I expect many readers will have blipped over the latest news of disaster in British classrooms. You may not have registered the importance of the revelation that our 15-year-olds are now among the worst at maths in the entire OECD, and have slipped to 17th place in reading skills.
Oh well, you may have said to yourself as you turned the page for more news of Maddy or the amnesiac canoeist; never mind. Someone else’s children. Someone else’s school. Some other set of parents who have failed to read to their kids, or who have allowed PlayStation to become a complete substitute for maths or any kind of academic effort.
Was that, roughly speaking, your reaction? If it was, and if there really are Britons out there who think they are immune from this classroom failure, then they need to think again. The educational problems of the minority can help to trigger an economic catastrophe for the whole of society. That is because mathematics – whether we like it or not – affects all of us, and our economy depends on all income groups having a basic understanding of numbers.
What is the single biggest financial decision we have to take? It’s about buying a house. It’s about how to finance the debt involved in taking out a mortgage. It involves understanding concepts of percentages and interest; and there is abundant evidence that millions of Britons either do not care about the debt they are taking on, or do not really understand the meaning of these squiggly figures for their future prosperity.
I have a chum who provides shared equity mortgages for some of the most disadvantaged people in Britain. He is passionately committed to helping people on to the property ladder. He wants to give them the opportunity to have at least a stake in their own home. He wants them to have that liberating sense of ownership – the pride in their own possession that millions have acquired in the past 30 years.
And yet he has been amazed at the deals they are willing to accept from less scrupulous lenders, and the risks they are willing to run with their lives. It’s not that they are stupid, he says. “It’s that they just haven’t been educated to understand the maths. They don’t see what an 11 per cent interest rate can do. They say, ‘Never mind the rate, just give me the mortgage.’ It’s ignorance.”
The consequences of this ignorance can be profound for the individual debtor, and for the rest of the economy. Look at what has been going on in America. What was the original cause of the credit crisis that has spread across the Atlantic, and triggered the collapse of Northern Rock?
It was the phenomenon described by my friend the mortgage broker. It was a sizeable minority of some of the poorest and most disadvantaged Americans who took on debts and obligations they did not really understand.
Whether they were diddled, or greedy, or just naïve, they made mistakes; and when the housing market cooled, they defaulted. They left the lending institutions with bad debts that have been endlessly diced and sliced and repackaged and sold on throughout the world’s financial system.
It is as though the entire global supply of meat pies had been contaminated with a small consignment of BSE-infected offal, and because no one is sure exactly which pie to fear, the panic is universal. Banks are still reluctant to lend to other banks. Confidence shows no sign of returning, and if there is a serious downturn now in the economy, there will be suffering everywhere – but of course it will be the vulnerable who will suffer the most.
It now looks very likely that there will be a fall in the property market, and in a sense that might be all very well if it actually enabled people to buy the housing they need. The reality, of course, is that Gordon Brown is likely to pull off the stunt of making houses cheaper without making them more “affordable” – because there will be less money around with which to buy them.
The services sector is under pressure; people’s disposable income is taking a knock, and there are now 1.5 million people who face being unable to make their mortgage payments; and though the credit crisis is a global phenomenon, Britain’s position is especially bad, because we have higher levels of personal indebtedness than anywhere in the developed world.
We are twice as indebted, on average, as the rest of Europe, and our personal debt levels have risen 59 per cent in the past 10 years. We have 27 per cent of the population with no savings at all, we have 8.2 million adults in debt, and we have one adult in three who makes no kind of financial planning whatever. To cap it all, we have a million people who use high-interest credit cards to pay off their mortgages.
Now some will say that this is all the fault of the sharks and the money-grubbing lenders, and that we need new regulation to stop the British people from mainlining credit.
There will undoubtedly be socialists who argue that the debt phenomenon shows that the British cannot be trusted to run their own financial affairs, and that we should stop encouraging them to set a toe on the housing ladder when they don’t understand the implications and they can’t afford it, and that we should instead encourage more social housing for those who are simply not suited to the property market. And though that is obviously true in some cases, it is also a counsel of despair.
Surely what we need to do is give people the confidence – and the intellectual tools – to make the right choices; and that means driving home the message, long before our children leave primary school, that maths really matters. It’s not just some abstract question of putting the right number in the box. It’s the difference between happiness and chaos. Without a basic feel for numbers, people will continue to make choices that are both individually disastrous and disastrous for society.
The American sub-prime crisis has shown how a few bad debts can put the world economic system at risk. The tragedy in Britain is that the most economically vulnerable are those who are failed by our educational system; and it is that educational failure that is now putting our economy in jeopardy – and that hits all of us.