William Kay: To help the poor, lessons in personal finance must start in the classroom

It went almost unnoticed this week, but the Chancellor's Spending Review contained far-reaching and potentially valuable proposals to help poor people with their finances.

It went almost unnoticed this week, but the Chancellor's Spending Review contained far-reaching and potentially valuable proposals to help poor people with their finances.

Gordon Brown's first step was to loosen the rules for Social Fund Budgeting Loans, which at present can force borrowers to hand over as much as a quarter of their weekly income in repayments. This is a godsend to loan sharks which was long overdue for reform.

Beyond that, though, the banks are to have their arms twisted to give more people bank accounts and loans that charge interest rates below the scandalous 30 per cent reserved for those regarded as high risk.

Last year, Barclays piloted a promising scheme in tandem with Cattles, the doorstep lender, but it was scrapped after only six months. Conflicts of interest between the partners were cited, but Mr Brown must ensure that such squabbles do not get in the way in future.

The latest tally, in April 2003, showedthere were around 3 million households without a current account and about 1.9 mil- lion households without an account of any kind. Mr Brown said: "Those without a bank account are much more likely to use the 'alternative credit market' and pay rates of interest many times those of a standard overdraft." But it is not so much having a bank account as satisfying the banks' criteria for granting an account that makes the difference.

There is no substitute for good, free financial advice to help the poor, and Mr Brown recognises that the supply of such counsel falls far short of demand. He is calling for suggestions to increase this supply, and is setting up a Financial Inclusion Taskforce to tackle financial exclusion.

I hope this taskforce will pick up the phone to John Tiner, chief executive of the Financial Services Authority, for very similar work is already being done by the FSA's Financial Capability Steering Group. And I can assure Mr Brown that that group's Debt Working Party, on which I sit, has been looking at the problems of advice and low-cost loans. The Treasury's Ruth Kelly is a member of the Steering Group, so there is no excuse for Mr Brown not being fully informed about its investigations.

Citizens Advice welcomed the Government's initiatives in this area, along with the relaxations in the Social Fund rules. But, despite the billions of pounds being devoted in the Spending Review to improving education, strangely Mr Brown did not make the connection between better education and the need for money advice. Britain's schools are still not compelled to teach finance. Until they are, the loan sharks will continue to make a fat and largely tax-free living.

So it was cheering to see Ron Sandler, chairman of the Personal Finance Education Group, congratulating the first students to pass the Institute of Financial Service's level 3 Certificate in Financial Studies, the equivalent of an A level. This is a first step towards the Personal Finance GCSE for which The Independent has long campaigned.

As Mr Sandler pointed out, if consumers are more able to recognise when the wool is being pulled over their eyes, they will demand better value for money. And then the entire financial services industry will be prompted to move in the right direction.

But it does need the government to start that process in every classroom in the country.

* The Office of Fair Trading is at last starting to fight dirty against the blight of the doorstep seller. It has summoned Nanette Newman to front a campaign aiming to give consumers the skills to keep control of the transaction.

This chimes in very much with Gordon Brown's plans to make more affordable loans available. It is always going to be difficult to protect someone who needs a doorstep loan just to pay for food and clothing, but the power to ask questions is invaluable. Through Ms Newman, the OFT is also advising the public to guard against emotional blackmail by not getting drawn into conversation about family or personal life, and never signing for something on the spot: send the seller away while you think about it.

And above all, don't be afraid to say no. If the item is worth more than £35 you always have a week to change your mind.

A&L circus rolls into town with new account

I sometimes wonder if bank marketing executives were brought up in a circus. Barclays became notorious last year for its 0 per cent credit card deal, now withdrawn, which it was virtually impossible for anyone to qualify for. Now Alliance & Leicester dons the greasepaint and beats the drum for its Premier Plus current account.

It follows the usual pattern, concentrating hard on the headline rates, 5.5 per cent on money in the account, 0 per cent on prearranged overdrafts. Then the small print kicks in: the 5.5 per cent is only up to £2,500, and you have to pay in at least £1,000 a month. The 5.5 per cent is the guaranteed minimum until the end of next year, by which time others will probably have overtaken it because of Bank of England base rate rises. From January 2006 the new account will pay a none-too-exciting 1 per cent below base.

As for the overdrafts, we'll never know how much A&L will lend interest-free, but the maximum is £2,500 and most people will get no more than £250. Like Lloyds TSB and Halifax before it, A&L has come up with an account wrapped in so many strings it might as well be running a puppet show.

We have seen Intelligent Finance and ING start with a bang and then slip back. So will this one. The 5.5 per cent is worth about £20 a year more than you can get elsewhere, and there's free worldwide travel insurance worth about another £55.

It hardly seems worth the effort, let alone the song and dance, unless you're a first-timer.

w.kay@independent.co.uk