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Financial Capability

Volume 448: debated on Thursday 13 July 2006

13. What steps his Department is taking to improve financial capability among the general public; and if he will make a statement. (84774)

The Financial Services Authority has a statutory objective to increase consumer understanding of the financial system, and works in partnership with the Government, the industry and the voluntary sector on those matters. I can tell the House that in the autumn my Department will publish a 10-year strategy on financial capability and inclusion, setting out the Government’s plans for action in that important area.

I thank the Minister for that answer and welcome his announcement. I know that the FSA is doing all it can to increase knowledge and literacy in financial matters for schools, young adults and workplaces and by providing money advice for new parents. Could the FSA extend its remit to pensioners and others who have to deal with instruments and other matters because of the increasing capital wealth among that age group?

My hon. Friend is right. In implementing the pensions White Paper, we will need to focus on such capability issues for future pensioners as well as current pensioners. Some things have been done, and we have announced that financial education will be embedded in the GCSE maths curriculum over the new few years. But there is much more to be done, and I shall give the House two facts. On the one hand, we know from our recent benchmark survey that more than 70 per cent. of schools provide personal financial education only occasionally—once or twice a month. We need to do much better than that, which is what the survey is about. However, our survey also shows that the cash management skills of many people on low incomes are very good—considerably better than the cash management skills of many people in the House.

When it comes to financial accountability, how many times in a row should a set of accounts be qualified by the auditors before the finance director gets the sack?

If the hon. Gentleman is referring to the European budget, I can tell him that I am going to Brussels this afternoon to meet Commissioners, and I shall be at the budget Council of ECOFIN tomorrow. It is of great concern to us that the budget has been qualified for 11 or 12 years. That is exactly why, last autumn, we agreed in ECOFIN a plan to sort it out by 2009. We ought to have support from Opposition Members in trying to sort out the European budget, rather than the continual triviality of their attempting to leave the mainstream of Europe and join the extremist fringes.

Has my hon. Friend considered funding courses in financial capability for MPs who believe that it is possible to increase spending in areas such as housing, child care, youth services and social enterprises at the same time as introducing a proceeds of growth rule that would result in cutting public expenditure by £17 billion?

My hon. Friend is right. Perhaps we could arrange such classes, where we might explain to people that it is not possible to invest in education, tackle child poverty, clean up the environment and at the same time cut £17 billion from public spending, as the shadow Chancellor proposes.

Does the Minister accept that too many financial institutions—such as banks, building societies and credit card companies—encourage people of all ages to borrow beyond their ability to repay? Is that responsible? Should not something be done about it? The citizens advice bureau in my area wrote to me recently about growing debt among the elderly, because they are encouraged to borrow. What can the Government do about it?

I understand the hon. Gentleman’s concerns, and join him in praising the work of citizens advice bureaux. I met them a week or so ago, and they are in the process of hiring 350 personal finance advisers, precisely to give that kind of advice. It is often the case, however, that people fall into debt because they suddenly and unexpectedly face unemployment, family break-up or ill health. In those circumstances, going into debt would be the wrong thing, and we need to give people proper advice and support. In general, I do not think it right to say that banks should discourage people from taking out loans or credit cards, which in fact play an important part in our economy. The fact that so many more people in our society have mortgages and are home owners is a good thing, but we need to make sure that people have proper advice and support, especially at times of crisis, and I commend the CAB for all its work.