House of Commons - Debt Management - Business, Innovation and Skills Committee

Debt Management - Business, Innovation and Skills Committee Contents

5 Government provision of debt advice: the Money Advice Service

124. The Government published its response to the personal insolvency part of its consultation on Managing Borrowing and Dealing with Debt in July 2011. In the response the Government announced that the Money Advice Service (MAS) had agreed to take on responsibility for the coordination of debt advice services in the future.[160]

125. MAS is a nationwide service that helps consumers understand financial matters and to manage their money better. Its statutory function is to:

Enhance the understanding and knowledge of members of the public about financial matters (including the UK financial system), and their ability to manage their own financial affairs. This includes providing information and advice to members of the public to help them understand money matters better and take control of their money.[161]

It was set up by Government under the Financial Services Act 2010 and was temporarily known as the Consumer Financial Education Body, until June 2011 when it was renamed and launched as the Money Advice Service.[162]

126. MAS told us that its new role in debt advice was two-fold:

To develop a model of debt advice delivery that is as efficient and effective as possible; and
To ensure continuity of service delivery during a transitional period while the delivery model is developed and implemented.[163]

However, when we asked what exactly it added to the debt advice landscape, we were given the following suggestions by MAS executives:

[MAS would] provide that objective overview and help work with those who do provide debt advice, including Citizens Advice, to come up with a more sustainable long-term model, including the funding for that.[164]

Our project is to develop a model of debt advice co-ordination that will be sustainable and build on the good practice that already exists[165]

There should be a single set of agreed outcomes for debt advice[166]

There should be an effective triage process, where consumers can come in and be directed to the right sort of debt advice, and that should be multi-channel[167]

There should also be a set of approved tools, so that the providers give consistent outcomes and there is an effective way of measuring that.[168]

127. While all of these aims are laudable we remain unclear on exactly what the role of MAS will be. Without its business plan or future budget—which are currently under consultation within the FSA—it is hard for us to gain a clear picture of what MAS will be doing within the next few years. When we pushed the Minister on this point, he told us that the role of MAS was to:

Make sure that the branding of free publicly funded and supported debt advice is strong and well known. As I said in the House last Thursday, the Citizens Advice brand is very strong, very trusted and is something we should build on.[169]

We asked whether MAS would be coordinating advice or providing advice and Tony Hobman, Chief Executive of MAS told us it was "already providing advice across the web, telephone and face to face" but would also provide a co-ordinating role across the sector.[170]

128. We highlighted to Mr Hobman that there was already a lack of clarity in the debt advice landscape over who the providers were—which MAS could be adding to—and that both co-ordinating and providing debt advice could present further problems. However he replied:

We absolutely do not want to add to the fragmentation and confusion that exists currently, so we will be working with all the stakeholders in the debt advice space to ensure this is not an issue, and that it ends being greater than the sum of the parts.[171]

Mr Hobman was at pains to reassure us that this was not setting up MAS in competition with Citizens Advice:

The brand that we are building we say is not competing, because it is a generic advice space. We are trying to help all of those who are in the debt advice space to channel their business more effectively.[172]

129. We are unclear how MAS can brand build as a debt adviser but not compete with debt advice brands already out there such as Citizens Advice; and how it can co-ordinate debt advice without bias in 'channelling' and 'triaging' when it will also provide debt advice itself.

130. Without sight of the Money Advice Service's business plan it is difficult to accurately assess the impact of the Service and how it will operate. This is particularly worrying given the fact that it will be up and running by April of this year. At present, it appears to have a confused remit and one which overlaps with existing and highly respected brands like Citizens Advice. We do not believe that the Money Advice Service should enter into competition with Citizens Advice. It would better serve the public by supporting and promoting Citizens Advice.

Face-to-face and web-based advice

131. The Government response to the consumer credit review recognised the continued need for free to consumer debt advice:

What has become abundantly clear from responses to questions on personal insolvency is the importance of ensuring that consumers have access to free and impartial advice on dealing with their debts. We are told that this is crucial to their finding the most appropriate debt remedy for their circumstances.[173]

When he came before us, the Minister repeated his commitment:

What I want to make sure of is that, for those consumers who cannot afford to pay, there is quality free-to-debtor advice available in different forms, and that people know that is available.[174]

I put a huge value on face-to-face advice. I do not believe there should be any diminution of face-to-face advice.[175]

132. However during the course of the inquiry we became aware that MAS seems to have been tasked with moving people away from face-to-face advice to web-based advice. Tony Hobman, Chief Executive of MAS told us:

There is a case for a substantial rebalancing. I understand that something like only 150,000 people of those millions that we talked about are currently using any form of internet based help. That instinctively feels far too low.[176]

This was supported by Lesley Robinson, Director of MAS Corporate Services who said that MAS was "currently looking at, the need point as opposed to the want point".[177]

133. Martin Lewis was not happy with this direction of MAS:

The Money Advice Service is a good concept, but I think there needs to be some focus. It has unique properties to do things that nobody else can do, and I slightly worry that it is not focusing on what it can do uniquely; it is trying to brand build in areas where it is not necessary. I have spent two years keeping my mouth shut on this, and today is the first day I have said it, because I think we have got to that point.

He argued that MAS was trying to build a money advice website yet there were many already out there, including his own:

I have had so many e-mails from people who work in the organisation saying that it is trying to brand build and build a big website, if I am going to be absolutely frank and honest with you. Personally, I do not see the point.

[...] We have 10 million users a month; I email 6.7 million people per week. thisismoney is big; lovemoney is big; Which? is pretty big. We all do a good job. You might say that we do some things you do not like, in which case, come and tell us and we will try to improve it. But why are we spending public money competing with that?

134. Martin Lewis believed that MAS should move away from web-advice and concentrate on financial education and helping vulnerable people through face-to-face and telephone advice.[178] MAS highlighted as an argument in favour of its web based work that 300,000 people had already visited its online financial 'health check' in 2011. However, as Martin Lewis pointed out his website moneysaver.com has 10 million visitors a month.

LEGAL AID BUDGET

135. The effects of the reduction in the legal aid budget could be compounded if MAS concentrated more attention on web-based activity and away from face-to face meetings. Citizens Advice informed us that the legal aid budget for debt advice in England and Wales is due to fall by 75 per cent from 2013 and as a result figures, from the Justice Department, suggest that the number of people currently helped with debt problems will fall by 105,000. Theresa Perchard of Citizens Advice explained:

At the moment it is difficult to say what capability the Citizens Advice Bureau service will have to deliver debt advice in two years' time. [...] With the reduction in legal aid funding for specialist debt advice, [...] we face rising demand and reduced resources.[179]

Commenting on this issue, the Money Advice Trust said that:

Changes to legal aid provision mean [it] will not be available to those in debt, except where repossession is imminent. We expect this to start to have an impact on the variety of sources to which we can refer clients in need of specialist legal support.[180]

136. The Minister recognised the cuts to legal aid could be a problem:

Clearly for particularly some Citizens Advice Bureaux and other advice agencies, it may well have quite a big impact. [...] I take the point, and I am afraid these are not easy times. There are cuts being made. What I am keen to do, and one of the reasons why we have now got the levy and the landscape review, is to make sure we are using the scarce resources as efficiently and effectively as possible.[181]

137. We are confused by the Minister's assertion that there will be no diminution of face-to-face debt advice when the legal aid budget for debt advice is being cut by 75% and the Government appointed debt advice coordinator, the Money Advice Service, is advocating moving people away from face-to-face advice provision to web-based help. Web-based advice is better provided by existing free providers—for example Citizens' Advice or moneysavingexpert.com—both of which have high levels of brand awareness. We believe that Government funds would be better directed at highlighting and supporting those services, leaving the MAS to concentrate on telephone and face-to-face support.

Funding

138. MAS is funded by a levy on financial services companies regulated by the Financial Services Authority. This levy will raise £27 million a year and will be used to replace Government funding of face-to-face debt advice from next year onwards. MAS was aware that raising money this way ran the risk of impacting on the funding of the fair share model. However, Lesley Robinson, Director of MAS Corporate Services was confident that this would not happen:

It is not in any sense replacement or duplication, which I think is a key point. We believe that approach will complement, if you like, the work done by those providers funded by Fair Share, like CCCS and Payplan.[182]

139. However, there is a danger that if the industry is already having to pay for debt advice through the £27 million to MAS, it may start to reconsider its funding through the Fair Share Model to CCCS and Payplan. Again, Lesley Robinson gave us the following reassurance:

We have obviously been in consultation with existing stakeholders, including the large financial services. They are fully aware of what we are doing and are supportive of it. They do not see funding the two as an issue.[183]

140. The future funding of the Money Advice Service through an industry levy will reduce government expenditure, but it runs the risk that industry may be unwilling to fund both the Money Advice Service alongside its existing financial support for the fair share model. The Government needs to be alert to any withdrawal of financial support for the fair share model.

Salary of the Chief Executive

141. During this inquiry we were informed that the salary of the Chief Executive, including bonuses, was worth approximately £350,000. When he came before us Tony Hobman explained that he received £250,000 per annum, with "some benefits beyond that."[184] When pushed whether it was appropriate for a relatively small organisation, he said that it would make him "hugely incentivised" to do well.

142. We also questioned the Minister who said:

It has not been a decision from BIS. As you will know, the budgets for MAS are set by the FSA and they are responsible to the Treasury via the FSA. We are just consulted on their budgets. But you will know, from evidence the Secretary of State has given to this Committee, that in BIS we are concerned about high salary levels, both in the public and private sector, and we would urge restraint at that sort of level, for sure. [...] I was not involved in the setting of it. All I will say is that it is quite a high amount, and I am sure the Financial Services Authority and the financial services industry will be wanting to look at it.[185]

143. We are concerned by the high salary of the chief executive of the Money Advice Service. At a time of pay restraint we do not believe that the head of a comparatively small organisation should receive a salary £100,000 in excess of the Prime Minister. We look to the Government to raise this with the FSA as a priority. The perception of such extravagance does not sit easily in an organisation tasked with helping those in debt.

160 Consumer credit and personal insolvency review: summary of responses on consumer credit and formal response on personal insolvency, HM Treasury, July 2011, para 5.35, p 23 Back

161 Consumer credit and personal insolvency review: summary of responses on consumer credit and formal response on personal insolvency BIS and HM Treasury Back

162 Consumer credit and personal insolvency review: summary of responses on consumer credit and formal response on personal insolvency BIS and HM Treasury Back

163 Ev 127 Back

164 Q 144 Back

165 Q 145 Back

166 Q 145 Back

167 Q 145 Back

168 Q 145 Back

169 Q 253 Back

170 Q 147 Back

171 Q 148 Back