While it's been available to publish since December, today the Treasury has finally released its response to the independent commissioned report by Christine Farnish, who has called for radical changes to the Money Advice Service and for an end to the marketeers gravy train.
The report also reveals the Money Advice Service (promoted as 'Ask Ma') has spent £50 million pounds on marketing its website – yet it still has a relatively small reach.
This research was launched last year to assess how effective and efficient it is in delivering financial education and advice to consumers, and to recommend any changes that could improve the service. It was set up on the back of heavy criticism of the Service by MPs on the all-party Treasury Select Committee.
Martin Lewis, founder and editor of MoneySavingExpert.com first raised concerns when he was called to give evidence there in 2012, where talking about the MAS website he said: "If the product wasn't crap I would think it might be a good idea, but its product is abominable and I'd be embarrassed to put most of its tools on my website.
The results of the review which have been published today call for radical changes to be implemented. The findings also raise questions over the amount of money spent by MAS and the value achieved from it. (MoneySavingExpert was consulted in detail as part of the independent review, and many of our suggestions on MAS as an information provider, rather than its separate role in providing debt counselling funding from back in 2012, have been incorporated).
Over the last four years the MAS spent £208.9 million on its service, including over £50 million spent on marketing the site alone.
The report, headed by Christine Farnish, the former chair of Consumer Futures and head of the National Association of Pension Funds, states: "Our vision of the new MAS will require significant transformation of the current model over a period of two-three years.
"MAS will need to recruit new skills and, to a degree, change its mind-set. It will need to work more as a strategic coordinator, sitting at the heart of the landscape and acting fairly and squarely on the consumer side. MAS has already started on this journey but more remains to be done. This will require strong leadership and governance.
"Given the ample provision of good advice and information that consumers trust elsewhere in the market, we do not believe that MAS needs to maintain a large website backed up by an extensive marketing campaign. MAS should scale back its website and marketing considerably."
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'Wasting cash that could have done far more good elsewhere'
On the independent report, Martin Lewis says: "MAS's job should be to make sure that financial capability needs across the nation are being met. Instead, for five years it has adopted the costly, empire-building attitude that it should meet these needs itself – and, as expected, has failed to do so.
"I've always supported the idea of public funds helping to improve the nation's financial capability. Yet MAS has a solid history of wasting what are effectively public funds (that come from a compulsory levy on the financial service industry) that could have done far more good elsewhere.
"It has spent more than £50million on advertising an online provision that – even if I'm being generous – has been ordinary. It has had to spend so much money getting people to go to the site because they don't use it, as it simply hasn't been up to scratch. In the main, MAS has simply aimed to target people who are already being served elsewhere. That has to change.
"Its 20m 'annual users' is a nonsense figure, used to persuade opinion formers that it is a big site. Yet this is separate site visits, which would include repeated visits by the same users and on multiple devices. It's not a figure we or most major sites would ever use, but for the sake of comparison, my site has 290m 'annual users' – an obvious impossibility, given the size of the UK population. In truth, MAS is reaching far fewer people than this figure would suggest.
"It's time for radical change. I am delighted the independent report calls for that. Of course, that is not to say that I agree with Farnish's report in every single way. I would like to see more money being kept and ring-fenced into hardcore financial education funding in the same way as we see debt funding."
Three areas of improvement needed
The report says the MAS' debt advice, money advice and the governance, accountability and coordination of the service, are the three key areas where improvement is needed.
It questioned whether MAS should seek to compete with other bodies who already have trusted brands and extensive consumer reach and Farnish writes: "there should be minimal spend on marketing, with the website redesigned primarily as a signposting portal to other good quality content."
On money advice the report writes: "The acid test of MAS's effectiveness is whether or not MAS's efforts have improved levels of financial capability and whether or not MAS's work results in consumers taking better financial decisions. Providing evidence to categorically prove this one way or another is not easy, particularly within the relatively short timeframe of MAS's existence, but MAS has been unable to provide us with a compelling case."
And on co-ordination of the service, the report suggests that "MAS should step in to fill gaps, and work with intermediaries, product providers, consumer groups and the media to help consumers make better financial decisions."
In order to improve the service, the report recommends the following:
- Minimise spend on marketing activity.
- Focus on identifying and filling gaps
- Establish a Financial Helpline so it's a 'one-stop-shop' for consumer queries on financial matters
- Simplify consumer information about products and work as an "honest broker" with financial product providers such as banks and insurers to help compare products more easily.
- Work closely with the Financial Conduct Authority, Financial Services Consumer Panel and the Financial Ombudsman Service.
The MAS is also responsible for distributing funds to debt charities to help with counselling, that side of the service has come under less criticism: "The National Audit Office found that MAS is achieving value for money in its debt advice role. MAS is helping to coordinate effective debt advice and has delivered some efficiency gains. MAS now needs to develop its approach further, so it can help increase the supply and cost effectiveness of free debt advice and offer more by way of sector leadership and strategic coordination" the report states. It recommends:
- To establish a Debt Advice Steering Group to improve the efficiency, effectiveness and reach of free debt advice.
- To ensure funds are available for debt advice, including from financial services and from energy and water sectors and are used in the best way.
- To identify and refer consumers with problem debt to advice bodies at an early stage.
A 'surprising' response from the Treasury
Andrea Leadsom, Economic Secretary to the Treasury and the Government has "welcomed" the review's findings. In her response she says: "Making sure that customers have access to high-quality financial education and advice is a key part of our long term economic plan.
"That's why I am pleased to announce that the government has published the final report from the independent review of the Money Advice Service, together with its response. I am grateful to Christine for her work in leading this review, which makes a number of important recommendations for improving the way MAS is run.
"I welcome the steps that MAS has announced today, alongside its commitment to consider the review's recommendations in full and submit a proposed action plan to the government in the autumn."
It echoes Farnish's report by stating that "MAS must ensure it is firmly focused on identifying and filling gaps in provision, so that it does not waste resources duplicating content or services available elsewhere, or crowd out other sources."
Her response goes on to say that "MAS will explore how it can better align its debt advice and money advice functions" by encouraging those people in danger of falling into debt to seek help at an early stage.
But Martin Lewis says it is "surprising" that the Treasury is putting MAS in charge of self-reviewing its own future.
He adds: "I'm rather surprised the Treasury seems to be putting MAS in charge of self-reviewing its own future. While management changes have improved the organisation – it needs a fundamental change in remit and that should come from strong external oversight, not from within."
'Moving these recommendations forward'
Responding to the report, Caroline Rookes of MAS wrote: "I welcome the review's conclusion that the Service should play a greater role in co-ordinating and aligning the various initiatives across all sectors to provide improved advice and education to consumers.
"The review has challenged the way we do our money advice work in particular. All organisations need to evolve as circumstances change, especially new organisations such as ours.
"In addressing the money advice recommendations, we want to ensure that changes we make are genuinely in the interests of consumers and deliver value for money. We currently help thousands of people every day to take action to manage their money better and in contemplating changes, we must not let those consumers down.
"So we will now work closely with the FCA, the financial services industry, consumer groups, the voluntary sector and other experts, to assess if the recommendations could be implemented in a way that would best benefit consumers and enhance the financial capability of the UK."
The MAS will now have to review the way in which it operates and will need to report to the Government on its progress in implementing its recommendations and objectives. It has also announced that it will be making the following changes as a result of the report's recommendations:
- It will chair a new Debt Advice Steering Group with the first meeting planned for the first quarter of 2015/16.
- Reduce marketing spend in 2015/16. This year it will lead a thorough assessment, working closely with the FCA, on size, budget, skill set and delivery mechanisms.
- Fill in gaps in advice with new online content to help people pre and post retirement, including guidance on how to budget in the run up to retirement, bring in a retirement adviser directory and annuities comparison table.
- This year it will create an accessible and searchable online Evidence Hub which will summarise current evidence on best practice and deliver a Financial Capability Evaluation Toolkit which will provide organisations with guidance and practical support needed to measure the programmes impact in a more robust and consistent way.
- It will also deliver a financial capability evaluation framework for teachers and parents helping those who deliver financial capability interventions to understand, provide and measure best practice.
Findings share Treasury Committee's concerns
Andrew Tyrie MP, chairman of the Treasury Committee, says: "The Treasury Committee concluded that there was a lot wrong with the MAS. Its inquiry identified a number of serious concerns about its effectiveness and value for money.
"The Committee considered carefully whether the MAS should be abolished, but concluded instead that an independent review should examine the role of the MAS in depth.
"The independent review published today is welcome. It makes some helpful suggestions for reform of the MAS. It echoes a number of the Committee's recommendations, including that the MAS should have a greater role in the provision of financial education in schools and should convene a working group on debt advice.
"Christine Farnish – the independent reviewer – shares the Committee's concerns about the high spending by MAS on its website and marketing. She has also expressed concern about the extent to which the MAS may be duplicating the work of private and voluntary sector providers. On the latter, she concludes that the budget for the MAS's consumer finance education role could be halved.
"However, the crucial question of the MAS's future as a statutory body was excluded from the reviewer's terms of reference. MAS have now been asked to respond to Ms Farnish's report in the autumn. When the Government considers that response, it should also consider the MAS's future as a statutory body."