HC 271 Money Advice Service

Written evidence submitted by Citizens Advice

Summary

Citizens Advice fully supports the legislative aims and creation of the Consumer Financial Education Body, now the Money Advice Service (MAS).

During a time of shared austerity the primary challenge facing advice and financial education providers is how to meet the demand for these services.    The existing sector offers advice from more than 5,000 physical locations, has more than 10m online users and receives more than 2m phone calls - but cannot resource enough advisers to meet demand. Each year the Citizens Advice service helps over 2 million clients to deal with over 7 million problems including over 2 million debt problems but each year 2 million people try to call the Citizens Advice service but cannot get through. Recent research estimates that between 5.5 and 6 million households are either in arrears with bills or credit commitments or are finding it a constant struggle to keep up [1] .

We warmly welcome MAS’ recent decision to continue their grant agreements with existing debt advice providers subject to satisfactory delivery against this year's agreement terms and approval by the FSA. As cuts hit hard, this move provides some much-needed financial certainty for bureaux as they continue to provide high quality, holistic debt advice to the ever-growing numbers of people in financial difficulty and reflects MAS's confidence in the existing providers, including the Citizens Advice service.

MAS could add significant additional value to existing services by maximising the resources available to fund front line services and focussing on facilitating and encouraging smoother and more consistent working and referral between existing providers of financial education, money advice and debt advice, evaluating and spreading best practice, developing practical tools, integrating debt and financial capability models, and enhancing training and support for advisers.

We believe that MAS could improve its approach in the following three areas :

· MAS has not always been consistent in the way it has engaged with the advice sector. Draft business and operational plans have not been shared consistently with delivery organisations for comment before publication. Delivery negotiations on service agreements are much easier where delivery partners have been engaged from the outset in the development of objectives and targets and the needs of clients are best met where agreement terms are co-designed on the basis of understanding of client need. We have seen signs that MAS is adopting a more partnership based approach recently, which we welcome.

· MAS has invested significant resources in developing new service offerings which in some cases duplicate or fail to add value to what is already available in the sector. We believe that the Money Advice Service could add most value by building on and strengthening existing good practice in the sector or building on existing funder initiatives.

· In 2012/13 MAS will spend circa £20 million on consumer communications and marketing [2] . There are already many existing providers of advice and financial education with strong brands and good public awareness of the services they offer – 97 per cent of people in the UK have heard of the Citizens Advice Service [3] and 76 per cent trust us [4] . Existing providers are primarily constrained by capacity and not by a lack of demand so we would like to better understand how and why MAS has taken the decision to allocate resources in this way.

   

Introduction

1. Citizens Advice welcomes the opportunity to submit comments to the Treasury Select Committee’s inquiry into the Money Advice Service.

2. The Citizens Advice service provides advice from over 3,500 outlets throughout Wales, England. We provide advice from a range of outlets, including GPs’ surgeries, hospitals, community centres, county courts and magistrates courts, and mobile services both in rural areas and to serve particular dispersed groups.

3. The service has two equal aims:

§ to provide the advice people need for the problems they face

§ to improve the policies and practices that affect people’s lives

4. In 2011/12, over 2 million people were helped with 7 million problems. Of these,  2.1 million problems were about debt, 255,000 about consumer goods and services and 129,000 about financial goods and services.

   

5. The Citizens Advice service is the largest provider of face to face debt advice services in receipt of funding from MAS with 139 bureaux delivering advice to 2100 clients per week under MAS agreements. In Wales, Citizens Advice holds contracts to deliver both face to face Money Advice and face to face Debt Advice. In the last financial year bureaux in Wales helped 5000 with a face to face Money Advice session.

6. As well as giving advice, the majority of Citizens Advice Bureaux deliver financial education initiatives to their community. In 2011/12 there were 280 Citizens Advice Bureaux that delivered financial capability services. Collaborating with other agencies through the network of financial capability forums, bureaux and forum members deliver initiatives that benefit a quarter of a million people a year. [1]

Specific comments

Statutory Objectives

The MAS has the right objectives. These would be best met by working with existing service providers to enhance provision and to build on existing networks and good practice wherever possible.

Citizens Advice strongly welcomed the creation of the Consumer Financial Education Body (CFEB), now the Money Advice Service, as a dedicated body to commission, design and co-ordinate financial education and guidance work. The work of Citizens Advice Bureaux in delivering financial education has demonstrated the appetite and need for such training and the quantifiable improvement it has upon people’s confidence in dealing with their financial affairs. Every year the Citizens Advice service deals with over 2 million debt enquiries. Consistent financial education work in conjunction with money guidance to explain products and services and proactive approaches from the financial services industry to simplify products are all needed to help reduce these numbers.

We argued strongly from the outset that CFEB, should have a remit to pursue the money guidance (now termed money advice) agenda, but also to influence the way that delivery links to debt advice, by funding both types of service, in order to avoid duplication and provide vulnerable consumers with a joined up service offer.

During a time of shared austerity the primary challenge facing debt advice, money advice and financial education providers is how to meet the demand for these services.

The Money Advice Service could add significant value to existing services by maximising the resources available to fund front line services and focussing on facilitating and encouraging smoother and more consistent working and referral between existing providers of financial education, money advice and debt advice, evaluating and spreading best practice, developing practical tools, integrating debt, money advice and financial capability models, and enhancing training and support for advisers.

In practice many Money Guidance services funded by MAS focus on budgeting skills, getting the best deal and income maximization, elements common to many debt advice and financial capability services funded by MAS and other funding streams. We would urge a review of the Money Guidance service to ascertain whether it is meeting client need and identify any duplication with other services.

There is a need to join up services such as Money Advice and Debt Advice and in Wales we have been able to do this to some extent because Citizens Advice has service agreements to deliver both services offering the client a faster and seamless experience.

Internal Administration and allocation of resources

In 2012/13 MAS will spend circa £20 million on consumer communications and marketing [1] . There are already many existing providers of advice and financial education with strong brands and good public awareness of the services they offer – 97 per cent of people in the UK have heard of the Citizens Advice Service [2] and 76 per cent trust us [3] . Existing providers are primarily constrained by capacity and not by a lack of demand so we would like to better understand how and why MAS has taken the decision to allocate resources in this way.

MAS has invested significant resources in developing new service offerings which in some cases duplicate or fail to add value to what is already available in the sector. For example although many advisors find the Money Advice Service website to be a comprehensive and easy to use source of information, many comment that awareness of it amongst the general public is low and much of the information it provides is also available from sources such as the Citizens Advice Adviceguide website or Money Saving Expert, which have much higher levels of public awareness - Adviceguide alone receives over 1 million visitors per month.

We believe that MAS could add most value by building on and strengthening existing good practice in the sector or building on existing funder initiatives.

There is significant overlap of the clients using the Money Advice service and clients using the debt advice services previously funded through the Financial Inclusion Fund and now funded by MAS as clients are regularly referred from one service to the other. Service agreement terms and data rules mean that the client may be required to provide the same information regarding their circumstances to both services, particularly where they are delivered by different agencies. Furthermore there is often some overlap in the advice and information received on elements common to each service such as income maximisation and budgeting. A move to providing more holistic services designed to simplify the client journey and meet client need in the round would not only improve the service from the client’s perspective but also achieve cost efficiencies. This has been largely overcome in Wales by the integration of all the services but the MAS case management system is poor and increases the administrative burden on providers.

We warmly welcome MAS’ decision to continue their grant agreements with existing debt advice providers subject to satisfactory delivery against this year's agreement terms and approval by the FSA. As cuts hit hard, this move provides some much-needed financial certainty for bureaux as they continue to provide high quality, holistic debt advice to the ever-growing numbers of people in financial difficulty and reflects MAS's confidence in the existing providers, including the Citizens Advice service. However, there is scope when re-visiting these agreements to ensure that service agreement terms drive service delivery which is focussed on meeting clients needs and services are assessed according to the outcomes achieved for clients.

It is vital that the effectiveness of all the services MAS funds or provides is evaluated in terms of the outcomes achieved for clients, including medium to long term changes in their financial situation, and not only the number of people reached.

MAS allocates significant resources to supervising the services carried out under its grant agreements, when both Citizens Advice and the Money Advice Trust already supervise the advice provided by its members and have robust quality assurance processes in place. Although adequate controls on performance management are necessary, MAS could develop more streamlined mechanisms in this area and primarily monitor outcomes.

We note that following recent staffing changes the majority of staff are based in London with only one policy officer in Wales . It is important that MAS business plans and service strategies reflect the needs of communities across the UK . This is especially pertinent in Wales where the Welsh Government has its own Financial Inclusion and Tackling Poverty strategies.

Target audience and benefits of services to specific groups

The existing advice sector offers advice from more than 5,000 physical locations, has more than 10 million online users and receives more than 2 million phone calls each year. The Citizens Advice service alone has been providing advice in community settings for over seventy years and helps 2 million clients per year through its bureaux network. This scale gives the advice sector a broad evidence base offering thorough insight in to the needs of their clients and allows advice agencies to spot emerging trends. However MAS has not consistently engaged with the advice sector or drawn upon the evidence of its experience when designing services. The needs of clients are best met where the contract terms for services are based on a robust analysis of client need, both at a national and local level.

Draft business and operational plans for the debt advice contracts, which replaced those previously funded by the Financial Inclusion Fund, were not shared with delivery organisations for comment before publication. These agreements included a sixty seven per cent uplift in the number of clients helped when compared with the old agreements necessitating a move away from casework and towards one-off advice sessions and supporting clients to "self-help". This decision was not taken as a result of consultation with the sector and so we would like to better understand the analysis which informed this decision.

Services provided through different channels meet the needs of different groups of people. A range of ways to get advice is needed and MAS should work with the advice sector to ensure that the right channel mix is available and has the capacity to meet clients needs.

Every year 2 million people try to call the Citizens Advice service Adviceline but cannot get through because we do not have the capacity within the service to process these calls.

Many people struggle to access phone or online services, perhaps as they have hearing impairments, mental health problems, lack the literacy skills to read websites or letters, or simply do not have credit on their mobile phone..

There is no single model of how advice services should be provided to meet the needs of all communities. For example in rural areas, clients prefer to phone first so they know they have the right appointment before travelling. Equally, initial face-to-face contact can work well, with follow-up by phone or email. Group financial education training also has an important role in helping raise awareness of potential problems sooner and acting as a gateway for more vulnerable clients into more mainstream advice services. Outreach is highly targeted and successful at engaging those considered more "hard to reach" [1] .

Face to face services for vulnerable clients or those with complex problems (or both) are under the most serious threat from funding cuts, but advisors know that this is often what makes the biggest difference and saves in long term costs. Face-to-face contact allows an advisor to explore complex problems with a client and to picking up on needs for other support services, such as social care needs or mental health problems. It.also builds trust and encourages clients to disclose underlying problems. In the context of cuts to legal aid, which has traditionally funded casework for complex debt cases, MAS needs to ensure that it is ensuring provision of services across the right mix of channels.

Financial Education in Schools

The main targets of Citizens Advice’s financial capability work are adults on low-incomes and our financial capability work is conducted mainly through our network of bureaux and outreach centres and through other established groups, with a small provision for educational settings.

We appreciate there is value in providing financial education to children and support the work undertaken by organisations such as pfeg (the Personal Finance Education Group) to incorporate financial education into the national curriculum and provide resources for teachers. However, we believe this is beneficial when delivered in conjunction with training for parents and carers as dealing with children in isolation may have reduced benefit if messages are inconsistent with the behavioural patterns of adult carers.

Pfeg has the expertise to lead on financial education in schools and MAS should not seek to duplicate the work of pfeg.

Funding model for the Money Advice Service

Although it is necessary that MAS retains its independence from the firms which fund it, we support the funding model whereby a levy on consumer credit firms funds the costs of money guidance and debt advice services. Our experience in helping people with their money problems suggests, there is an overlap in needs for education/information/guidance and for debt advice.

Financial education programmes are preventative and proactive and can reduce overall demand for money advice services. Considerable support is received from the financial services industry for the delivery of these programmes but there is evidence of this reducing in the current economic climate.

In the past, the majority of the funding for face-to-face debt advice currently came from local and central government– the latter via the Legal Services Commission and the Financial Inclusion Fund.

Creditors contribute only an estimated £4 million per annum in corporate donations to the free debt advice sector [1] . However creditors benefit greatly from the provision of independent debt advice, so there is a compelling argument that they should contribute a higher proportion of the cost of providing it. Recent research estimates that each year the provision of free debt advice allows creditors to recover £1 billion more than they otherwise would. Allowing for the estimated £45 million already spent by creditors on "Fair Share" payments, the creditors of an average customer, who has received debt advice collectively recover in excess of £1,000 more per individual. In addition, where customers have sought advice, creditors further benefit from reduced administration costs due to a reduction in chasing customers in arrears; an overall reduction in the need to spend time understanding the customer’s financial position; and reduced costs in pursuing customers through the courts [2] .

In 2008, 58 per cent of CAB clients had no money left after essential expenditure, with which to pay their credit debts. Debt advice services provided through the for-profit sector or services funded through a "Fair Share" arrangement, whereby the credit company pays a proportion of a customer’s repayments to the agency who has arranged their repayment plan will not meet the needs of these clients. Therefore it is vital that funding for free, independent debt advice services is maintained.

Not all private sector creditors contribute to the levy and therefore the funding of money guidance and debt services funded through MAS. Every year Citizens Advice Bureau deal with over 100,000 fuel debt enquiries and in 2008 20 per cent of CAB clients had water debts [3] .

The state is also a creditor which should contribute to the cost of debt advice services. In 2008 one quarter of CAB debt clients had council tax arrears and just over 5 per cent had debts in respect of tax credit overpayments [4] . In 2009/10 the CAB service received £25.7 million for specialist advice services through the Legal Services Commission. Following the Legal Aid, Sentencing and Punishment of Offenders Act we expect legal aid funding for debt advice is likely to reduce to around £3.2 million from 2012- 13 onwards. In addition many Citizens Advice Bureaux are experiencing cuts to the funding they receive from local authorities.

June 2012


[1] The impact of Independent Debt Advice Services on the UK Credit Industry , Wells J, Leston J,Gostelow M, Friends Provident Foundation (2010)

[2] FSA Regulated fees and levies: Rates proposals 2012/13 pg 103 http://www.fsa.gov.uk/static/pubs/cp/cp12-03.pdf

[3] Awareness and perceptions of the Citizens Advice service, BMRB, 2009

[3]

[4] NfpSynergy Brand Attributes survey, 2010

[1] Financial Skills for Life – from small change to lasting change , Citizens Advice, May 12 .

[1] FSA Regulated fees and levies: Rates proposals 2012/13 pg 103 http://www.fsa.gov.uk/static/pubs/cp/cp12-03.pdf

[2] Awareness and perceptions of the Citizens Advice service, BMRB, 2009

[2]

[3] NfpSynergy Brand Attributes survey, 2010

[1] East of England Final Evaluation report – March 2011 http://www.citizensadvice.org.uk/index/partnerships/financialskillsforlife/fsfl_projects/fsfl_projects_eastofengland.htm

[1] Ibid

[2] The Impact of Independent Debt Advice Services on the UK Credit Industry by Jackie Wells, John Leston and Mary Gostelow (2011)

[3] A life in debt: The profile of CAB debt clients in 2008 (2009)

[4] Ibid

[4]

Prepared 15th June 2012