Government tries to dodge effective financial education in schools?

The Department of Education under Michael Gove has sometimes seemed like the proverbial group of monkeys randomly typing in the hope of producing the works of Shakespeare. A maths teacher would tell you that given enough time and enough monkeys and enough typing random statistical chance means every now and then a fragment of the Bard’s works would be produced. 

Sadly the random musings of the Department are being inflicted unedited on the country in the form of education policy.


But, credit where credit is due, every now and then something coherent turns up. One such thing was the notion to make Financial Education a compulsory subject in schools. Sadly, once that sentence was typed the Department of Education returned to its incoherent output of simian drivel. Their ‘big idea’ is to include Financial Education as part of the Citizenship curriculum, with Maths  taking responsibility for teaching percentages (as it already does, so no real change there). It is true, as the Department asserts, that Citizenship is a compulsory subject like Maths and English – but that’s where the coherence ends. 

Being ‘compulsory’ means students must take the course. Whether they take the course seriously is reflected by the number who actually go on to the GCSE examination. 

Maths and English are compulsory, and each had over 650,000 GCSEs awarded in 2012. 

On the other hand, Citizenship (10,982 GCSEs awarded) sits between the non-compulsory study of the ancient Greeks and Romans (Classical Studies, 15,265 GCSEs) and Welsh as a second language (9,743 GCSEs).

According to the Department of Education: 
"Citizenship focuses on the political and social dimensions of living together in the UK and recognises the influence of the historical context. Citizenship also helps pupils make sense of the world today and equips them for the challenges and changes facing communities in the future.

The study of citizenship should include:

a. political, legal and human rights, and responsibilities of citizens

b. the roles of the law and the justice system and how they relate to young people

c. key features of parliamentary democracy and government in the constituent parts of the UK and at local level, including voting and elections

d. freedom of speech and diversity of views, and the role of the media in informing and influencing public opinion and holding those in power to account

e. actions that individuals, groups and organisations can take to influence decisions affecting communities and the environment

f. strategies for handling local and national disagreements and conflicts

g. the needs of the local community and how these are met through public services and the voluntary sector

h. how economic decisions are made, including where public money comes from and who decides how it is spent

i. the changing nature of UK society, including the diversity of ideas, beliefs, cultures, identities, traditions, perspectives and values that are shared

j. migration to, from and within the UK and the reasons for this

k. the UK’s relations with the European Union and the rest of Europe, the Commonwealth, the United Nations and the world as a global community."

All this is fitted into on average 45 minutes a week. Is squeezing Financial Capability on top of this anything more than a fig-leaf? This is like educating children about lions using cuddly toys and then letting them loose in a lions den. The only ones benefiting from this will be the lions.

The Financial Services industry manifests its interest in schools through various 'education' channels. RBS and Barclays in particular are active in producing materials aimed at schools. The most single minded is perhaps PFEG, that describes itself on its website:

"pfeg (Personal Finance Education Group) is the UK’s leading organisation helping schools to plan and teach children and young people how to manage their money now and in the future. A registered charity, it values its independence and integrity."

PFEG's 10 trustees comprise of 3 directors of the Association of British Insurers; 1 director of the Association of Investment Companies; 1 director of the Investment Management Association; 1 current CEO of an investment company; 1 former CEO of an investment company; 1 former senior civil servant at the Treasury. Oh, and also 2 teachers. While we don't cast doubt on their motives, which are doubtless sterling, we wonder about their instincts: selling more financial products and services. With the announcement that the Department of Education was consulting on putting compulsory Financial Education in schools into the Citizenship curriculum, PFEG breathlessly announced it had achieved a "huge victory for [its] financial education campaign":

"With financial mathematics included as a part of maths and financial capability included in citizenship education for the first time, the campaign has achieved both of its objectives. "

Do they envision hundreds of thousands of Trojan ponies scampering from schools and welcomed through the front doors of homes around Britain? Asking for help doing homework extolling the virtues of insurance (like Payment Protection Insurance (PPI)); saving for a pension (where high charges is one of the biggest financial rip-offs, with an English pensioner getting a fraction of a Dutchman saving the same amount); taking a business loan (ask the casualties of the Interest Rate Swaps scam).

The "National Curriculum in England" consultation document envisions that Citizenship would include financial education as follows:

Key Stage 3 (age 11 to 14)

• the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services.

Key Stage 4 (age 14 to 16)

• wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services.

Half baked compulsory education in a "range of financial products and services" will cause more harm than good. The Chairman of PFEG, Otto Thoresen (also Chairman of the Association of British Insurers) should know this better than most. In 2008 HM Treasury, the UK finance ministry, commissioned a report by the same Otto Thoresen, who was at the time CEO of the insurer Aegon UK. This report, on how best to deliver generic financial advice to the nation, stated:

  

The Review’s research also indicates that an effective Money Guidance service can drive behaviour change. Eight out of ten users of the prototype [money guidance] services surveyed went on to take at least one action within a week or so of using the service. Of these, over half took specific action such as buying a new product or speaking to a regulated adviser

Is the prospect not mouthwatering and terrifying (depending on which side of the till you are standing)? The prospect of over half of parents, having helped little Jonny and Janey with their homework, going on to buy a new product or speak with a “regulated advisor” (i.e.“salesman”)?

Citizenship homework as a Trojan Horse to get parents and grandparents to think about financial products? In a nation where, according to a survey by the Department for Business Innovation & Skills, a quarter of adults have the numeracy of a 9 year old or below. Is that why PFEG regards getting Financial Capability into the Citizenship curriculum as an objective achieved?

The correct place for Financial Education is in the Maths GCSE. Just two things need to be taught:
a) teach children how to calculate basic percentages, though even the better students struggle to comprehend compound interest. As Albert Einstein himself commented:

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”

b) teach children how the scams of recent decades worked. This won't help them understand the next scam, but it will teach them to be very wary of salesmen - whether they are selling loans or mobile phones, or asking for their votes. If you only have time to teach one thing about sharks, teach that they bite.

Ultimately, financial education in schools will not teach most children how to spot rip-offs. Rip-offs are not driven by the ignorance of victims, they are driven by the incentives of the perpetrators. No matter how well educated the victims are, the scamsters will always find a way to trick them. Just as they tricked all the highly educated and financially aware policy makers and regulators and credit raters and bank board directors and finance ministers whose only defence after the Banking Crisis struck was to claim not to have understood what was happening. 

The way to prevent ordinary Britons being ripped off by financial and other institutions is no different to the way to prevent ordinary Britons being killed by reckless drivers on the roads. It is 5% about teaching Britons to watch out for drunks, and 95% about strong regulations to discourage and punish drunk driving. 

Rip-offs are driven by:

1. excessive rewards (pay and bonuses)
2. inadequate punishment (perpetrators inevitably get away “without admitting nor denying wrongdoing” with fines and legal bills paid by shareholders) encouraging scamsters to try their luck. 

Of the two, excessive pay is the key culprit. Pirates throughout the ages have overlooked the downside of punishment in the expectation of all the cool stuff that can be bought with stolen treasure. Hardly any disgraced board director of a bank have suffered anything more than a well funded retirement.

Putting Financial Education in schools into the Citizenship curriculum is a cop-out on the scale of putting "smoking kills" on cigarette packets. It allows the government to wash its hands of responsibility and hand Britons over to the financial industry. As successive governments for decades handed Britons over to the tobacco industry. 

Martin Lewis who kicked off the petition for financial education to be discussed in Parliament back in 2011 seems cautiously excessively exuberant, stating: 

"So, I am jumping for joy at the news of financial education joining the national curriculum as a part of citizenship for the first time – providing, of course, the detail lives up to the announcement.

"What's most important is the Government has done this in citizenship, which is a compulsory subject.

"This, therefore, is the first step to ensuring that every child has at least some basic financial education to help them navigate our complex consumer economy. A genuine game-changer."

As a cheeky-chappie it is Lewis' job to be optimistic. And he, in contrast to PFEG, recognises this is the "first step", and depends on whether "the detail lives up to the announcement".

Few people would accuse us at Ripped-Off Britons of being optimists. Actually we really are optimists, otherwise we would have given up ages ago. So, on an optimistic note, perhaps there actually is a place in the Citizenship curriculum for Financial Education. It would be as a compulsory course for people of influence who are in a position to rip us off: bankers; insurers; energy companies; train companies; etc.  

Make it compulsory for them to take a Citizenship GCSE in why they have a responsibility as Citizens not to rip us off.