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MAS faces £20m budget cut as Farnish review proposes radical overhaul

The Money Advice Service faces a fundamental structural overhaul after a Treasury-commissioned report recommended slashing its £43m “money advice” budget in half.

In a report published today, former Consumer Focus chair Christine Farnish calls on the Government to redefine the MAS’ role based around four main activities.

Firstly, Farnish says the MAS should establish a budget for grants and commissioning to encourage providers to develop products that fill gaps or provide innovative ways of educating and informing consumers, citing examples of apps or “edutainment” tools.

Secondly, the report argues the MAS should establish a free financial helpline service to provide independent answers to queries about financial products and services. This would be coordinated with the FCA, and Farnish suggests the regulator requires firms to promote the service, for example on bank statements.

Thirdly, MAS should invest in promoting financial education in schools, coordinating and quality-assuring existing schemes, as well as bringing resources together for teachers and awarding prize funds to leading and innovative schemes.

Finally, it should also work with the industry to cut jargon, developing consumer-friendly quality criteria and investigating the feasibility of a kite-marking regime.

Farnish adds such a restructure would likely take up to three years, and would need to be monitored by a statutory framework to hold MAS to account, and clarify its remit.

She says: “The MAS debt advice budget should be kept under review as demand and supply continue to change.

“Under the new model, we believe the budget of MAS’ consumer finance education remit could roughty halve from £43m at present, while serving consumer needs more closely.

“This is a high-level estimate and MAS, the FCA and the Treasury will want to review this as part of the transition.”

The report also sheds doubt on MAS’ expectation that 7 to 10 million actions will be taken by consumers as a result of visiting its website this year.

Farnish says: “We consider this to be subject to considerable uncertainty and likely to be an overestimate.” She adds consumers are able to access good quality information elsewhere from trusted sources, albeit without this being run the by Government.

“Given this, we consider it not to be good value for MAS to seek to duplicate other provision. Rather, MAS should be focusing on improving the quality of the broad range of other information and guidance provision.”

On debt advice, Farnish says the MAS has been “largely successful”. She recommends the organisation takes on a stronger coordination role, chairing a new debt advice steering group, bringing together senior representatives from major creditor firms with chief executives from Citizens Advice, Money Advice Trust and Step Change.

This group could foster agreement on triage processes to ensure customers get cost-effective debt advice, better early identification of customers with debt problems, common processes and approaches to help drive efficiency and a common framework for management information reporting.

Responding to the report, MAS chief executive Caroline Rookes says: “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 complete its own investigation into the conclusions of the Farnish report, presenting its findings to the Government in Autumn.

The Government will then publish its own conclusions and plans for any changes to MAS by the end of 2015.

In March 2012, the Treasury select sub-committee announced plans to probe the effectiveness of the MAS and review the salaries of its senior management.

The MPs’ inquiry into the MAS, published in December 2013, concluded the service was “not fit for purpose” and in need of a “radical overhaul”.

Farnish was subsequently appointed by the Treasury to lead a review of the MAS in May last year.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. Nick Pilkington 20th March 2015 at 1:06 pm

    Just close it down. Complete waste of money & duplication of services already available elsewhere.

  2. “Given this, we consider it not to be good value for MAS to seek to duplicate other provision” – so is that the end of the MAS’ adviser directory then?

    Sounds like a fairly sensible set of recommendations, although it falls short of just recommending that the MAS is scrapped, which is a shame.

    The MAS’ investigations into the conclusions of the review should be entertaining reading.

  3. E L Wisty (an only twin) 20th March 2015 at 1:09 pm

    Caroline Rookes already has a total lack of credibility with the advisory community, and this report throws further doubt on the effectiveness of her leadership.

    She should resign, or be sacked.

  4. As it will have a smaller budget should not Rookes’ salary be cut.

    One interesting point ‘ …. would need to be monitored by a statutory framework to hold MAS to account, and clarify its remit’. Fully agree but should this not also apply to the FCA etc?

  5. @Wisty – You must have missed that she has already been given a new post. Can’t remember what it is at the mo though.

  6. There is no evidence that MAS has achieved anything apart from what comes out of MAS. Has anyone a good word for it?
    Not heard one yet.

  7. So this is the result of her saying she did not trust financial advisers at a fringe meeting of the Labour Party conference. Maybe some of our comments are listened to.
    Is it just a coincedence that Pension Wise has had an increase of just short of 20 million to its budget, or am I just adding 2+2 and making 5?

  8. #Pro V#1

    You have obviously not been reading the MAS guides otherwise you would know that 2+2=6.

    She has gone to NEST! That guarantees disaster.

  9. #Jack Martin

    I have a good word for her but if I used it my comment would be struck out by the moderator.

  10. E L Wisty (an only twin) 20th March 2015 at 4:40 pm

    @ Phil Castle

    Yes, I did see that. And am still simmering!! Don’t these people ever undertake meaning due diligence, or is it just a case of jobs for the girls?

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