In last week’s budget announcement, Chancellor George Osborne revealed plans to abolish the Money Advice Service – an organization set up by the previous government to provide free financial advice and information. This decision follows the public financial guidance consultation launched in October.
While the announcement may come as a shock to many, the Money Advice Service (MAS) has been under scrutiny for some time, with an independent review of the service revealing a number of failings, including inadequate visibility in the public eye, and improper financial handling. The government has advised on the replacement of MAS with a smaller advice body, more suitable for providing financial guidance, with better targeted activities.
During consultation with the public, the government discovered that there was a widespread view that MAS has tried to deliver too much on money guidance and financial capability, that it has duplicated services offered elsewhere in the market and that it was not able to demonstrate improved outcomes for consumers, in part because of an unclear statutory remit. Thus the government’s view is that the MAS is flawed and a new “slimmed down money guidance body” needs to replace it. Yet, the new model of delivery remains a bit ambiguous and unclear as to what it entails in practice.
Some have welcomed the idea of abolishment – ‘The closure is no great surprise. It was never able to deliver actual advice, just information, and there were already better services available’ says Karen Barrett of unbiased.co.uk – a professional advice company. Several MPs have said the service was “effectively duplicating” other services such as the Citizens Advice Bureau and Moneysavingexpert. But some raised that there were things that MAS was doing well, citing in particular the Financial Capability Strategy, which aims to help Britons improve their understanding of finances and money management. There were also concern from others in the sector that this reform will put a strain on local community organizations and services such as Citizens Advice Bureaus.
According to the Treasury document, the new money guidance body will be focused on equipping consumers to make more effective financial decisions by identifying gaps in the financial guidance market and commissioning providers to fill these gaps to ensure that consumers can access the targeted debt advice, money guidance and financial capability support they need.
Essentially, it will not deliver financial guidance directly, but will provide funding to third parties with the relevant expertise to deliver these projects and services. It will identify projects that demonstrate strong potential to increase financial education, and help people make effective financial decisions, and will support these interventions, thereby building financial capability in the community. The key areas that the new body will look out for will be debt advice, money guidance and financial capability projects, and as an intermediary between service providers and service users. It will not have a public facing brand, and it will commission out services rather than delivering anything directly. The new money guidance body will award contracts to deliver debt advice to impartial, FCA authorised debt advice providers, mostly from the third sector.
The money guidance body will be accountable to the Treasury and will be funded by a levy on the Financial Services industry, and will aim to direct as much funding as possible to the front line. The levy on the financial services industry will continue to be main funding source for the new guidance body.
Because MAS has been heavily criticized for a lack of clear and focused objectives and insufficiently defined accountability mechanisms and measurability tools, it will be required to report on outcomes (i.e. how consumers are benefiting from debt advice) rather than simple outputs (e.g. how many debt advice appointments were held). These requirements will be set out in legislation, with clear and specific statutory objectives and a clear accountability regime, with reliance on FCA to collect the levy necessary for funding the projects and initiatives.
The money guidance body will set an annual business plan, explicitly stating the products and services it proposes to commission to deliver against its objectives, and what success looks like, in terms of measurability. It will be governed by a small independent board comprising a CEO, senior executives and non-executives from relevant sectors including the third sector, financial services sector, digital/technology sectors and consumer groups, upon approval from the Treasury. There will also be open dialogue, to actively engage with stakeholders and discuss funding opportunities. The body’s corporate website will publish details of these opportunities, and host only content of interest to funders, the third sector and the industry, for example details of funding calls, project results and minutes of board meetings. However, there will not be a consumer facing website like the one that currently exists. Budgeting tools and general guidance products created by the MAS will be hosted on other appropriate websites.
The government has announced a consultation on how the new services will be implemented, with final details expected in the autumn.