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Newsroom & speeches
18 October 2006
I am delighted to be here today, and to add my own thanks to you all for the work you have been doing. It’s eighteen months now since I had responsibility for this area as the then Financial Secretary. I kept a more distant watching brief as pensions minister, but I am pleased to be renewing personal links today and to be able to catch up on the progress since.
I strongly support your work on financial capability, on improving financial literacy, on working hard to combat exclusion. That work has been taken forward with great commitment and personal enthusiasm by so many people, from right across the industry as well as from Treasury and the FSA, with banks and financial service providers at the heart of this. And we are starting to see some real gains from all that effort.
It’s important because we need people to be able to use financial services with confidence. Retail banking is continuing to change fast, and the wider retail financial environment too. People need to be equipped to take advantage of the better choice available today, and not be put off by the bewilderment which for many is a natural reaction.
You heard earlier from my colleague Ed Balls, who as Economic Secretary leads on this in government. He outlined our efforts to date, and the work on a 10 Year Strategy. That fits well with our work on the Comprehensive Spending Review – looking ten years ahead – alongside our commitment to reduce child poverty and eradicate it by 2020. The national financial capability strategy is a vital undertaking, and I applaud the clarity of the focus which has been developed on schools and workplaces, on Young Adults and New Parents.
And tackling financial exclusion. I used to refer to our focus on three priorities as ABC – access to advice, access to banking, and access to affordable credit. Those are the foundation for better inclusion, and I know from Brian Pomeroy that the work of the Financial Inclusion Taskforce, supported by the £120 million Financial Inclusion Fund, has taken important strides forward.
But capability allows consumers to realise a real shift in value. Everybody benefits. The financial sector, from seeing more active consumers, moving up the value chain. Government, from a nation-wide improvement in the financial skills of our citizens, and a boost to job preparedness. And consumers, more in control of their financial circumstances and more confident about getting what they want from financial service providers.
Let me just mention a couple of examples from the east side of London, my home area, which I have been impressed by. In one project – funded by PFEG – teachers from eight primary schools in Tower Hamlets and Greenwich have developed different modules for teaching personal finance education via mobile communications.
Working together, the teachers have developed three days of activities for pupils aged between 7 and 11 years, delivered over three weeks.
The schools have also conducted a survey amongst parents and students to find out what is already known about mobile communications and to identify topics that will be relevant and engaging. The focus of the lessons includes behaviour management and "what if" situations, as well as providing an understanding of cheque books, texting and other areas.
This isn’t just a fun project, mixing financial education with parts of modern life – it is also an opportunity to improve the capability of children in dealing with financial matters, in a practical, useful, effective way. The outcome is a set of materials for other teachers to use to create similar schemes within their own schools. And already, I understand there have been a number of responses from primary school teachers interested in running similar lessons.
At the other end of the teaching spectrum, Lewisham College developed an “Economic and Financial Aspects of Life” module. This comprises 15 classroom hours and 15 hours of self-study. It builds up understanding of the different types of payment – wages, salaries, piecework, fees, commission and so on. It makes clear the difference between gross and net pay, voluntary and non-voluntary deductions, income tax and VAT too, not to mention PAYE, and National Insurance.
Again, the key is a focus on building capability, building knowledge and an appreciation of the need to develop skills associated with money, to help with budgeting, or using direct debts, or credit cards, as well as internet banking.
We have had a lot of support in our work on financial inclusion from SAFE, based at Toynbee Hall in East London. Alice Rogers there has told me about one of those who has benefited from their Families & Financial Capability Programme. Joyce is a single parent to two teenage boys, who is in full time employment and often does overtime to keep the family afloat.
Through the sessions, Joyce improved her grasp of the services on offer, the differences between financial products and the rules attached to them. She became much more aware of other financial services within the community. Together with her new knowledge of saving products she became much more confident to make financial decisions that are right for her and her family.
Through budgeting properly, she could see just how much money she had and the potential that gave her and her sons. She has joined the local Credit Union, and decided to save in a tax-free ISA. She can take advantage now of services and facilities which in the past were shrouded in mystery. It allows her to adopt an inspiring new confidence in resolving the wider challenges of everyday life. She was also able to work out that she had enough funds to on holiday with the boys for the first time in 13 years – and they had a great time. Their life has been changed!
Through straightforward education, decent advise, fair access, and support from people working in the financial system, we can improve the social and economic life of so many people. We need to make sure we don’t let them down.
Thank you.
