A Treasury sub-committee, led by Labour MP George Mudie, has today called for an urgent independent review into the Money Advice Service (MAS), after it found "serious problems" in how the body operated.
The committee today issued its findings after a year-long inquiry into whether the MAS delivered on its objectives of: enhancing people's understanding of financial matters and their ability to manage their financial affairs, and coordinating and providing debt advice.
Here is a round-up of where MPs think the MAS went wrong:
1) Spending too much money on marketing and following a "misguided" approach
MPs alleged that the MAS has spent too much money on marketing as opposed to service delivery, particularly in its early years.
The Treasury sub-committee said the MAS had planned to spend £20m of its £46m budget on 'consumer communications and marketing' in 2012/13, followed by £12.5m the year after. The expense was largely to do with an effort to digitalise and create the new MAS brand.
However, MPs criticised MAS's strategy, saying they had concerns that it was "re-branding" as a service that was already provided by the FSA under the brand Moneymadeclear.
They said: "While we accept that some marketing activity is necessary to build a brand and to encourage people to visit a website, the very large amounts that have been spent on marketing in the service's early years suggest that the strategy to build a separate brand, and in particular to re-brand as the Money Advice Service when the the Moneymadeclear brand was already in use, was misguided."
2) Moving to a 'primarily digital' strategy
From 2012/13 the MAS embarked on a 'primarily digital' strategy, trying to increase the numer of people it estimated it could reach from 600,000 face-to-face and about three million over the phone, to 9-11 million online.
However, the MPs questioned the effectiveness of the approach and whether it had an impact on those people it reached.
The MAS' online questionnaire, the Financial Health Check, which was described by the MAS as "a major gateway into our service" was also put into question by the MPs, who suggested it might have "serious flaws".
Research suggested that the checker had been used by around 80,000 since its launch, compared to Moneysavingexpert's similar online product, which was used 150,000 a day. What's more, MPs said an external study had suggested that the checker tool had had no impact on users either in the immediate or long-term.
3) Unnecessarily duplicating other services
MPs accused the MAS of having failed to integrate into the consumer education and money advice space. Instead of playing its own part it was effectively duplicating other services such as the Citizen Advice Bureau and Moneysavingexpert, it found.
The MPs said: "The initial failure effectively to consult and build relationships with existing organisations in the sector resulted in the Money Advice Service duplicating what was already being provided in the private and charitable sectors."
What the MAS should have done instead, witnesses in the MPs' inquiry said, was to co-ordinate and fund the work of others. "Credit Action argued that the most suitable role for MAS is not for it to undertake direct delivery (as a range of providers already exist), but rather in funding and helping existing providers to operate strategically, so that their initiatives complement each other," the MPs said.
4) Failing to give enough resources to debt advice
The MAS took over the provision of debt advice in April 2012. It has since collected separate, ring-fenced levies for the provisions of money and debt advice.
The MPs said in their report that they were "concerned by the lack of flexibility available to the service" in the way it split its resources with regards to providing debt advice.
They also criticised the fact the MAS had not used all the money allocated to the debt budget to provide services. "During economic downturns, demand for debt advice is likely to increase," the MPs said, and "the MAS' resources should be focused on helping those in crisis".
The MPs were also concerned about the quality of the MAS' debt advice, after the chief executive of Citizens Advice, Gillian Guy, from whom the MAS commissioned its debt-related advice services, said the MAS had delivered a 50% increase in output without additional resources. "Looking underneath that, it was quite clear it was less contact with individuals that was to give that rise in throughput," she told the MPs.
5) Handing out excessive executive pay
MPs criticised the scale of the remuneration packages handed out to former chief executive Tony Hobman and senior management staff. Hobman had been paid £250,000 a year before benefits during his tenure which ended last year, and the senior management team had taken a bonus of £100,000 in 2010/11.
New chief executive Caroline Rookes took over in January this year on a lower salary than her pre-decessor, however the Treasury committee found little consolation in that sacrifice.
They said: "We regret that the decision to reward the previous chief executive so excessively was taken in the first place and that two members of staff continue to be paid more than the current chief executive. These decisions risk undermining the credibility of the organisation."
The Treasury committee inquiry into the MAS, which came to a conclusion at the end of November, was conducted in two phases from June 2012.
The first phase consisted of three hearings in June and September 2012, in which expert witnesses, the MAS and the Financial Services Authority (FSA) gave evidence.
The second phase commenced in November 2012 and interviewed newly appointed Economic Secretary to the Treasury, in charge of the MAS, Sajid Javid, and the MAS's new chief executive Rookes.
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