HC 271 Money Advice Service

Written evidence submitted by ifs School of Finance

About the ifs School of Finance

The ifs School of Finance is a registered charity, incorporated by Royal Charter, with more than 130 years experience in delivering effective financial education.

For the purposes of this inquiry, our range of financial capability programmes fulfil a number of what are now the Money Advice Service (MAS) statutory objectives i.e. enhancing public understanding of the financial system and providing future generations with th e ability to manage their money .

The School of Finance is currently the only specialist provider of GCSE, AS and A level equivalent qualifications in personal finance and financial studies. These are the Certificate in Personal Finance (GCSE-equivalent), Certificate in Financial Studies (AS) and Diploma in Financial Studies (A level equivalent).

Well over 10 0,000 teenagers have taken one of these qualifications since they were made available to all schools and colleges in September 2006 and between 25- 30,000 more 14-19 year olds are expected to take these qualifications during the current academic year.

This substantial suc cess has been achieved with no assistance from Government, the FSA /CFEB/MAS or the financial services industry.

The School of Finance also operates a free to enter competition for teenagers to invest a fantasy £100,000 in the stock market over a four month period in order to learn about savings and investments . Over 40,000 14-19 year olds participate annually.

Furthermore, t he School of Finance runs a free to enter young business writer of the year competition too, encouraging young people to take an interest in business and finance as well as improving teenagers writing skills.

Executive Summary

MAS , broadly has the right objectives but in terms of the specific area of financial education for young people ,   meeting these objectives is another matter.

For many years we have been almost a lone voice in being critical of MAS predecessor organisations ( the FSA financial capability division and then the Consumer Financial Education Body) for having poor levels of accountability, effectiveness and assessment. Despite organisations such as the National Audit Office sharing some of these concerns (April 2007 report) they have always been ignored. We therefore welcome the Treasury Select Sub-Committee focus on this area and hope such problems can be avoided with this new incarnation.

MAS predecessor organisations have encroached into other organisations areas of activity - often with poorer results but greater marketing reach. Although we can only comment on the limited area of financial education for young people, MAS seems to have retreated from doing so and we naturally welcome this.

We do not believe MAS should have a greater role in financial education in schools. This superficially attractive idea has been attempted in the past with limited success . Millions of pounds have been invested but there has not been a single piece of independent research to show that any of the actions taken by the FSA/CFEB and their partner organisations over the last 7 years or so have made any difference to the financial capability of young people.

Views of the ifs School of Finance

Does the MAS have the right statutory objectives?

In relation to the wider public , MAS probably has the right objectives but needs to be clearer about exactly what it is doing, what it aims to do and how it is going to do so.

With specific reference to young people, policymakers should note that MAS predecessor organisations never met their objectives to improve the ability of young people to either understand the financial system or manage their own financial affairs.

This is something that MAS now recognise and are taking steps to address. T hey should be given credit for seeking to avoid the costly mistakes of the past.

Many individuals and organisations will doubtless use this inquiry as a means to make calls on MAS to provide financial education in schools. Such populist calls should be resisted.

MAS predecessor organisations spent several millions of pounds on the provision of "education" in schools. This was well intentioned but such misguided and ill informed spending resulted in no discernible improvement in the financial capability of young people.

We make further comment on this issue in the relevant section below.

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

No comment.

MAS accountability, effectiveness and assess ment

As alluded to above, predecessor organisations were n ever held to account for the millions of pounds wasted on input focused financial education programmes in schools. The fact MAS appears not to intend to repeat these mistakes is to be welcomed.

As long ago as 2005 we publicly warned that the FSA approach to financial education and their lack of accountability and assessment would result in no improvement in financial capability among future generations and a substantial waste of both taxpayers and industry money (at the time funding was evenly split between the taxpayer and the industry unlike the new MAS model of being solely funded by industry).

The shortcomings of the FSA backed approach of spreading financial education in a cross curricular manner have been clearly highlighted by previous Education & Skills Select Committee reports as well as studies by the likes of the University of Cornell (2001) London School of Economics (2008) University of Manchester (2009) and Univer sity of Sheffield Hallam (2011) as being less than effective.

In contrast the schools inspectorate Ofsted have made it very clear (Ofsted reports in 2008 and 2011 and the verbal Ofsted evidence to the APPG on financial education inquiry in 2011) that a standalone course that has clearly defined outcomes and is assessed – such as the School of Finance qualifications - is effective in improving young peoples understanding and abilities.

A quick glance through Hansard will confirm that the success of previous FSA and CFEB work on financial education in schools was measured either through 1) how much money was spent or 2) how many young people had been "reached" i.e. school visits and number of students present, sent a leaflet or clicked on a web site, all irrespective of whether they had actually learned anything or changed their behaviour as a result. We are sure all members of the Committee would agree that both measures were not meaningful .

We have consistently stated that h aving an examinable subject enables schools, parents and policymakers to determine how effective the teaching and learning of personal finance has been.

Mindful of the wor d limit to this submission, Committee members may find London School of Economics research (2008) in this area to be of interest. They were commissioned by the FSA to look at the effectiveness of the work being undertaken by the FSA and their partners and found there was no evidence that their approach did anything to change behaviour.

We take no satisfaction from being proved correct but we do forewarn that any return to previous models would inevitably result in similar outcomes.

MAS and other organisations

Unlike many other organisation s we have never received any form of financial support from the FSA financial capability division, from CFEB or from MAS.

We have spent several years seeking support in the form of these organisations merely mentioning the availability of our 14-19 qualifications when making speeches, at presentations or in press releases and so on but such support has been limited .

We are hopeful that under new leadership and with a different focus this may change.

MAS have confirmed that they are now mapping the range of education initiatives available in the UK with a view to providing a signposting service for those interested in this area.

We very much hope this mapping exercise will include our work as the only specialist provider of 14-19 qualifications in personal finance in the UK. Whilst our inclusion may appear to be a given, the London School of Economics research undertaken on behalf of the FSA in 2008 failed to take into account our work in schools and colleges because the team of researchers were unaware that over 500 schools and colleges were offering our GCSE, AS & A level equivalent qualifications.

We understand that this mapping exercise will be completed by the end of the month and look forward to a signposting service that will direct interested parties to existing provision rather than seeking to re-invent the wheel as has previously been the case.

Whilst we historically had some concerns about their work overlapping with other organisations, in the specific area of financial education for young people we no longer believe this to be the case. MAS appear to be genuinely committed to working with others in this space rather than in competition.

Should the MAS have a greater role in financial education in schools?


When financial education in schools was a key focus of MAS predecessor organisations they spent millions of pounds achieving no evidenced improvement in the financial capability of future generations. We highlighted the inevitability of this outcome before the y embarked on this, during their activities and immediately afterwards but their predecessors did not accept that taking an evidence based, outcomes focused approach to financial education was the best course of action.

Credit should be given to the MAS for recognising the faili ngs of their predecessors. In a recent speech to the OECD t heir Chairman Gerard Lemos said,

"As far as financial education is concerned, over the course of the past five years or so we have supplied a great deal of information to the public – in leaflets, publications and online - in schools, workplaces and neighbourhoods.

However, we have been less good at making sure people get this information when they need it. And, much more significantly, we haven’t seen any robust evidence that information and education – on their own – change people’s money habits either immediately or in the long term. "

This precisely mirrors what we have been saying since 2005 i.e. that their approach to financial education was badly informed, misguided and lacking in any kind of educational rigour.

The only problem with the approach now being taken by MAS is that because their predecessors failed they have taken the view that all financial education is ineffective when nothing could be further from the truth

The MAS’ negative view of financial education is based on their own activities, and those of their partners, over many years but it does not take into account the robust evidence from Education Select Committees, Ofsted, the University of Manchester, Sheffield Hallam University, Universities in the US and others (we are happy to provide full details of each of these if required) that prove the right kind of financial education can make a marked difference to the financial behaviour of young people. 

In short, their new approach of acting as a signposting service strikes t he right balance of involvement.

I t is essential that a truly independent and impartial authority provides such a serv ice but it is equally important that they do not seek to spend industry money repeating the mistakes of the past or on well intentioned programmes that are not independently proven to deliver their statutory objectives of improving the financial understanding and knowledge of members of the public and future generations ability to manage their own financial affairs.

Appropriateness of MAS funding

No comment.

June 2012

Prepared 15th June 2012