The Treasury select sub-committee says the Money Advice Service is “not fit for purpose” and in need of a “radical overhaul”, as it publishes its damning inquiry into the future of the service.
Following a year-long inquiry, the Treasury select committee has today published its report into the effectiveness of the MAS.
MPs say they considered recommending MAS be scrapped completely, but have granted it a “stay of execution” until the findings of a Government review into the MAS’ objectives are published. The National Audit Office is to publish a separate report on the value for money delivered by the MAS later this week.
The Treasury is set to carry out a review of the MAS between 2013 and 2015. But the sub-committee is calling for the review to be brought forward “as a matter of urgency” and be conducted by an independent body rather than the Treasury over concerns it may have already decided the service should continue in its current form.
Sub-committee chairman and Labour MP George Mudie says: “The MAS is not currently fit for purpose. It is far from clear it has adopted the right strategy or even that it is performing the correct role.
“In finalising this report, the committee considered carefully whether to recommend the MAS be scrapped completely.
“Given the Treasury had already announced its intention to conduct a review of the MAS, we were persuaded to grant a stay of execution.”
He says the Treasury review must assess whether the MAS should continue to exist, and if so, how it can overcome the “serious problems” exposed by the sub-committee’s report. He adds the Treasury’s findings should be made available by scrutinty of the Treasury seclect committee and others by the summer of 2014.
He says: “People up and down the country need access to high quality money and debt advice. If this is to continue to be facilitated by a public body, a radical overhaul is needed.”
The report found the large amounts of money spent on marketing by the MAS in its early years suggest a strategy to build a separate brand was “misguided”, and that the service’s failure to effectively consult with existing providers has resulted in the duplication of services in the private and charitable sectors.
It says the service’s accountability to the FSA was “confused and misguided” and the review should consider whether the FCA needs additional statutory powers to hold the MAS to account. This could include powers to intervene on operational matters and additional powers to scrutinise the service’s budget.
Caroline Rookes became chief executive of the MAS in February on a base salary of £140,000. She replaced Tony Hobman, who received total pay in excess of £350,000 a year.
The report says in appointing a new chief executive on a considerably lower salary than her predecessor, the MAS, FSA and Treasury appear to have recognised the remuneration of the former chief executive Tony Hobman was “excessive”.
But MPs say while this is welcome, the decision to pay Hobman so highly in the first place, and the fact that two members of staff continue to be paid more than Rookes, “risk undermining the credibility of the organisation”.
MAS strategy and innovation director Mark Fiander, and marketing and service delivery director Karen Broughton, are both on a base salary of £160,000.
The report says the Government review should examine the remuneration of the MAS’ senior staff and should seek legal advice about whether existing salaries could be reduced.
“The MAS is fit for purpose”
In a statement, Rookes says: “The MAS is fit for purpose.
“The committee’s findings are largely based on evidence taken well over a year ago. Since then, we have, with the FCA, appointed a new chairman and chief executive, and changed the direction of the organisation to focus much more on working with partners to help customers. What is more, we have already done much of what the committee recommends.
“We will work with the Treasury and the FCA to respond to the findings of today’s report, in the context of the NAO’s conclusions.”
Money Marketing revealed in March 2012 the committee was launching an inquiry into the MAS.
During the inquiry MPs hit out at the MAS for not being clear about its objectives and failing to deliver value for money.
An FCA spokesman says: “The MAS has an important role to play in providing free, impartial advice to help people better manage their money.
“Under a new senior team, including a new chief executive and chair, MAS has begun to implement many of the recommendations of today’s report. The FCA welcomes these developments and will oversee this work.
“We’ll be discussing the committee’s findings with MAS and the Treasury to agree what further steps should be taken.”