A review of the Money Advice Service has concluded it should slash its £43m consumer finance education budget by half.
The independent review, led by Christine Farnish, has been published this afternoon. The body has come under fire in the last couple of years, particularly from MPs who have questioned its role. The report says the organisation must undergo major changes.
Ms Farnish said: "MAS has two important jobs to do: helping people who face problem debt get the help they need, and helping consumers understand financial services and make better decisions. No one I spoke to questioned the need to pursue these objectives. Stakeholders support MAS's coordination of debt advice and would like to see further developments.
{desktop}{/desktop}{mobile}{/mobile}
"MAS's work on money advice continues to attract controversy however, despite some welcome recent developments. This report sets out a blueprint for a stronger, more effective and better value MAS. I am hopeful that it will command broad support and enable MAS to move forward with greater confidence."
The report stated: "Our vision of the new MAS will require significant transformation of the current model over a period of 2-3 years.
"MAS will need to recruit new skills and, to a degree, change its mind-set. It will need to work more as a strategic coordinator, sitting at the heart of the landscape and acting fairly and squarely on the consumer side. MAS has already started on this journey but more remains to be done. This will require strong leadership and governance."
Regarding the funding and money given to MAS to carry out its duties, the review said: "The MAS debt advice budget should be kept under review as demand and supply continue to change. Under the new model, we believe the budget for MAS's consumer finance education remit could roughly halve from £43 million at present, while serving consumer needs more closely.
"This is a high-level estimate and MAS, the FCA and the Treasury will want to review this as part of the transition."
The review also recommends that the MAS "accountability framework would benefit from being strengthened" and certain steps should be taken within the current statutory framework to enable it to be held more to account.
{desktop}{/desktop}{mobile}{/mobile}
Below is the response from Caroline Rookes, chief executive for the Money Advice Service:
"The Independent Review has found that levels of financial capability in the UK remain low. Our own research shows that 50% of people struggle to pay bills and credit commitments and 9 million people are over-indebted. In this context, Christine Farnish has confirmed that the Money Advice Service has two important functions: helping people who face problem debt get the help they need, and helping consumers understand financial services and make better decisions.
"The review has found that our work on debt advice has been largely successful and has made a positive difference for consumers. I welcome that. And I'm particularly pleased that the water and energy industries are announcing today that they will contribute to funding free debt advice, with each sector providing £1 million this year.
{desktop}{/desktop}{mobile}{/mobile}
"I welcome the review's conclusion that the Service should play a greater role in co-ordinating and aligning the various initiatives across all sectors to provide improved advice and education to consumers. Christine Farnish is very clear that the Financial Capability Strategy for the UK which we are leading, and the consumer awareness campaigns that we have run, are exactly the type of initiatives we should be pursuing.
"The review has challenged the way we do our money advice work in particular. All organisations need to evolve as circumstances change, especially new organisations such as ours.
In addressing the money advice recommendations, we want to ensure that changes we make are genuinely in the interests of consumers and deliver value for money. We currently help thousands of people every day to take action to manage their money better and in contemplating changes, we must not let those consumers down.
"So we will now work closely with the FCA, the financial services industry, consumer groups, the voluntary sector and other experts, to assess how the recommendations could be implemented in a way that would best benefit consumers and enhance the financial capability of the UK."