HC 271 Money Advice Service

Written evidence submitted by Toynbee Hall

Executive Summary:

The MAS should have additional core statutory objectives that reflect their responsibility for coordinating and leading the debt advice sector. We are concerned that the new remuneration structure could lead to the most vulnerable, and those with the most complex debt issues, not being adequately served. It is our belief that in order for the MAS to reach those who are most disadvantaged from a lack of financial knowledge they must do more physical outreach work. Financial education is part of a package of solutions that would increase the level of financial knowledge in the UK and therefore should be included on the statutory national curriculum.


To what extent is the Money Advice Service (MAS) meeting its core statutory objectives:

· to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and

· to enhance the ability of members of the public to manage their own financial affairs?

Are these the right objects for MAS to have?

1. We believe that the MAS should have statutory objectives which are wider in scope. These objectives were created before the MAS took on the role of coordinating debt advice services in the UK and this subsequent addition to their remit should be reflected in their objectives. The job of coordinating free debt advice services in the UK is a crucial role and this new responsibility should be prominent in the core statutory aims of the MAS.

2. The core statutory objective could be ‘to coordinate, and provide strategic leadership for, the free debt advice services in the UK, ensuring a universal, high quality offering’.

3. The difference between debt advice and preemptive financial education should be clearly defined. There is a significant amount of overlap between the two activities, and because the MAS is coordinating one and supplying the other it should be very clear where the boundaries of these activities lie. We believe strongly that a government body should not be tasked with giving people debt advice; it should only ever be responsible for coordinating and procuring these services.

4. The MAS should be a leader in this sector. We believe that the MAS is ideally placed to be able to represent the debt advice sector to both the financial services industry and government legislators. We welcome the good research and advocacy work that the MAS has, to date, produced, however we would envisage the role of the MAS as being a visionary leader, providing radical and strategic oversight. The debt advice agenda is so far reaching that we need a sector leader who is able to influence policy right across government departments.

5. The relationship that individuals have with their finances and the policy landscape for money and debt advice is crucial to our emergence out of recession. We know that empowering people so they are able to make good choices about managing their money; ensuring that the appropriate products and services are made available to people by the financial services sector, and providing good quality debt advice services will allow individuals to make responsible and wise decisions about their money. It should be the role of the MAS to provide a voice in this debate. The debt advice services coordinated by the MAS see hundreds of thousands of debt cases each year, this information could, and should, be used to influence policy for the benefit of consumers.

6. The MAS should continue to analyse debt data and ensure that lessons that are learnt are fed back to the appropriate agent, whether it is government, politicians or representatives from financial institutions.

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?

7. The target audience of the money advice service is everyone. This aim is impossible to achieve, however we believe that there are certain groups of people who find it more difficult to access the MAS’s services.

8. Much of the MAS’s service, which is reflected in the allocation of investment, is delivered through the website. We know that a large proportion of the UK adult population remains digitally excluded. The ONS recently estimated that 8.2m adults, 16.3% of the adult population, are digitally excluded [1] . There are many causes of digital exclusion, it can be a result of lack of access, lack of skills, language barriers, or geographical remoteness, but evidence shows that age is the most common factor determining exclusion [2] .

9. The MAS must work to ensure that it is reaching the hard to reach. Digital exclusion can have a compounding impact upon social exclusion. Evidence shows that 70 per cent of people who are digitally excluded live in social housing and 49 per cent of people without access to the internet are in the lowest socio-economic groups (DE) [3] . We welcome the outreach work that the MAS is providing but suggest that to ensure that vulnerable consumers are protected and informed the MAS will need to diversify its outreach.

10. We also have uncertainties about whether the website should absorb such a large sum of money and attention. Anecdotal evidence suggests that those individuals who would most benefit from money guidance are unlikely to visit a website prior to experiencing financial difficulties. The health check in particular may have attracted a number of participants but we do not know how many of those people were inclined to be money savvy before, or indeed who has put the recommendations into action. We believe that in order to make a real difference to the financial capability of those who most need it energies should be concentrated on physical outreach activities.

11. We are also concerned that those individuals who are most vulnerable, or have extremely complex debt cases may, in the future, not be able to be served by the debt advice providers that the MAS coordinates. In April 2012 the way that the contract is administered was changed to a payment by results format, based upon the number of clients seen. This means that advice given about a simple problem is awarded the same recognition as assisting someone to solve a complex debt situation or give advice over a number of sessions. It is our concern that this change in funding will constrain the amount of time that advisors can give the most vulnerable in our society.

12. Toynbee Hall is based in Tower Hamlets, many of the clients that we see have limited understanding of the English language and this means that it can take time to explain situations. A number of our clients are also very fearful of their situation and the future, it can take time to counsel individuals about the best way to progress and ideally to initiate actions to solve their debt problem. In many cases the best outcome for the client would be to become bankrupt, or do a Debt Relief Order (DRO). These procedures take time, especially if the client has mental health problems, learning difficulties or limited English, and we are therefore concerned that people will not be provided with the best service because of the constraints inflicted upon them by the new targets.

13. The Mary Ward Legal Centre delivers debt advice services in London, they see some of the most complex debt cases often referred by CAB and other advice agencies. Margie Butler, the Chief Executive, estimates that 70 per cent of their clients using debt advice services funded by the MAS aren’t getting the level of support they need; that few of their clients can go off confidently and know what to do.

14. One specific example of this occurred last week; the Legal Centre advised a computer analyst who works for a City firm who had a charging order on his property. The gentleman was given 1.5 hours of face to face advice. The gentleman later wrote: "I am deeply grateful for your patient and thoughtful advice. However, I am struggling in filling in the N244 form you advised me to pick up. I am most grateful if you could assist me in completing the form". This illustrates the fact that even individuals who are highly educated find it difficult to tackle many debt issues alone and require ongoing support.

15. We would like the MAS to conduct an impact assessment around the introduction of the new contracts. It is crucially important that face-to-face debt advice in the UK remains high quality and is able to cater to the complex requirements of all individuals.

16. The new contractual arrangement drives participants towards a more corporate business aligned approach rather than a charitable delivery model. We accept this change, but ask for recognition that a business could not continue to offer high quality services that individuals require, namely repeat and complex assistance, and remain solvent. We believe that in the future those cases which justifiably require more input should receive greater financial recompense.

17. A lack of knowledge of financial matters negatively affects everyone. It means that people are not able to make their money stretch as far. However, there are some people for whom this is particularly problematic. This group of people includes low income households, people with multiple needs, students and those who have been refused products by mainstream financial services.

18. In this case, we take knowledge of financial matters to mean having the knowledge and skills to manage your money well.  This includes being able to budget, being an informed consumer and understanding financial products, as well as being able to use them and having the confidence and motivation to do so.

19. Research shows that the following groups are worst affected by a lack of knowledge of financial matters.

i. People on low incomes. This group is among the worst affected because they live on the breadline, with a small amount of money to cover all of the essentials. For this group a high degree of knowledge of financial matters is essential in enabling them to balance their income and expenditure. It can be the difference between being able to manage on a very small amount of money and forgoing essentials [4] .

ii. Those with complex needs, including physical disabilities, learning disabilities, homelessness, substance misuse and involvement in the criminal justice system. This group is particularly negatively affected for a number of reasons. There is a high level of social exclusion among this group, a high risk of financial stress contributing to low wellbeing and they are more likely to be turned away from financial services, for example due to lacking certain ID. Knowing their consumer rights is important to enable people to access financial products and services. [5]

iii. Students, especially those at University, are often taking on financial responsibilities for the first time. These responsibilities may include paying for rent, bills, food and the hidden costs of learning, such as books. The stakes are high for this group because taking on financial responsibilities without the skills to manage money can lead to financial problems [6] and stress [7] .

iv. Those who are digitally excluded and don’t know about products and resources easily accessed online. This group is particularly affected because they are unable to access lots of financial information, and are also unable to take advantage of online discounts – for example those without access to the internet can pay an extra £560 per year as a consequence of not paying bills online [8] .

v. People who have been refused products by mainstream financial services, for example those who churn in and out of work, or are on a low or an unstable income [9] . This is because being refused a product without knowledge of alternatives may cause people to go without products, or to choose less affordable suppliers i.e. a subprime lender instead of a credit union.

vi. There is a particular risk of low income families lacking knowledge of financial matters. This is because the implications are more severe for families, since there are more people to take care of and the consequences of lacking this knowledge can worsen the experience of poverty, forcing some families to forgo essentials [10] .

vii. Evidence suggests that many people may fall into a number of these categories of people worst affected by a lack of knowledge of financial matters.

20. We want to see financial inclusion become a reality in the UK. That means ensuring that the right financial products and services are available for people; that individuals are empowered and informed to make good choices about their money and that they are assisted in finding a solution when things go wrong. One change that can be made to help achieve this goal is to put financial education on the statutory curriculum. The concepts of money management and definitions of financial terms should be included within the subjects of personal, social, health and economics (PSHE) and mathematics throughout school. As people’s circumstances change they need to be able to access high quality advice at any age, however, providing a solid foundation in school can make all the difference to making savvy decisions when you’re older.

21. The MAS should take a leading role in ensuring financial education is added to the statutory curriculum, however there are many other organisations, particularly PFEG, which can take a lead on developing teaching materials.

June 2012

[1] Office of National Statistics: Q4 2011

[2] Digital Exclusion, Low Incomes Tax Relief (2012)

[3] http://www.21stcenturychallenges.org/60-seconds/what-is-the-digital-divide/

[4] Jane Perry, ( 2010 ) , Over the odds , Church action on poverty. ‘protecting against the poverty premium’ particularly has examples of the effect managing money well can have.

[5] Pratt and Jones, (2009), Hand to Mouth. The impact of poverty and financial exclusion on adults with multiple needs, Revolving Doors Agency.

[6] http://www.independent.ie/business/personal-finance/latest-news/over-70-of-students-in-financial-trouble-1462859.html

[7] http://www.freepatentsonline.com/article/College-Student-Journal/62839434.html

[8] http://www.21stcenturychallenges.org/60-seconds/what-is-the-digital-divide/

[9] Kempson and Whyley, (1999), Kept out or opted out: Understanding and combating financial exclusion, The Policy Press.

[10] Sharma, (2007), It doesn’t happen here: the reality of child poverty in the UK , Barnados. http://www.barnar d os.org.uk/poverty_full_report_07.pdf

Prepared 15th June 2012