Money Advice Service inquiry

Written evidence submitted by the Money Advice Trust

Executive Summary

· It is too early to judge whether MAS is meeting its statutory objectives.

· Since MAS has taken on a new debt role in addition to its financial capability function, it needs to consider how it prioritises between the two functions.

· In 2010, spending across Government departments on debt advice totalled £106-109 million. Government has now pulled back from this, leaving MAS as one of the few funders of debt advice – their Board needs to be thoughtful of this.

· An unintended consequence of the extension of the levy which funds MAS to debt advice, and of uncertainty as to its long-term plans has been a destabilising effect on funding for debt advice charities.

· Against the current difficult macro-economic backdrop ensuring people in debt find their way to effective advice as quickly as possible is vital. Marketing spend is a significant proportion of MAS’s budget; we urge them to leverage this spend to ensure people understand the benefits of crisis advice and are quickly referred to appropriate free independent sources of it.


Response by the Money Advice Trust to inquiry by the Select Committee for HM Treasury into the Money Advice Service.


1. The Money Advice Trust (the Trust) is a national charity founded under that name twenty one years ago to help people across the UK tackle their debts and manage their money wisely. The Trust’s frontline services include the provision of debt advice to individuals and small businesses via National Debtline, our internet tool My Money Steps and Business Debtline. We provide significant training and support to free-to-client debt advisers across the UK and develop tools and products (such as the Common Financial Statement) to improve the credit and debt environment. We also fund both core infrastructure supporting the whole free debt advice sector, and innovation in debt advice. We are on track to support approximately 1.3 million people in 2012.

2. The Trust sits at the heart of money advice across the UK. Our Partnership Board (an advisory group comprising funders, UK wide advice agencies and relevant Government departments, see Appendix 1 for membership) and grants programmes enable us to gather intelligence from other local and national advice providers, Government departments, major creditors and local charities. We conduct a research programme which develops understanding around causes of and behaviours in relation to problem debt, and how advice services could be improved. Recent publications have looked at the key macro-economic drivers of demand for debt advice, differences in how men and women deal with problem debt, the case for early identification of debt problems and supportive intervention by creditors, and the ongoing impact of the recession on low and middle income families in relation to their use of credit.

3. Despite the similarity in our names, the Money Advice Trust and Money Advice Service (MAS) are very different organisations: we are a charity providing frontline services for people in debt, and training and support for debt advisers; MAS is a private company established by statute with public duty functions and commissioning services from both the private and third sector.

4. The National Audit Office’s 2010 report Business, Innovation and Skills: Helping Overindebted Consumers [1] , published 23rd February 2010 found that charitable services procured by the Government had been effective and provided good value for money, but that there was a lack of co-ordination across Government departments regarding policy on overindebtedness. The Trust agreed with the central finding of the report, that a co-ordination function was needed and we continue to support the principle of such a function. As we suggest below, this could support public interest awareness raising of services, maintain common processes to ensure clients can access appropriate channels, provide a "kitemark" to reassure consumers of service quality and enable forward planning on volumes and revisions to service provision based upon data-sharing.

5. The Trust has recently signed an agreement with MAS to deliver training to the face-to-face debt advice services they are funding during 2012-13.

Responses to questions raised by the Select Committee

Extent to which the Money Advice Service (MAS) is meeting its core statutory objectives:

6. In our opinion, it is too early to say whether MAS is meeting its core statutory objectives, since it has not yet published independent service evaluations or annual reports and has only been fully operational for approximately one year. In line with other bodies with public duty functions we would expect that when this happens its reports will include qualitative and quantitative ways of showing the effectiveness of the services it commissions.

Are these the right objectives for MAS to have?

7. Overall, we note that MAS’s objectives are very broad. Our primary consideration with regard to MAS’s objectives is the sphere within which we operate: debt advice. This was not part of the original set of objectives and added subsequently in September 2011. MAS is understandably still getting to grips with this area. Based on our accumulated experience and evidence base, the Trust considers that the most significant issues regarding unmanageable personal debt and debt advice are:

· lack of public awareness that free-to-client debt advice services exist (or who the providers – other than the best known brand, Citizens Advice – are)

· the extent to which individuals experiencing unmanageable debt do not recognise the key signs

· public wariness of using free-to-client debt advice services because they are unable to distinguish them from feechargers (understandably given ‘lookalike’ fee-charging debt management companies, see attached screenshots in Appendix 2.)

· the extent of public use of fee-charging debt management services. We do not have an ideological objection to fee-charging services per se but are concerned about the extent of poor and predatory practice highlighted in the OFT’s reports and reviews 2010-11 and in the BIS Select Committee Report April 2012 [2] , and which our own experience at National Debtline confirms.

8. Since MAS has taken on a new responsibility (debt advice) it isn’t clear how or whether its Board (or the FSA which oversees it) have considered how to prioritise this work vis-a-vis its original remit. With a much larger remit and an £81m budget overall does it still make sense to spend around half of that on financial capability; rather than increasing the proportion to fund frontline crisis debt advice, particularly given the economic situation in which the UK finds itself now, compared to when MAS came into existence? Research from the Friends Provident Foundation found that central and local Government spent in the region of £106m on free debt advice in 2009 [3] ; MAS is spending around a quarter of that despite the fact that most other sources of funding have depleted. To use the analogy of the NHS, investing in preventative messages unfortunately does not negate the need for spending on accident and emergency services. If MAS does not feel it can spend more than it is on crisis advice, has it made representations to Government about this urgent need?

9. MAS has already sunk considerable investment into creating its own brand. We would consider it a highly effective use of this brand and the authority it should convey to address some of the issues outlined above through activities which could both raise awareness of debt advice and signpost potential clients to existing – free – charitable services. A useful precedent is the campaign which the Department for Communities and Local Government ran in 2009-10 – an example newspaper advert from this is contained in Appendix 3.

How effective is the MAS’s internal administration and expenditure on staff and other resources?

10. MAS is a relatively new organisation and it is unsurprising therefore that its corporate culture still feels somewhat detached from the end user of the services for which they are responsible. This manifests itself in a focus on numbers and process. It is right to measure outputs but due weight needs to be given to quality measures as well as volumes. We believe that there is still not a clear enough focus on the effectiveness of the services delivered beyond numbers of clients served, although MAS is currently commissioning a piece of consultancy on the quality of debt advice which might assist here.

11. One example of this corporate culture is MAS’s approach to commissioning. Other than giving grants for some face-to-face debt advice [4] , MAS’s services have thus far been tendered on a commercial basis. We welcomed the awarding of the contract for telephone money guidance to Turn2Us, which is part of national poverty charity Elizabeth Finn Care, and face-to-face contracts going to Citizens Advice and Citizens Advice Scotland. However we remain concerned that timelines and culture have so far made it difficult for many charitable organisations to compete for contracts on a level playing field since many charities do not use charitable funds to build up substantial teams of tendering staff as have more commercially based companies who have successfully tendered for MAS contracts, such as A4e. As an example the most recent tender issued during May had an eight working day turnaround in the initial instance. This was extended by three days and subsequently a further two at our request, but still poses significant resource problems for potential bidders in the third sector and could mean that organisations with the expertise to deliver significant benefit are not able to engage. We believe this would result in a worse outcome for clients in debt.

12. We also understand that many members of MAS’s staff with relevant subject matter expertise have been made redundant in recent months; in May 2012 three of the six senior management positions advertised on its website focused on brand-building and marketing (Appendix 4). This presumably reflects current priorities; we are unable to judge whether these changes are at the expense of a skill set which is more closely connected to the members of the public MAS needs to ensure are served.

13. Clearly it is for MAS’s Board together with the FSA to sign off its budget and business plan and they are presumably content with the proportion of the budget to be spent on marketing; £21m of an £81m budget does seem like a very significant sum, when frontline services are being cut drastically because of cuts in funding in local authority budgets, cuts to Legal Aid and in other savings to the public purse and elsewhere. It contrasts sharply with priorities in Government departments, where budgets on marketing and publicity have been slashed.

What accountability mechanisms are in place for the MAS? Are they sufficient? How can the effectiveness of the MAS be assessed?

14. While we have no reason to doubt that MAS has effective accountability mechanisms, we would welcome greater clarity as to what these are and how they operate.

15. By contrast, the Financial Ombudsman Service sets out clearly on its website its relationship to the Financial Services Authority [5] . Another difference between the two seems to be that MAS is not currently subject to freedom of information requests [6] . While we do not consider these issues fundamental, we have some concerns that this lack of clarity does not necessarily promote the principles of transparency and accountability associated with effective public sector governance and which we would consider important given that MAS carries out public duty functions and receives a levy provided under statute (Financial Services Act 2010) for which the public is the intended beneficiary. We presume that MAS is subject to judicial review as a body with public duty functions, but we have not yet seen this set out anywhere; clarity would be welcome.

To what extent are the services provided by the MAS also provided by other organisations? How does the MAS compare to these organisations?

16. We understand that MAS is not planning to provide debt advice directly and as such has the potential to complement rather than compete with existing services provided by ourselves, Citizens Advice, the Consumer Credit Counselling Service and others. We are glad to see that MAS’s provisional plans around debt advice will allow charities to utilise their own identities and strengths rather than rather than the uniform approach required under their money guidance contracts. We very much support a ‘light touch’ approach to the co-ordination of free debt advice: seeking to build on the considerable richness and diversity of the charitable debt advice sector, rather than burdening it with additional bureaucracy. Charitable services have established links with and expertise in reaching a wide range of niche client groups. We therefore welcome the recent announcement that MAS proposes to extend agreements for face-to-face debt advice beyond the existing ones which end in March 2013.

17. Our experience in working with the creditor sector, the advice sector and Government departments (see Partnership Board above) in developing tools and services used by the free advice sector (such as the Common Financial Statement, which now has over 2000 licences, and the research we commissioned using data sourced from a wide variety of agencies) leaves us thoughtful about how our role and theirs will dovetail in the future.

Is the MAS reaching its target audience? Are any groups unable to access the MAS’s services? Who is worst affected by a lack of knowledge of financial matters? Should the MAS have a greater role in financial education in schools?

18. We consider it too early to say whether MAS is reaching its target audiences, and note that this answer requires MAS management information which has not thus far been published.

19. Clearly, prevention is better than cure, but it is worth considering again the point we make above about the balance of spending on the two activities MAS funds, so that there is a safety net in place for the many thousands currently in crisis.

20. In our experience (of running National Debtline and working closely with other advice agencies) people are most receptive to learning how to manage their finances when they are in a crisis situation. 86% of our clients, having engaged with our advice, say that they feel more confident about dealing with their finances going forward. We therefore suggest that prioritising services which provide this remedial support is a useful means of reaching MAS’s wider target audience for financial capability.

21. Although financial education in schools is outside our core expertise, we consider it important; given MAS’s position and other remits they would seem well placed to ensure its effective delivery.

How appropriate is the model, using fees raised from financial services firms regulated by the FSA, by which the MAS is funded?

22. An unintended consequence of the levy and uncertainty as to MAS’s long-term plans has been a destabilising effect on funding for the free advice sector. In our own case, we had been moving toward three year funding arrangements and our funders, many of whom are now also payers of MAS’s levy, encouraged this, yet are now only able to make one year arrangements. Levy payers may be understandably reluctant to pay into the same sector twice even though our own frontline services are not being funded by MAS. Whilst our funders are supportive and understand the complexity of the situation, it is hard for them to justify to their boards and shareholders what appears to be double payment. There is a real risk that funding for telephone and internet debt advice will be reduced, despite the fact that these can meet the needs of many of those seeking debt advice at significantly less cost than face-to-face services.

23. We are grateful to Government for the ongoing funding we have received towards our frontline services. We are concerned that the presence of MAS and the levy may result in Government departments pulling back from funding and engagement with overindebtedness issues. This would be a seriously retrograde step: Government itself is a beneficiary of debt advice through repayment of, for example, council tax and benefit/tax credit arrears and engagement through funding has always been an effective driver of good practice. For example, the Department for Business, Innovation and Skills worked with its stakeholders in the credit industry to establish a "breathing space" (a procedure by which creditors agree to allow an individual thirty days to seek independent advice and create a plan for repaying their debts without creditor contact). Debt advice services also collect debt for Government. Research commissioned by the FSA and MAS published in December 2011 considered that £1.1m invested specifically in debt advice services delivered a £4m return [7] .

24. Finally, MAS’s current funding model is based on a levy on financial services companies authorised by the FSA, whilst the beneficiaries of debt advice (through repaid debt, reduced expenditure in collections and customer contact, etc) constitute a much broader group. This latter includes Government (19% of our clients at National Debtline have council tax debts and 6.52% have benefit or tax credit arrears, smaller numbers also present with arrears in repaying Social Fund loans, TV licences, magistrate’s court fines etc), utility companies (approximately 15% have gas or electricity debts), telecommunications companies, retail and others. The funding model we have established for our own organisation is on a ‘polluter pays’ basis and works across all of these sectors (see appendix 5 for MAT’s funders).


25. The Trust still supports the principle of a co-ordinating function for debt advice. We have worked closely with MAS and will continue to do so by, for example, sharing research and data from our frontline services. It is early days for this new function of MAS; we would like to see a light-touch co-ordination function, for instance by enabling effective use of client data to further improve services. We remain concerned about the effect of MAS’s corporate culture on the third sector’s ability to engage and deliver services working with them, and there are certainly unintended consequences regarding funding for advice charities.

26. The YouGov Debt Track survey indicates the prevalence of problem debt in the UK is increasing and found in late 2011 that approximately 10 million individuals in the UK describe meeting their debt commitments as a ‘constant struggle’ yet only one in five of them seek advice.

27. In addition, our experience shows that people seeking debt advice have better outcomes if this is sought early.  This clearly benefits the individual, as well as their creditor and avoids expending precious adviser resources unnecessarily.

28. A key role for the MAS is raising public awareness of the benefits for people struggling with their debts of engaging with free debt advice and of where they can seek this advice, and we hope that they will think about ways in which can do this.

29. Against the current difficult macro-economic backdrop ensuring people in debt find their way to effective advice as quickly as possible will be vital. So therefore will be the continuing availability of those services.

May 2012

List of Appendices

1. Membership of MAT’s Partnership Board

2. Screenshots of "lookalike" fee-charging debt management companies

3. Department of Communities and Local Government advert from awareness raising campaign 2009-10

4. Screenshot of senior management jobs advertised by MAS in May 2012

5. List of MAT funders

6. Screenshot of recent MAS-issued tender indicating MAS as not subject to FOI.

Appendix 1. Membership of the Trust’s Partnership Board

Government and Public Sector

Cabinet Office

Department for Business, Innovation and Skills

Department of Enterprise, Trade and Investment (Northern Ireland)

Department of Work and Pensions

Department for Communities and Local Government

HM Treasury

Local Government Association

Ministry of Justice

Scottish Government

Welsh Assembly Government

Creditor Sector

British Bankers’ Association

Barclays plc

British Gas

HSBC plc

Lloyds Banking Group


The Royal Bank of Scotland Group plc

Advice Providers

Advice NI

Advice UK

Consumer Credit Counselling Service

Citizens Advice

Citizens Advice Northern Ireland

Citizens Advice Scotland

Institute of Money Advisers

Money Advice Trust

Money Advice Scotland


Appendix 2. Screenshots of "lookalike" fee-charging debt management companies shown in a "paid for" box above our own entry for National Debtline

Appendix 3. Department for Communities and Local Government advert from awareness raising campaign 2009-10

Appendix 4.Screenshot of senior management jobs advertised by MAS in May 2012

Appendix 5. List of current funders of the Trust

· Allied International Credit

· American Express Foundation

· Argos

· Bank of America

· Barclays Bank plc

· Barclaycard

· British Gas (here to HELP)

· BT plc

· Building Societies Trust Limited

· Consumer Credit Counselling Service

· Department for Business, Innovation and Skills

· Esmée Fairbairn Foundation

· Experian

· Finance & Leasing Association

· HM Treasury

· HSBC Bank plc

· Insolvency Service

· Lloyds Banking Group plc

· Ministry of Justice

· Money Advice Service

· National Australia Bank Group

· Nationwide Building Society

· npower

· Optima Legal

· Payplan Ltd

· Provident Financial

· Santander


· Scottish Government

· Standard Life

· Swift Advances plc

· The Royal Bank of Scotland Group

· Wescot Credit Services

· Wessex Water

· Yorkshire Building Society

Appendix 6 . Screenshot of recent MAS-issued tender indicating MAS as not subject to FOI

[1] The National Audit Office, Business , Innovation and Skills: Helping Overindebted Consumers, published 23rd February 2010. Available from:

[2] Business, Innovation and Skills Committee , Fourteenth Report: Debt Management , 2012

[2] Available from:

[3] Friends Provident Foundation and Glasgow Caledonian University , Funding Money Advice Services , 2009. Available from:

[4] £ 3 2.8m in MAS Debt Advice Plan 2012-13. Available from:


[5] See FOS website with particular reference to: ;

[6] see statement by Mark Hoban in Hansard: Column 854W and screenshot of recent MAS-issued document in Appendix 6


[7] Funding Debt Advice: A Proposed Model, Money Advice Service, 2012. Available from

Prepared 18th June 2012