Basic math skills oil the wheels of financial literacy

This article is the last part of the FT’s Financial Education and Inclusion Campaign

When my father was teaching calculus to adults in Birmingham in the 1980s, he asked each new class what they hoped to learn. On one occasion, a woman who worked as a lunchtime supervisor said she wanted to know the percentages. Her colleagues were telling her that the pay raise they had been offered was not enough, but she had no way of judging that because she did not understand the concept of a percentage increase.

Understanding percent change is one of those fundamental mathematical principles that often surface in discussions of financial literacy. The original 2015 Money Advice Service report used this as a key metric, asking respondents to say how much £100 paid into a savings account was worth after a year if it accrued interest at 2%. More than a third could not answer correctly.

So arguments, such as the one advanced in FT Money by Robert Halfon, Chairman of the House of Commons Education Select Committee, for more targeted teaching of financial literacy in schools instead put the cart before the horse. .

Without basic math skills, lessons on fixed and variable rate mortgages, or how student loan repayment rates are indexed to inflation, will have little success. Financial literacy is in any case more effective if taught at key life stagesin the context in which it is going to be useful, rather than as a generic skill.

So perhaps the greatest service we could do for future financial literacy is to embed math skills in today’s students. The UK lags behind the OECD average in these skills, with more than half of working-age adults estimated to have low basic numeracy, meaning that ‘they can’t correctly read a payslip or convert a weekly bill to a monthly or annual amount. The low level of functional numeracy affects all age groups and is highest in disadvantaged areas.

Food writer and poverty campaigner Jack Monroe has opened up the debate on poverty and inflation with his calculations of recent supermarket food price hikes, even managing to put the Office for National Statistics on the defensive.

How many others, lacking the formidable skills of Monroe, lack the mathematical agility to calculate increases in the cost of their weekly grocery store? Or calculate the combined effect of the expected 50% increase in fuel bills in April and a 1.25 percentage point (not the same, mind you, 1.25%) increase in premiums. national insurance?

Implementing these changes should certainly be a high priority for financial literacy as people prepare for these shocks.

So what resources do we put into this mathematical leveling? Not enough, it seems. In our latest book, After the virus: lessons from the past for a better futuremy co-author Professor Simon Szreter of the University of Cambridge and I had a long view of investing in education, going back to the post-1945 social contract. increased massively, almost doubling as a percentage of GDP, from 2.9% in 1955-56 to a peak of 5.6% in 1975-76.

In 1972, all children received free and compulsory education until the age of 16. As we show, these were years when productivity grew by an average of 2.4% a year, the highest on record in the UK, and in stark contrast to the anemic 0.3% seen since 2007.

The crises of the mid-1970s ushered in neoliberal conservatism and state retrenchment. Tax cuts have gone hand in hand with a drastic reduction in the percentage of national income spent on education. Only private schools have continued to increase the amount spent per pupil.

New Labor then reversed the cuts, investing at all stages, from early years, to schools and higher education. But Conservative austerity has again reduced the share of GDP going to education, bringing it down once again to 4%, the same level as 60 years ago. In real terms, expenditure has even decreased. That this is happening at a time when most young people were continuing their education until the age of 18 and almost half of them progressing to university is quite an achievement.

UK education spending

The Institute for Fiscal Studies has released its Education Spending Report 2021, with the stark observation that “the cuts to education spending over the past decade are effectively unprecedented in UK history. post-war years, including a 9% drop in real terms at school. spending per student and a 14% drop in spending per student in lower secondary schools. While we have chosen to devote an ever-increasing share of the national income to health, we have remarkably reduced the fraction… that we devote… to education.

We are investing, it seems, to meet the growing health and care needs of the elderly population, while neglecting to invest in the young.

It’s not sustainable. It is also deeply inequitable. Before the pandemic, education spending fell faster in deprived areas than in prosperous ones. Then, when Covid kept children out of the classroom for months, it was, as our book shows, those with fewer resources who fell behind.

Underfunded catch-up programs struggle to cope with the consequences and an alarming number of 80,000 to 100,000 children have disappeared from school lists.

But, unexpectedly, a door opened. A boost to national coffers has materialized in the UK’s falling fertility rate, offering the Treasury the prospect of savings as classrooms and schools close in years to come.

We could decide not to take the windfall. We could use that money to invest in better education – and perhaps higher skills and incomes – for the smaller number of children who will be there to pay taxes to support our old age.

Providing all students with safe math skills, regardless of background, will provide them with an essential foundation to effectively manage their household finances in the future. For the economy as a whole, the return on investment should translate into higher productivity, as it supports the transition to the high-skilled, high-wage economy we aspire to.

After the virus: lessons from the past for a better future, Hilary Cooper and Simon Szreter, is published by Cambridge University Press. £12.99.


Sarah J. Greer