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So what about functional maths? Ministers have stated that the new functional maths GCSE, to be introduced in 2010 will include elements of financial capability. In evidence to the Treasury Committee published in November 2006, the ifs School of Finance expressed its concerns that the standards for functional mathematics published
by the Qualifications and Curriculum Authority were inadequate. The Select Committee concluded:
What is being masqueraded as financial capability is confined to recognising notes and coins and simple calculations using money.
That is not financial education. Regrettably, it would appear that this latest Government initiative offers little other than a tasty soundbite but no real substance. Indeed, if I could make one plea to the Minister tonight, it would be to move away from the idea that maths is a natural home for anything relating to personal finance. Financial capability is first and foremost about behaviours, not about numeracy.
Of course, in looking at all the Governments financial education policies in the round, I am concerned that there is little if any evaluation of financial education programmes in our schools. Unfortunately, time will not permit me to elaborate, but I wish to alert the Minister to concerns raised in the Governments own report Financial education: a review of existing provision in the UK published by the Department for Work and Pensions in 2005. The report stated:
Our review found that little formal measurement of the quality of financial education teaching
is taking place through Ofsted or any other inspection mechanism. Formal measurement is likely to reduce further with the new Ofsted inspection regime starting in September 2005.
Sprinkling personal finance across the curriculum has done little to improve financial capability and there is little evidence to suggest otherwise, so it is time for a different approach. Academic evidence from Tennyson and Nguyen published in 2001 and from the university of Manchester in 2006 suggested that a specifically designated course in which students know that its total aims relate to areas of financial management is more effective than courses that cover a wide range of areas.
The Manchester university report provides powerful evidence of the effect that financial education can have on behaviour and young peoples lives. It found that the majority of young people taking a stand-alone financial educational qualification had made positive changes in the way in which they managed their money. Many changed to a different bank account; many looked for additional, non-traditional products such as mini cash ISAs and were fully equipped to handle their money when they went off to college or university. Ninety-five per cent. of students said that they were better able to manage their finances as a result of taking a dedicated stand-alone personal course.
A further benefit of stand-alone qualifications is that we know whether any learning has taken place and thus whether changes in financial behaviour have occurred as a result. I cannot emphasise enough to the Minister that it is essential that any actions to improve financial capability are measurable. The simplest, most cost-effective way of doing so, which is most informative in
terms of the data produced, is to offer a course that requires accreditation. I accept that schools will say that it is yet more to fit into a crowded curriculum, yet more than 100 schools are already doing the equivalent of a GCSE course sponsored by ifs School of Finance. If they can do it, we need to be able to do it in the schools where students will benefit the most.
Almost every aspect of modern life in the UK involves some form of financial transaction, irrespective of our income, class, background or academic ability. Finance impinges on everything we do so it should be taught as a stand-alone component of the curriculum. I acknowledge that there are some excellent initiatives in financial education that deserve the highest praise. I fully accept that some schools are working within the Governments overall programme and delivering high quality. Initiatives such as the learning money matters programme funded by the Financial Services Authority, in which Personal Finance Education Group employees offer teachers support via e-mail, telephone and personal visits, are super.
I welcome those small steps, but it is really the role of the DFES to equip teachers with the skills and confidence to teach the subject by introducing a personal finance element in teacher training programmes. At present, there is no such element in any of those programmes. Maintaining the current approach and pursuing the path set by the Government for the next 10 years will not deliver the objective we seeka financially literate society. I hope, however, that the Minister will at least reconsider functional maths in relation to personal finance. I hope that he will carefully consider the Select Committee report on citizenship in relation to financial education and that he will examine the possibility of incorporating an element of financial education in all teacher training programmes.
Finally, I make a simple plea to the Minister. Will he look again at the evidence that supports making financial education a compulsory part of the national curriculum? Will he talk to the FSA, the School of Finance, the Institute of Chartered Accountants, the Finance and Leasing Association and the Council of Mortgage Lenders? Look at the evidence, Minister, and make new plans.
The Minister for Schools (Jim Knight): I congratulate the hon. Member for Harrogate and Knaresborough (Mr. Willis) on securing this debate and on bringing an important subject to the attention of the House. Clearly he and I, and my hon. Friend the Member for West Bromwich, West (Mr. Bailey), agree that schools and colleges have an important role to play in ensuring that young people go out into the workplace with the skills they need to plan and manage their finances.
Education has to prepare children and young people for the real world beyond the school gates, and financial literacy is a skill that every citizen needs to function effectively in society. As the hon. Gentleman said in his opening remarks, social, economic and demographic changes over the next few years will make that increasingly important. Young people in school or college today are likely to make several major career changes over their working lives. They will need constantly to develop their skills to stay ahead, through lifelong learning and more opportunities for flexible working. Meanwhile, increasing life expectancy means that people will need to plan for longer retirement. All that is alongside issues
people already need to understand, such as student loans, mortgages and pensions.
Many adults already struggle with those skills. About 15 million adults lack the numeracy skills to make appropriate decisions about saving; they find it difficult to make comparisons and weigh up different choices. With that in mind, my colleagues at the Treasury recently published a long-term strategy to develop financial capability for all, to which the hon. Gentleman referred. By coincidence I met Treasury colleagues today to discuss taking the strategy forward, with enterprise education.
Over the long term, we want to ensure that all children and young people can access a planned and coherent programme of personal finance education, so that they leave school with the skills and confidence to manage their money well. What does that mean in practice? What will schools and colleges need to have in place? What do the Government and their partners need to do to offer schools the right support and resources?
First, there is already considerable scope for schools to address those issues. The hon. Gentleman referred to some good examples, although he expressed impatience that they are not universal. There is scope not only within personal, social and health education, but also in citizenshiphowever flawed the hon. Gentleman may think it ismaths, business studies and careers and enterprise education. Within PSHE, pupils develop their financial skills through age-appropriate activities. Younger children are introduced to ideas such as saving and planning, whereas older pupils study more complex concepts, such as influences on saving and how to budget.
Within citizenship studies, older pupils must study broader financial issues such as how the economy functions. I accept that that is not directly personal finance, but it provides an important context in which to judge personal financial decisions.
The Government are spending £60 million each year until 2011 to help schools embed enterprise across the curriculum, helping young people to develop creativity, innovation and risk-management skills. The focus on enterprise will, I hope, help pupils to develop financial literacy and business understanding. Clearly, they are not the same thing, but there is a good relationship between the two. If young people are developing enterprises in schools, as many are, they are learning about budgetary processes and financial management for those small business that they are developing. They can then, in time, apply some of those principles to their own finances.
We think that we could do more to help young people develop their financial capabilityhence our proposed changes, outlined within the Treasury document. For example, we will introduce a new child trust fund payment for seven-year-olds from 2009. We think that that is an important opportunity for children to start to think about finance, so we will explore ways of making the most of that with appropriate resources in schools.
The current review of the secondary curriculum provides an opportunity to consolidate financial capability within the curriculum for older pupils. The review is designed to reduce prescription and increase flexibility, offering the kind of personalised learning that we think is essential if we are to continue to drive up standards.
The proposed new curriculum, which is out for consultation until the end of this month, revises the
PSHE curriculum, so pupils will study economic well-being as a discrete strand of work. Personal, social and health education will then become, as the hon. Member for Harrogate and Knaresborough said, PSHEE, standing for personal, social, health and economic education. That would include learning how to manage money, addressing concepts such as savings, investment and trade, and understanding financial terms relevant to pupils everyday lives.
The development of functional maths is important: it will be an essential component of GCSE maths from 2010. I accept that it will not address behaviour, which should be addressed in another context, but no one will be able to pass GCSE maths without demonstrating that they are able to apply their theoretical knowledge of maths to real-life situations. For example, students may be asked to calculate interest repayments on a mortgage or think about the cost-effectiveness of various mobile phone tariffs. As those examples show, financial literacy is an important element of functional skills and students will need to demonstrate that they have a solid grasp of those issues as they study the fundamental subject of GCSE maths.
Functional mathsalongside literacywill also be part of the new diplomas. Those enthused by concepts of financial literacy who want to develop their skills further may want to pursue the new diploma in finance and business administration, which will be available in some areas from September 2009 and will be an entitlement for all pupils from 2013. The financial services sector skills council will be leading the development of this diploma, ensuring the content will effectively prepare young people for careers in the sector or for further study.
Colleges in particular have a critical role to play in helping those adults whom I mentioned earlier who struggle to make sense of the financial world. As part of our overall skills for life strategy, the Basic Skills Agency has had £3 million of funding to invest in a financial literacy project. It has developed materials and learning programmes for use in FE colleges. York college, for example, has used those resources to embed financial literacy within different vocational courses.
It is also critical, as both hon. Members have mentioned, that teachers in schools and colleges have the support and training they need, so that they are confident in helping young people to develop their own skills and knowledge. There is a newly formed professional subject association for PSHE, which will support teachers to plan, deliver and evaluate better PSHE provision, including personal finance education.
We are updating the curriculum guidance for personal finance education this year. The Qualifications and Curriculum Authority has also recently published guidance for PSHE, which covers financial education, and from September, the functional mathematics element of the new diplomas will become part of the curriculum for trainee teachers of the relevant age group. We will also be examining whether more support is needed for PSHE teachersperhaps, for example, by developing a new module in financial capability in their continuous professional development programme.
I must also mention, as the hon. Member for Harrogate and Knaresborough did, the excellent support made available by the Personal Finance Education Group, an educational charity primarily funded by the Financial Services Authority, whose learning money matters
programme offers a one-stop-shop for schools to get advice on planning their provision for financial education. It aims to reach 4,000 secondary schools directly by 2010. Because of its significant expertise in this area, we have asked it to redevelop the guidance on teaching financial capability that I referred to before. Finally on this point, the new national centre for excellence in maths teaching will play an important role in supporting better teaching and sharing good practice in financial literacy in respect of functional maths.
I have talked about the range of activities that we are undertaking in this area, but I should comment on the principal point that the hon. Gentleman made about compulsion. We do not believe that it is necessary or desirable to make financial capability a separate statutory area of the curriculum. In fact, we do not think that making all elements of the PSHE statutory for secondary school pupils is necessary, although all are required to cover sex, drugs and, not rock and roll, but careers education. In essence, we are trying to reduce the level of prescription from Whitehall and offer more flexibility on the ground for schools.
Making the subject compulsory will not necessarily improve the way in which it is taught, and we think that that is the crucial factor that we need to focus on. We need to concentrate on improving delivery in the classroom. That means a focus on ensuring that teachers have the skills and confidence to teach those subjects effectively. We think that it is more important that we invest in the work force and ensure that the appropriate resources are available to them. Teachers themselves agree with that approach. An FSA survey of teachers showed that there is little support for personal finance to be made statutory and that what schools need is flexibility within the curriculum.
Moreover, PSHE and citizenship already covers some elements of financial literacy, and that will be enhanced by the proposed changes in the secondary curriculum review, which, as I have said, will free up time. I hope that freeing up time, particularly in key stage 3, will mean that schools will opt to develop further their enterprise and financial education, alongside other things such as learning outside the classroom and some of the other skills for life that can make school more engaging during those critical first three years of secondary schoolwhere there is a secondary system, rather than a middle school system, in place. That will mean that pupils can continue to be engaged in those areas, but also in their academic learning, as they go on.
For similar reasons, we do not believe that it is appropriate to make it compulsory for every pupil to have a qualification demonstrating their financial capability. The qualifications are available to the schools that wish to provide them. Some may choose to use the time that they will have in key stage 3 for that purpose. But it is more important that young people acquire the relevant skills.
I hope that I have reassured the hon. Gentleman that I have listened to his argument. I will, of course, reflect on what he said. I hope that he is persuaded that the Government and I are determined that financial education must be part of our education system and that we are implementing changes to ensure that financial literacy is embedded at every stage. We might disagree about some of the practical measures to be taken, but the commitment is certainly there and we want to be judged on our success in delivering that commitment. I am confident that we are offering teachers the right support to teach those vital skills.