By Rt Hon Robert Halfon MP, Chair of the Commons Education Select Committee.
At the time of writing, the public’s number one concern is the rising cost of living. And rightly so. Soaring prices in energy, food and fuel have led to the largest squeeze on incomes since the 1970s. To its credit, the Government has responded with a fiscal package which will shield the poorest from the worst of inflation. But we will need to remain vigilant as we move into what will likely be an incredibly challenging Autumn and Winter for many vulnerable people.
Yet this crisis must also prompt us to think hard about how we build the foundations for families’ financial stability over the longer term. This is not only about ensuring people have enough money in their pockets, but also about making sure people have the skills to manage their income to maximum benefit. Reforming financial education should be at the heart of this.
As this timely and important report from the Centre for Social Justice shows, almost half of individuals – 46 per cent – who have suffered from financial problems said that low money management skills played a part.
Of course, many people find themselves in difficulty and debt for reasons well beyond their control. But it is striking how many consider boosting skills as the way out: the same poll found that 44 per cent of all adults, and two-thirds of those aged 18–34, believe their situation would improve with more financial education. The appetite for greater control and empowerment is resounding, and it should be the Government’s aim to deliver this. Yet we must be honest about the scale of the challenge. Despite considerable progress made under recent governments, including the introduction of financial education to the secondary school curriculum in 2014, the findings of this inquiry show that there is still much more to do.
Too many adults continue to lack the basic skills which underpin financial capability. Around nine million working-age adults in England have low literacy or numeracy, with five million lacking both. One in two were found to be unable to pass a financial literacy test run by the OECD, which placed the UK well below international comparators France, Norway and Canada.
So while the Government’s £560 million fund for adult numeracy is extremely welcome, I hope that funding from this pot is made available for programmes integrating financial education into the adult skills agenda the Chancellor is rightly pursuing.
And the truth is we have to start earlier. Research by the Money and Pensions Service shows that children’s money habits that will stick with them for life are formed as early as age seven. This report shows how those leaving school without an effective financial education are at high risk of financial abuse, fraud and debt.
Around 55,000 children aged 11–16 are estimated to be problem gamblers and recent reports warn of increasing numbers of young people being turned into ‘money mules’ for criminal gangs. Yet today only one in three children currently receives any form of financial education at primary school to help protect them from these sinister risks.
Young adults must now navigate a financial marketplace evolving at an electrifying pace while at the same time making major financial decisions for the first time – from staying on top of rent and household bills to taking out loans. As the CSJ found, most young adults attribute their financial problems to low money management skills.
But such people are among the many who have become regular consumers of ‘Buy Now, Pay Later’ schemes. Do they understand the agreements into which they are entering? Like all forms of debt, there can be serious consequences when treated with insufficient caution. Financial education today must recognise that the TikTok generation faces altogether different challenges than those armed with a chequebook in years gone by. Preparing our young people for a world and workplace with high demands of them means taking skills seriously. And money management skills are no exception.
This report provides a detailed action plan that Government can take to put financial education back on the map. First, we must be bolder – critically, by adding financial education to the curriculum in primary school in PHSE at a minimum, where money management remains absent in England.
Second, we must learn from past mistakes and new evidence. Inclusion on the curriculum alone is not enough to guarantee high quality financial education in schools; empowering teachers to harness the business and charity sector would give children the financial education experiences shown to make the difference in boosting skills.
Finally, adults of all ages need opportunities to develop critical financial skills throughout their life, whether in the workplace, further education or via the welfare system, to set them on the path to financial resilience.
Above all, this new financial education offer is needed to build the resilience in our society and our economy that buffers against cost-of-living crises when they appear – whether that is avoiding a personal debt emergency or an unexpectedly large bill. The ‘soft’ skills which we too often denigrate in fact aren’t soft at all. Indeed, they are skills for life. And when people are empowered with them, they have more control over their lives. What better mission exists for Government than that.