management, but the qualitative and judgment-based elements of financial literacy.

Fiona Bruce (Congleton) (Con): I apologise to you, Mr Deputy Speaker, and to the Minister if it turns out to be necessary for me to leave the Chamber before the end of the debate.

It is almost a year to the day since I spoke in this Chamber about the need for better financial education in schools. I talked about the patchy or non-existent current provision in so many schools and about the sad results of the lack of financial capability, which I witnessed over many years in my community law firm. It was apparent not only in the levels of debt but in the breakdown of relationships and health. There is a huge cost to society of providing debt advice—essential though it is. Currently, citizens advice bureaux receive around £27 million, much of which is for debt advice.

The main thrust of my argument then was that better financial education is necessary because prevention is better than cure. Shortly after I spoke, the all-party parliamentary group on financial education for young people was founded. I am sure that I speak for all my colleagues who have served on the parliamentary inquiry into the need for better financial education for young people in schools when I say that it has been a real privilege to serve on that inquiry. It has been one of the most fulfilling roles that I have undertaken in my short time in this House. I pay tribute to the chairman of the group, my hon. Friend the Member for North Swindon (Justin Tomlinson) and to the chairman of the inquiry, my hon. Friend the Member for Brigg and Goole (Andrew Percy), for their vigour in leading this work and for the fact that this week, a substantial report on financial education and the curriculum has been published. I have to say also that they have stolen all of my good lines.

During the course of the inquiry, we took evidence from dozens of witnesses. I pay particular tribute to two witnesses from my constituency. David Black, who has recently retired, was head teacher of Alsager high school. He has spent years co-ordinating volunteer educators who advise young people in schools in Cheshire and train teachers to deliver financial education under the banner of “debt cred”. Will Spendilow of New Life church, Congleton, was one of those volunteer educators. Last year in Cheshire, 7,000 pupils benefited from this “debt cred” advice. Those pupils are fortunate, but what of the many across the country who receive no such advice? Even more worrying is the fact that many teachers do not feel up to the task of teaching financial education.

Our inquiry found that the whole area of financial capability urgently needs addressing. Some 70% of 18 to 25-year-olds are in debt. People in their 20s are the least capable age group in making ends meet, choosing financial products and balancing a budget. This lack of financial capability has cost Britain nearly £250 million in bank charges and penalties alone, and 71% of people say that a lack of basic financial understanding is to blame for debt.

While young people are faced with a financial world of baffling complexity, they are vigorously targeted at an early age by retailers and lenders and assaulted by a consumer culture that raises for them unrealistic lifestyle expectations. Our report found that two thirds of people in the UK feel too confused to make the right choices about their money and more than a third say that they do not have the right skills to manage cash.

In the 12 months to the third quarter of 2011, approximately one in 361 people became insolvent, which is significantly higher than the annual average of one in 1,655 people over the past 25 years. It was clear to us that without fundamental changes to the way in which individuals manage their money, the problem would continue to grow. Financial education is a long-term investment and a solution to what is now a widespread national problem. Teaching people about budgeting in their personal lives is also an essential basic component to equip the work force with the necessary skills to succeed in business and drive forward economic growth.

Where will young people improve their financial literacy, the costs of which are clearly set out in our report, if not in school? It is not from their parents; our inquiry found that a third of teenagers’ parents had never talked to their children about budgeting. They will not learn it from the banks; the era of the trusted family bank manager who knew people and took a personal interest in their financial welfare has long gone, although many banks do provide support for financial education in schools, which is valuable. It would be wrong to rely on voluntary organisations to give advice, although many do provide excellent advice; organisations such as Christians against Poverty, which was originally founded to help those in debt, has now moved into the proactive area of providing courses on personal financial management, and I commend it for that. However, such organisations should not be relied on to provide financial education, particularly in schools. That void makes it essential for financial education to be taught in schools to all young people before they enter the world of work and are faced with some of the financial challenges to which I have referred.

Let me now comment on the recommendations. The first is that personal financial education should be a compulsory part of every school’s curriculum, and that it should be assessed. David Black, whom I mentioned earlier, has said: “Unless you test, it will not happen.”

I recall an amusing exchange at one of the inquiry’s evidence sessions. I said, “As a mother of two teenagers, I know that nothing focuses a pupil’s mind like an exam.” One witness responded, “And nothing focuses a teacher’s mind like an exam.” We also found that in 20 countries across the globe financial education is already compulsory, and has been for many years. It would be interesting to see whether they share our nation’s debt problems.

Kevin Brennan: The report says, and the hon. Lady has just said as well, that personal financial education should be a compulsory part of every school’s curriculum. Does the hon. Lady mean that the Government should make it a compulsory part of every school’s curriculum, or was that merely an exhortation that she thinks should be out there in the ether?

Fiona Bruce: I believe that it is such an important issue that space should be made for it in both the PSHE and the maths curriculums. Another of the recommendations makes that very suggestion: that financial education should be cross-curricular, overlapping with maths and PSHE. Pupils made clear to us that they enjoyed financial education. One said: “I thought it was really interesting because, personally, I learnt a lot and a lot of my peers said they learnt lots too.”

We all know that we learn more when we enjoy a subject, and it seems that including financial education in the maths curriculum could well aid maths learning overall, which would be an important added-value benefit.

Again and again, teachers told the inquiry of their sense of inadequacy when it came to teaching financial education. It was almost a refrain. They talked of significant barriers to teaching it well, particularly their own lack of confidence in their knowledge of the subject, as well as a lack of awareness of suitable resources. One of the most important recommendations in the report is to establish a quality kite mark from a trusted body, which would assure teachers that if the subject took up valuable curriculum time, that time—if Members will pardon the pun—would be well spent.

The last recommendation that I would like to mention—by no means the least important—is that there should be a financial education champion in every school. Another head teacher giving evidence to the inquiry said: “if you asked me for the number one thing, and that is to have a senior member of staff responsible for it as the champion, who has enough resources or enough clout to draw people to work at it. Then you will find it will come together.”

It is vital to ensure that members of the next generation are better equipped than those of the present generation to make informed financial decisions, for the sake of their well-being and that of our whole society. That applies to a host of areas: mental and physical health, relationships and family life, career prospects and entrepreneurialism. I believe that, over time, investment in financial education will reap exponential benefits for our society, and I urge the Minister to give constructive support to the recommendations in the report that was published this week. Let us work towards prevention rather than cure.

Andrew Bingham (High Peak) (Con): I am delighted to follow my near neighbour, my hon. Friend the Member for Congleton (Fiona Bruce).

Like many others who have spoken, I congratulate my hon. Friend the Member for North Swindon (Justin Tomlinson) and his colleagues not only on securing the debate, but on their continual hard work, the pressure that they have put on the Government, and the publicity that they have secured—including the use of Martin Lewis to press home the importance of the issue. The launch of the all-party group on financial education for young people attracted more than 200 Members of Parliament, and it is now the largest of the all-party groups. I congratulate it on its report on financial education, which was released this week and which deals comprehensively with the subject.

I do not wish to be labelled a grumpy old man—I am sure, though, that my hon. Friend the Member for Brigg and Goole (Andrew Percy) will soon label me one—but I must refer back to when I was a lad.

Andrew Percy: It was in black and white then.

Andrew Bingham: Yes, it was.

I remember my late father taking me to Williams and Glyn’s bank to open my first bank account and my walking out proudly with my Williams and Glyn’s plastic piggy bank, which I suspect I still have somewhere and is probably worth a lot on eBay. They say that servicemen can always remember their Army number; I can still remember my bank account number from that day.

When I came of age, there were few temptations for somebody my age to acquire extra funds or credit. In those days, it was the bank or it was nothing. Credit cards were unavailable without a parent or guardian to guarantee it and wages were paid in cash. Consequently, we lived in a pay-as-you-go world—to coin a modern-day phrase. We were not educated in financial matters in school in the 1970s, because there was not the multitude of financial opportunities—and, indeed, pitfalls—available to young people today.

When I refer to young people, I do not refer exclusively to school leavers but to those who left school a few years ago, have built up savings and are now plunging into the world of credit or embarking on the next stage of their life—getting their first mortgage or signing a tenancy agreement—and who require financial knowledge to navigate these potentially treacherous waters.

When people turn on the television today, read the newspaper, surf the internet or look at magazines, they are bombarded with adverts offering them cheap money, easy money and, in some cases, apparently free money. In fact, some claim that it is possible to borrow enough money to get completely out of debt. When we pick up the Sunday newspapers, out drop a multitude of pieces of papers, one of which is usually advertising cheap money.

Borrowing money is inevitable, and we all have to borrow at some point in our lives, whether for a mortgage or whatever, but it is important to do it prudently—a word from the past—and sensibly. To do that, people need to understand what these companies are offering, to read beyond the quick, snappy headline and to make an informed decision. To do all that, they need to understand finance, the methods by which it can be obtained, the cost of that finance, the conditions attached and, more importantly, the short and long-term consequences of failure to adhere to those conditions.

Not only must young people contend with this wealth of advertising and pressure, but they live in a very different world from that of their predecessors in my generation and that of many in the House. As has been alluded to, they have phone contracts, credit cards, payday loans, tuition fees, store cards—the list goes on and on. These are all things that are part of modern-day life but which were either unheard of or unavailable in days gone by. Added to that, there are many alluring ways of paying for luxury goods—televisions, holidays and so on—that appear to be completely free of any credit charge yet are full of pitfalls buried in the small print.

How many people realise, when they buy a television on a buy now, pay later deal, that if they miss the payment date, they are automatically locked into a three-year finance agreement potentially on an annual percentage rate that can be more than 20% and perhaps as much as 30%? Indeed, how many actually understand what APR really is?

And how many people understand the pitfalls when they get older and decide to buy a car? A car might be advertised with low monthly payments—”You can have this car for £159 a month”, the advert might read. However, it might not explain until the small print that at the end of the term the person will not own the car, because a significant final amount will still be outstanding—balloon payments, they are sometimes called—and that, if unpaid, they will have to give the car back and have nothing to show for it.

We live in a world where peer pressure exerts a huge influence, especially on young people, to have the latest mobile phone, trainers or designer clothing. It matters very much to young people and it drives their shopping habits. When that is coupled with the myriad easy ways to pay, we have a cocktail of debt and ensuing misery.

Financial education will not stop that—after all, people will always want to buy goods; the economy depends on it—but I believe that financial education will do several things. First, it will enable people to tell whether a deal is as good as it seems. There is an old adage: “If it looks too good to be true, then it usually is.” Financial education will enable young people to ascertain whether a deal is good or not, and see what the total potential cost is of the iconic item that they feel desperate to own. Being armed with that knowledge might not prevent them from buying that item, but they will I hope make a rational, informed decision and ask themselves whether they need it and whether they can really afford it. In the long term, that will spare people much misery, as well as the further consequences that excessive debt can have for people personally and for their families. As was said earlier—by an hon. Gentleman who is no longer in his place—that knowledge will also enable people to make decisions about savings. This is not all about debt: it is about savings, investments and pensions. On the Select Committee on Work and Pensions, we are looking at auto-enrolment and how to judge one pension against another. That is another story, but having informed financial knowledge and advice could help people to make better decisions about such matters.

Several years ago I produced an e-book, which was designed to plug into a computer. It was called “Living On Your Own” and was aimed at students leaving home to go to university and living away from their families for the first time. It dealt with all the issues that many of us take for granted: council tax, rent, utility bills, registering with a local GP and so on. It even had some easy-cook, healthy recipes. The book also contained an interactive budget planner, in which students could enter all their incomings and outgoings, and which gave a figure for how much money they had left at the end of the week or month. If they were overdrawn, the figure went red. We gave the e-book away to students—I think we gave away 200—and those who got back to me said that the most useful thing in it was the budget planner, because it showed them in simple, stark terms whether they were living within their means or beyond them.

There is a further implication of our young people not having the level of financial literacy they need when they leave education. Those young people are the next generation of our wealth generators, entrepreneurs and business builders. They are the people we will look to in five, 10 or even 20 years to build businesses, create jobs and grow the economy. We cannot expect them to be able to do that successfully if we do not give them the tools they need while they are being educated. Anyone who goes to the bank for an overdraft or business loan has to have a business plan and know how best to make the money work so that their business can survive. If we do not get this right, we will not have those people and we will pay the price later.

When I was at school, we did subjects such as metalwork and woodwork. I can turn on a lathe and wooden lathe—

Andrew Percy: Show-off!

Andrew Bingham: It is not a question of showing off: my hon. Friend never saw the results. In fact, my mother still has the table lamp that I made at school in woodwork to this very day—

Damian Hinds: Still waiting for it to come on!

Andrew Bingham: I didn’t do the electrics I left that to my dad.

Schools have moved on. They now teach subjects such as IT, media, technology—

Andrew Percy: French.

Andrew Bingham: I wouldn’t go that far.

Education moves to fit the world it provides for. I fully support today’s motion, as education needs to move again to suit the financial jungle that is the world in which we operate today.

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, 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 literary 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.

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): It is nice to speak at this point in the debate, when everybody has said everything.

May I begin my adding my plaudits to those already heaped on my hon. Friends the Members for Brigg and Goole (Andrew Percy) and for North Swindon (Justin Tomlinson)? I was a mere foot soldier in their regiment as they steamrollered this through and I must say what an efficient manner—[Interruption.] I was sometimes cannon fodder, yes.

If I were a little younger, I could have had when I was at university the e-book that my hon. Friend the Member for High Peak (Andrew Bingham) had and it might have saved me from being part of that generation that got one credit card to pay off another before I realised that I was not gaining very much by it.

I cannot remember ever being taught financial education at any time in my history at school. People from the Post Office came in once in the 1950s and I think I still have a Post Office account with 10 shillings in. If anyone finds the book, I would be grateful for that. I spent 27 years as a teacher in secondary education and I never saw financial education taught; indeed, one of the surveys in the report shows that 45% of teachers have never seen it taught in school. The only time I touched on it—it is a pity the shadow Minister is not here—was when I taught American history in the 1920s and 1930s, with the Wall street crash, the depression, and banking and shares. I was going to say to the shadow Minister that it takes a good history teacher to teach decent economics.

In my constituency, I came across a scheme run by two guys from Fleetwood, Paul Freeman and Martin Hull. They are community support officers and they noticed that in the areas where there were problems, kids did not understand the idea of saving. This goes back to what my hon. Friend the Member for Congleton (Fiona Bruce) said: they wanted instant money. A scheme was developed in conjunction with a primary school and pupils were rewarded with school pounds, but the school had to take part in various business exercises to earn the prizes that the kids had to save up for. The scheme has been developed through other schools and it is now working with a primary school outside my constituency, with the involvement of a secondary school in my constituency, Rossall school—I mention it for a reason—whose lower sixth has already set up its own businesses and it is running them as a practical demonstration. Rossall school is a public school and the primary school that it is helping is a state school. The example is double edged: the private sector is helping the state sector and we have the involvement of one of those schools about which the shadow Minister kept talking. They do not use the national curriculum but, because they are good schools, they are already way down the line in financial education.

One thing that we in the all-party group have been trying to do is help state schools to catch up. Having said that, none of us underestimates the problem and I am grateful for the Minister’s generosity in taking our proposals on board. Perhaps this debate is timely, given that a review of the national curriculum is coming forward, but none of us who has been a teacher underestimates what we are asking teachers to do. The hon. Member for Makerfield (Yvonne Fovargue) and others have said that we need confident teachers with really good back-up to do this.

Fiona Bruce: Does my hon. Friend agree that we ought to consider including this subject as an element of teacher training in colleges?

Eric Ollerenshaw: I think we need to deal with this in all kinds of ways.

On the remarks we have heard about maths teachers and the lack of maths, if we want this kind of revolution to begin, teachers need to be utterly behind it—not just theoretically but practically, and with that confidence. As my hon. Friend the Member for Brigg and Goole has said, we had a debate in the all-party group about personal, social and health education and maths. I still warm to the applied maths idea, partly because I would have been like my hon. Friend the Member for Worcester (Mr Walker). I scraped through maths because I had to, but then forgot most of it, as was obvious in my subsequent financial career. So I veer more towards the latter approach. My hon. Friend the Member for Brigg and Goole commented on how PSHE is regarded in some schools.

There is also the issue of back-up and time. The Personal Finance Education Group has given us a lot of support. Given the financial support that it has had from some banks, perhaps it would be apposite for the Minister to challenge the banking and financial institutions of this country, which have suffered somewhat in the public’s estimation, to provide the back-up that is needed to deliver financial education in a substantial way. I take on board what my hon. Friend the Member for Congleton said about training and suggest that financial support could involve the provision of money to release teachers to train or to provide materials for schools. We are asking for a huge turnaround in schools if such education is to be provided properly and is not just to be drip-fed, with some good schools doing it but more schools just paying lip service and trying to get by. Is this subject as fundamental as hon. Members from all parties have said it is? I am not underestimating its importance.

Time is running out and all my best lines have been taken my hon. Friends who have expressed the points far better than I could have. I think the hon. Member for Darlington (Mrs Chapman) ended on a quote and I should like to end on a quote from an article in The Independent today by Andreas Whittam Smith, who said that “the real explanation of the fall of RBS was the incompetence of the British ruling and managerial classes…without having the foggiest idea of how business worked.”

I am not suggesting that if we carry out these recommendations, we will end boom and bust tomorrow, but it might be a start.

Damian Hinds (East Hampshire) (Con): As my hon. Friend the Member for Lancaster and Fleetwood (Eric Ollerenshaw) has just said, it is difficult to think of anything original to say at this stage of the proceedings, so I shall be mercifully brief. I must start with the obligatory fawning to my hon. Friends the Members for Brigg and Goole (Andrew Percy) and for North Swindon (Justin Tomlinson) for the genuinely outstanding work they have done on the all-party group. The way that group has grown is not just impressive but phenomenal. In double-quick time it has brought to the British Parliament an issue that matters so much and about which so many people are genuinely bothered. The report and the depth of the analysis and work the group has done are already helping to stimulate debate here and more widely—and will do so further.

Today’s debate is not about approving every line in the report. I would have loved to remind the shadow Minister, if he were here, that the motion does not say that there should be compulsory financial education in free schools and academies or that it should be part of the national curriculum in primary schools. The key phrase in the motion is: “That this House…believes that the country has a duty to equip its young people properly through education to make informed financial decisions”.

I could not agree more.

I shall not go into examples of the problems that we have all seen when people have come into our surgeries or when we have met people. My hon. Friend the Member for Worcester (Mr Walker) has mentioned that some people, astonishingly, think that a high APR must be better than a low APR because it is a bigger number. These things would be funny if they were not so tragic. When we hear about them, our natural reaction is to say, “If we get them young and educate them, we will sort out all these problems.” There is, of course, as it says in the motion, a great advantage to equipping people with the capability to make smart financial decisions. There can also be a more immediate benefit, to which the hon. Member for Makerfield (Yvonne Fovargue) alluded. If teachers get kids to bring in material—junk mail—that they have received at home, and they discuss it, messages can then get back to home, so there will be a beneficial impact even in the shorter term.

Even better than telling, of course, is doing, through schemes such as junior savers clubs. I was a member of the Abbey National junior savers. It used to have gold, silver and bronze; I only ever made bronze, but there you are. We have savings clubs in schools, and I pay tribute to credit unions in particular, although others do this as well, which run schemes in schools, often with parent volunteers and schoolchildren helping to manage them. That is another great way to pick up experience.

I have an issue with PSHE, however. It sometimes feels as though the answer to any social problem in this country is another module in PSHE. That is true whether the problem is that people are too fat or that people are too thin, or whether it is teenage pregnancy. Whatever it might be, we do it in PSHE. There are limitations to PSHE. When one mentions it to teachers, their response is not one that can be written down because it is just a groan. As a general rule, teachers do not like doing PSHE lessons. Although report of the all-party group says “only 45%” of teachers in the survey had taught personal financial education, I have to say that that struck me as an extraordinarily large number. Almost half the teaching population has taken on the teaching of that subject. I think it unlikely that they are all experts in that area.

In PSHE in general, and this applies also to financial education, there is naturally a reliance on off-the-shelf—or more likely, these days, off-the-net—lesson plans and on input from third parties. Although I accept that the banks and building societies who take part do so with responsibility and do not use it as a way to ram home their brands, there is an element of indirect marketing. It certainly gets the message out there that there is a massive range of financial products, including ones that can get people into debt.

Andrew Percy: My hon. Friend’s points are exactly those that we identified during the inquiry and support the argument for putting financial education into PSHE to support maths and raise the profile of PSHE. He is quite right: a lot of the stuff that is used is photocopied hand-outs. That is not teaching a subject properly. If we link PSHE with maths, we can raise its profile and the standards of the teaching and lesson plans.

Damian Hinds: I recognise the point, and the report stimulates such debates, but I do not agree.

People mean different things when they talk about financial education. There is a whole continuum. If we talk about pure financial education, as opposed to a mathematical way of approaching it, there are two key dangers. The first I call the redundancy danger, and the second is the ubiquity danger. None of us did financial education at school, and although some people have great financial problems, not everybody does, and it is perfectly possible for somebody to get through life without the benefit of that education. Had we done financial education, we would have learned about cheques, clearing houses and endowment mortgages, and, spreading it out to the wider economy, the public sector borrowing requirement and sterling M3. None of that would be of particular relevance today. We would not have learned about debit cards and payday loans because, to all intents and purposes, they did not exist at that time. There is a real danger that although we think we are equipping people with skills, by focusing too much on financial services, as opposed to the underpinning principles, that education may become redundant.

Andrew Percy: It is true that the world does not stand still, but does my hon. Friend agree that if we give young people the ability to understand what is available now, we give them the skills to be able to understand products as they develop and move on into the future?

Damian Hinds: I cannot do geometry in a written speech without slides. I would be more tempted to go for the underlying principles, which could enable people to understand the things that used to be there and the things that will be there tomorrow.

The second danger is ubiquity. Already, on the television and the internet, when kids are at home or out, everywhere there are messages about debt. There is a danger that introducing discussion of specific financial services too early in schools might contribute to that feeling by normalising and legitimising the idea that everyone uses such products.

As I said to my hon. Friend the Member for Brigg and Goole, the key things are the tools, and I think that we agree on that but perhaps differ on how best to use them. To my mind, the key tools and principles that help inform financial decisions are mathematics, but not mathematics on its own. There is also a big element of personal responsibility, common sense and some of the maxims to which my hon. Friend the Member for High Peak (Andrew Bingham) referred. Make no mistake: young people do not learn common sense, wisdom and personal responsibility simply by turning up to PSHE. It is a much wider issue. I would welcome more emphasis on practical mathematics at GCSE, especially at foundation level, although it applies to both levels.

I am pleased to say that I have an original point to make. We also now have an opportunity post-16, because raising the participation age to 18 means that more young people who have perhaps not passed GCSE maths could, if we are to follow the guidance in the Wolf report, be encouraged to keep up maths and English. We need new, innovative, creative and engaging ways of taking on maths, and this would certainly be one of those. I thought that the example questions that my hon. Friends who constructed the report included in it illustrated very well the practical ways we could use the maths curriculum.

The introduction of these concepts into mathematics is no panacea. The hon. Member for Makerfield and I agree on many things related to debt and personal finance, but I completely disagreed with her today when she implied that there was no element of personal irresponsibility in being over-indebted. There are of course times when it is purely a matter of a change in circumstances and completely unpredictable, but there is also a major issue of responsibility. She was right to say that there are broader concerns about regulation and too-easy access to credit that we must also address. The reason we need to address those concerns, even if we did financial education perfectly, is that in that market, alarmingly, the basic laws of economics, such as the way competition works and the assumption that consumers will be rational, frequently do not apply.

I congratulate the members of the all-party group again on the report that stimulated the debate. My view is that I would say no to adding more to PSHE and specifying exactly how these things should be done at a younger and younger age, but I would say yes on the need to refocus GCSE maths and to find new and creative ways to teach practical maths at 16-plus. I would also say yes to not being afraid to say that people must take responsibility, which is also a good thing to teach in school.

Justin Tomlinson: I will give a brief conclusion to what has been an extremely positive debate. I thank all Members who contributed from both sides of the House for taking the time to set out their support for our ongoing campaign. I hope that the 100,000 people who took the time to sign Martin Lewis’s e-petition will feel that Parliament has served them well today. We have shown one of the better sides of Parliament, as we have taken a tangible issue that the public are interested in and tried to set out a way of dealing with it. I thank all the members of the all-party parliamentary group and the supporters, particularly the individuals and organisations—over 1,000 of them—who contributed to our comprehensive report. We deliberately took our time and were patient so that we could deliver something that was thorough and that set out constructively and comprehensively our case as part of the national curriculum review. I am grateful that the Minister and shadow Minister acknowledged that our delivery of the campaign is an example that others should follow. Interestingly, this is not just a pie-in-the-sky request. We look at our international neighbours and find that many states in America, and Australia, New Zealand and Canada, are leading the way in financial education.

As part of the national curriculum review, I hope that today we have taken a very good opportunity to set out our positive case, so that we might deliver on our duty to equip the next generation of consumers with the ability to make informed decisions.

Question put and agreed to.

Resolved,

That this House notes that young people today grow up in an increasingly complex financial world requiring them to make difficult decisions for the future, often without the necessary level of financial literacy; believes that financial education will help address the national problem of irresponsible borrowing and personal insolvency and that teaching people about budgeting and personal finance will help equip the workforce with the necessary skills to succeed in business and drive forward economic growth; further believes that the country has a duty to equip its young people properly through education to make informed financial decisions; and calls on the Government to consider the provision of financial education as part of the current curriculum review.

What do I do if my MP is the Speaker?

I was slightly stumped by this question yesterday. I had tweeted asking people to take 2 minutes to write to their MP to encourage them to attend the financial education debate in the Commons this Thursday, on the back of the e-petition hitting 100,000 signatures.

This was one of the first replies I received and it got me thinking. For those who don’t know, the Speaker of the House of Commons is currently John Bercow, who is the presiding officer of the chamber, and a sitting MP. By convention the role is non-partisan and the Speaker never votes or takes sides in any debates.

While of course this is a good idea for the man having to referee our heavily adversarial system – where does it leave constituents? They have a Member of Parliament they can’t lobby or push to engage in politics, effectively disenfranchising them from big political activity. Of course I suspect he still acts as a constituency MP dealing with individual issues, but not political ones.

While I love the history of our Parliament and the long established traditions, this is one of the areas where I think the anachronistic system needs a bit of tweaking. I often wonder what it must be like to live in a sitting PM’s constituency too – does he still do weekly surgeries? Or do you effectively lose a constituency MP?

I’d be interested in your thoughts.

The difference between ‘free’ and free

When is a freebie not a freebie? When you have to pay for it! Sounds simple, but in the real world things aren’t that clear cut. So this week we’re introducing a new site convention – the difference between ‘free’ and free.

Our forums have always been clear – we have the freebies (no spend) required and freebies (low spend) boards. The latter is for when there’s a cost associated with getting the freebie eg, you need to send off for it (stamp cost), or pay for delivery. The first means absolutely no cost.

This is a convention we’ve struggled with in the weekly email where space is a premium so from now on it works like this:

  • When it’s freeThis is where there is absolutely no cost to you. Eg, you fill in an online form or web app to get the freebie. I’ve also decided that if you need to pick it up in store then that’s in this category (even though you could argue there are transport costs – but we need draw the line somewhere).

    Example from this week’s email:

    FREE £150 insulation for ALL – here there’s no cost to you whatsoever and provided you qualify it’s a total freebie.

  • When its ‘free’Here we are indicating that the company fairly refers to it as a freebie, but that there may be some costs associated. I know the difference is small, but the key is we will prominently tell you about the charge anyway – so see it as part of the whole package.

    Example from this week’s email:

    ‘FREE’ £8 personalised mug (pay £2 p&p) – there is a real cost associated, but it’s the standard delivery cost only.

    Another use of this would be last week’s:  ‘Free’ up to £32 tie if you buy a £2 newspaper. While the tie itself is free, you need to shell out for the paper – so if you weren’t planning to, it’ll cost you.

In general we’ll be following that convention in the email and all new things on the site. Though there may be editorially justified exceptions. An extreme example (sadly, made-up) will help:

Imagine a company is giving away a £30,000 Mercedes to everyone who sends a stamped, addressed envelope – we’d probably just focus on the freebie as the cost is negligible in context.

Just because they call it a freebie, doesn’t mean we will

If any companies are reading this thinking that calling something ‘free’, but manipulating their pricing means we’ll follow – they’re very much mistaken.

Often this happens with package and postage charges – they’re inflated to cover the freebie. If the p&p is disproportionately high, we’ll simply phrase it differently (as we’ve done in the past).

Eg, suppose a spectacles company said it was giving £30 glasses for free, but the p&p was £10. Provided the deal was good and worth telling people about we’d phrase it as: Get £30 glasses for £10 even if their marketing called it a freebie.

The only problem here is when people go for these deals, what we write doesn’t match up to what they see – so we tend to have to explain it out to help.

Thoughts welcome.

Best-buy payday loans – should MSE include them?

Update: 12 July 2013: On 9 July 2013 we published our Payday loan best buys? guide.

We’re in the middle of writing our new guide to payday loans (eg Wonga, Quickcash etc.) and I’d like to solicit your views. The key concept is actually to explain all the alternatives you can try before using that type of lending.

So it’ll be a big checklist hopefully providing people with alternative safer routes and options. Then we will have a section on what to watch for and how to make it as safe as possible if you do get a payday loan.

The debate

What we’re currently debating in MSE Towers is whether the guide should include best-buy payday loans (or perhaps least worst is a better view), but there’s a difference of opinion – so we thought we’d ask you.

My view – we should include the best buys

This market is now £1.9billion a year – so there are a huge number of people doing it. No matter what we do, people are going to borrow this way and while I would like hardcore regulation to protect people, it isn’t happening yet.

Thus it’s a bit like drugs, if people are going to do it, we should ensure they are safe. Here are my reasons:

  • It gives us a chance to dissuade. Hopefully our best-buys will get search traction and then we can at least get the counter arguments and warnings in.
  • It’s mostly a bad move, but not 100% bad. Most of the time it’s not a good move, but a few times it is. Sadly there are few alternatives to cheap short term borrowing – and there are worse culprits out there. For example, if you could borrow £100 for a week to stop you getting Clydesdale bank’s £35 a transaction bank charge, and repay on time, it’s much cheaper.
    (Interesting isn’t it? We demonise payday lending but not bank charges, which are even worse for some than the 5,000% rates advertised).
  • There are big differences between the best and worst. Not all lenders are the same, so helping people choose when it’s right for them is worthwhile.
  • Parliament wants this. I was giving evidence to the Business Select Committee on Tuesday and one of their points is about helping people choose if they are going to do it.
  • We can factor in the safest ones. If we did it we wouldn’t just look at cost, but we’d also look at rollover policies, whether companies report loans to credit rating agents (a good thing as it helps prevent irresponsible lending) and most importantly their attitude to people who get in trouble.For example, very few payday lenders co-operate with non-profit debt advisors like CAB and CCCS, making it difficult. We would try and show which lenders do co-operate – so if you got in serious trouble you know they’d behave reasonably.

MSE Wendy and MSE Alana’s arguments against:

Rather than putting the counter point myself, here are MSE Wendy and MSE Alana’s worries about it:

By including specific company names in the guide people may think we approve of the companies mentioned and even with the warnings, people could see this as an active recommendation.

There’s also the issue that there are enormous numbers of small local payday lenders across the UK, so we could only include the big ones in the best-buys.

What’s your view?

PS. We don’t intend to use any affiliate links (links that pay the site) to payday lenders – see how this site is financed.

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