House of Commons Treasury Committee · which are set o ut in House of Commons Standing Orders ......

HC 457 [Incorporating HC 271, Session 2012–13]

Published on 3 December 2013 by authority of the House of Commons London: The Stationery Office Limited

House of Commons

Treasury Committee

Money Advice Service

Seventh Report of Session 2013–14

Report, together with formal minutes and oral evidence

Written evidence is available on the Committee’s website at www.parliament.uk/treascom

Ordered by the House of Commons to be printed 20 November 2013

£15.50

The Treasury Committee

The Treasury Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of HM Treasury, HM Revenue and Customs and associated public bodies.

Current membership

Mr Andrew Tyrie MP (Conservative, Chichester) (Chairman) Mark Garnier MP (Conservative, Wyre Forest) Stewart Hosie MP (Scottish National Party, Dundee East) Andrea Leadsom MP (Conservative, South Northamptonshire) Mr Andy Love MP (Labour, Edmonton) John Mann MP (Labour, Bassetlaw) Mr Pat McFadden MP (Labour, Wolverhampton South West) Mr George Mudie MP (Labour, Leeds East) Mr Brooks Newmark MP (Conservative, Braintree) Jesse Norman MP (Conservative, Hereford and South Herefordshire) Teresa Pearce MP (Labour, Erith and Thamesmead) David Ruffley MP (Conservative, Bury St Edmunds) John Thurso MP (Liberal Democrat, Caithness, Sutherland, and Easter Ross) Michael Fallon MP (Conservative, Sevenoaks) was also a member of the Committee during the inquiry.

Powers

The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk.

Publication

The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/treascom. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in printed volume(s). Additional written evidence may be published on the internet only.

Committee staff

The current staff of the Committee are Chris Stanton (Clerk), Anne-Marie Griffiths (Second Clerk), Jay Sheth and Adam Wales (Senior Economists), Hansen Lu, Gregory Stevens (on secondment from the Bank of England), and Callum Saunders (on secondment from the NAO) (Committee Specialists), Steven Price (Senior Committee Assistant), Lisa Stead and Paul Little (Committee Assistants) and James Abbott (Media Officer).

Contacts

All correspondence should be addressed to the Clerk of the Treasury Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5769; the Committee’s email address is [email protected]

Money Advice Service 1

Contents

Report Page

1 Introduction 3 History of the Money Advice Service 3 Purpose of the Money Advice Service 5

Financial capability 6 Debt problems 6 The “advice gap” 8

Financial education in schools 8 Changes in the course of our inquiry 9

2 Review of the Money Advice Service 10

3 Money advice and debt advice 11 Introduction 11 Effectiveness of a “primarily digital” strategy 11

Financial Health Check 13 Spending on marketing 14 Developments in 2013 15

Debt advice 17

4 Engagement with existing providers of money and debt advice 19 Introduction 19 Consultation 19 Duplication 20

5 Financial education in schools 23 Role of the Money Advice Service 23 Training of teachers 24 Developments in the course of our inquiry 25

6 Accountability and governance 27 Remuneration and staffing 30

7 Conclusions 32

Conclusions and recommendations 33

Formal Minutes 37

Witnesses 38

List of written evidence 39

List of Reports from the Committee during the current Parliament 40

2 Money Advice Service


1 Introduction

1. The purpose of this inquiry has been to assess the effectiveness of the Money Advice Service, a statutory body established with the following objectives:

• To enhance the understanding and knowledge of members of the public about financial matters;

• To enhance the ability of members of the public to manage their own financial affairs; and

• The responsibility for the co-ordination and provision of debt advice.1

2. The total budget of the Money Advice Service in 2012/13 was £80.8m. The Service is funded by an allocation from two levies on financial services firms regulated by the FCA—one for the delivery of money advice and the other for the coordination and provision of debt advice. The Service’s total budget for money advice in 2012/13 was £46.3m, which came from FSMA-authorised firms, payment institutions and electronic money issuers. The Service’s debt advice budget for 2012/13 was £34.5m. 15 per cent of this came from deposit acceptors and 85 per cent from home finance providers and administrators. We have been mindful throughout our inquiry that the Service is funded by these businesses and their customers.

3. Our inquiry was completed in two phases: three initial hearings in June and September 2012 during which expert witnesses, the Money Advice Service (MAS, or the Service) and the Financial Services Authority (FSA)2 gave evidence, and two further hearings in November 2012 and June 2013 with the then Economic Secretary to the Treasury and the Money Advice Service following the appointment of both a new responsible Minister and a new Chief Executive. We are grateful to the witnesses who participated in these hearings and to all those who submitted written evidence to our inquiry.

History of the Money Advice Service

4. The Financial Services and Markets Act 2000 set out the general duties of the FSA, which included “public awareness”. The Act defined the “public awareness objective” as follows:

(1) The public awareness objective is: promoting public understanding of the financial system.

(2) It includes, in particular—

(a) promoting awareness of the benefits and risks associated with different kinds of investment or other financial dealing; and

1 Money Advice Service, About us, www.moneyadviceservice.org.uk

2 The FSA was replaced by the Financial Conduct Authority and the Prudential Regulation Authority in April 2013.


(b) the provision of appropriate information and advice.3

5. From November 2003, the FSA led and co-ordinated the National Strategy for Financial Capability, under a Steering Group chaired by the then Chief Executive of the FSA, John Tiner. During our predecessor Committee’s inquiry into financial inclusion, the FSA told us that the Steering Group had decided in October 2005 “to take forward into implementation a set of priority projects: schools; higher education; the workplace; maternity/paternity leaver resources; FSA information campaigns; development and roll-out of the Debt Test; and further work on whether there is a commercial case for the wider delivery of generic advice”.4 The FSA had also established an Innovation Fund to support “new and innovative financial capability projects run by voluntary and community organisations” and had embarked on a “Baseline Survey” which would “describe and measure the state of financial capability in the UK, including consumers' knowledge and understanding, skills and confidence and attitudes.”5

6. In written evidence to our inquiry, the United Kingdom Shareholders’ Association told us that the FSA had introduced a “consumer section” to its website in 1999, and noted that: “Over the period to 2005 a range of initiatives were mentioned; among them: ‘Education for Financial Capability’; ‘Adult Learning Programme’; ‘Consumer Publications’; ‘Consumer Help Website’; ‘Consumer Campaigns’; ‘Consumer Research’; Consumer Helpline; ‘Comparative Tables’; ‘Interactive adult learning programme’; and ‘tools to analyse consumer products and their inherent risks’.”6

7. The FSA launched the “implementation stage” of the National Strategy for Financial Capability in 2006 with the publication of a report, Financial Capability in the UK: Delivering Change. This report established “a road map for delivering a step change in the financial capability of the UK”.7 The report set out a seven-point programme to improve financial capability, as follows:

• Translating the Government’s intention, that the National Curriculum should contain high quality and comprehensive personal financial education, into real change in the classroom.

• Ensuring that students in Higher Education institutions, and young adults who are not in education, employment or training, have access to guidance on managing their money.

• Providing general financial education to employees in their place of work through accessible resources, and seminars delivered by trained professionals from the financial services industry and elsewhere.

3 Financial Services and Markets Act 2000, s.4

4 Treasury Committee, Twelfth Report of Session 2005–06, Financial Inclusion: credit, savings, advice and insurance, Ev 307

5 Treasury Committee, Twelfth Report of Session 2005–06, Financial Inclusion: credit, savings, advice and insurance, Ev 308

6 Ev w15

7 FSA, Financial Capability in the UK: Delivering Change, March 2006


• Fundamentally revamping the FSA’s consumer communications and information to make them more targeted, engaging and accessible. Includes a revised distribution strategy for the FSA’s tools and resources, to increase significantly their reach and impact.

• Developing, and making more widely available, online tools to help people to assess their financial situation and, if necessary, to take action and get further help.

• Developing and distributing a Money Box containing information for new parents, better equipping them to take on the additional financial responsibilities of parenthood.

• Working to ensure that consumers have access to money advice that is relevant, engaging and good quality.8

8. This report was followed in 2008 by the publication of the Thoresen Review of Generic Financial Advice, a review commissioned by HM Treasury. The Thoresen Review argued for a national money guidance service and recommended that a “pathfinder” body be created, which would test and refine the “high-level blue-print” for a money guidance service set out in the review.9 In April 2009 the pathfinder was created under joint control of the FSA and HM Treasury, and ran a pilot service in the North East and North West of England under the brand moneymadeclear. Following completion of the pathfinder phase, the Consumer Financial Education Body (CFEB) was created with a statutory underpinning in the Financial Services Act 2010. In 2011, the service was rebranded as the Money Advice Service. In April 2012, the Money Advice Service also assumed responsibility for co-ordinating free debt advice, a role previously performed by the Department for Business, Innovation and Skills.

Purpose of the Money Advice Service

9. The Thoresen Review concluded that a generic financial advice service would bring significant benefits to individuals and the UK’s economy as a whole. Its final report recommended that this service should deliver information and guidance on the following:

• how to budget weekly or monthly spending;

• saving and borrowing;

• protecting and insuring the individual and the family;

• retirement planning;

• understanding tax and welfare benefits better; and

• translating technical financial language into something that people understand– “jargon busting”.

8 Ibid.

9 HM Treasury, Thoresen review of generic financial advice, March 2008


10. The Money Advice Service also took on responsibility for commissioning and co-ordinating debt advice in April 2012.

Financial capability

11. In its 2006 publication, Delivering Change, the FSA noted that:

There is a clear need to act to improve the UK’s financial capability. Individuals are being required to take on more responsibility for their financial decisions. Yet many lack the skills or knowledge to do so, and some groups appear particularly vulnerable.10

Recent scandals such as the misselling of payment protection insurance and interest-rate swaps have demonstrated some potential consequences of this vulnerability. Sue Lewis of stl consultants, an independent consultant specialising in financial education, said that:

Research has established that more financially capable individuals plan ahead, save more and invest more in pensions. It is also likely that they would shop around more for products, use less revolving credit, or become overindebted, and be less likely to be vulnerable to product misselling.11

Martin Lewis of MoneySavingExpert.com told us that:

Right across society, we struggle from genuine consumer illiteracy, if I can take the broadest term possible, where I would say 60% to 70% of the population simply do not understand many of the products that we have.12

12. Witnesses supported action being taken to improve financial capability. For example, Joe Garner, Chair, Financial Services Practitioner Panel, told us that “There is a big savings gap. There is a big pensions gap in this country. Between us we can’t do enough in this area.”13 The Institute of Chartered Accountants in England and Wales (ICAEW) predicted that financial capability was something that would become even more important in future:

In a context of an ageing population and the possibility of low growth for years to come, governments will look to individuals to make greater personal provision for retirement and other requirements, such as healthcare. For this to work, the general population needs greater financial capability.14

Debt problems

13. Problem debt appears to affect a growing proportion of the population, a situation which may have been exacerbated by the recent financial crisis. In August 2013, the Money

10 FSA, Financial Capability in the UK: Delivering Change, March 2006

11 Ev w30

12 Q 67 [Martin Lewis]

13 Q 53 [Joe Garner]

14 Ev w50


Advice Service published a review which indicated that “the proportion of people who are struggling to keep up with their bills and credit commitments in 2013 has risen by 17 percentage points—up from 35 per cent in 2006 to 52 per cent in 2013.”15 According to Credit Action, Citizens Advice Bureaux in England and Wales dealt with 7,824 new debt problems every working day during the year ending March 2013, and UK banks and building societies wrote-off £3.67 billion of loans to individuals over the four quarters to Q2 2013.16 Advice UK told us that:

The global financial crisis highlighted an absence of responsible financial management by business, governments and consumers. While there is some evidence that consumers in the UK are starting to pay down their debts in the aftermath of that crisis, the Office for Budget Responsibility (OBR) predicts that total household debt will exceed £2 trillion by 2017.17

14. In April 2013, Step Change (formerly the Consumer Credit Counselling Service), a debt advice charity, reported that “average total arrears on household bills rose from £2,134 in 2011 to £2,258 in 2012”, and that “over the same period the proportion of [Step Change] clients with arrears on at least one household bill has increased from 27 percent to 35 percent.”18 The Money Advice Trust told us that “The YouGov Debt Track survey indicates the prevalence of problem debt in the UK is increasing and found in late 2011 that approximately 10 million individuals in the UK describe meeting their debt commitments as a ‘constant struggle’.”19

15. These trends suggest a growing need for those struggling with debt to receive advice on how to manage it. Advice UK told us that “there are 4.3 million overindebted households in the UK but only 2.1 million actively seek debt advice. The problem for advice centres is capacity, i.e. meeting client demand”.20 Unlike generic money advice, debt advice is provided on an individual basis to address particular problems specific to the individual. David Hawkes of Advice UK told us that money advice and debt advice formed “a whole package [...], what we call a ‘whole person’ approach so that you are looking at generic financial advice as part of a preventative agenda in addition to debt advice as part of crisis intervention.”21

15 Money Advice Service press release, New study shows UK developing positive money habits despite money struggles,

2 August 2013

16 Credit Action, Debt Statistics: September 2013, http://www.creditaction.org.uk/

17 Ev w9

18 StepChange press release, UK household crisis: Dramatic rise in families seeking help for utility bills, council tax and rent arrears, 23 April 2013; http://www.stepchange.org/Mediacentre/Pressreleases/priorityarrearsrise.aspx

19 Ev w1

20 Ev w9

21 Q 9


The “advice gap”

16. The term “advice gap” refers to the number of people who are unable to access financial advice. In its written evidence, the Money Advice Service quantified the problem as follows:

Some 23m people do not know where to go for impartial advice on credit and borrowing, only 15% has a financial adviser and one in five people have someone they trust to confide about money.22

17. In July 2011, the Committee reported on the Retail Distribution Review (RDR), a major reform by the FSA of the regulation of retail investment advice. During our inquiry, we heard evidence that the RDR could increase the ‘‘advice gap’’. In our report we expressed our concern that “the loss of advisers, particularly individuals and those in small firms, will disadvantage smaller savers by reducing choice and competition.”23 As a result of the RDR, the Financial Services Consumer Panel commissioned research to “look at the ‘advice gap’ in the UK”. This research concluded that “there were a number of factors which were increasing the advice gap, which can, in part, be met by a generic advice service such as the MAS.” The Chair of the Panel, Adam Phillips, told us:

I think [the Money Advice Service] definitely play a role. We did research five years ago, talking about the initial consultation on the RDR, where we said it was essential that generic advice was brought in if the RDR was to go ahead, simply to deal with this issue.24

Financial education in schools

18. One of the objectives of the Money Advice Service is to enhance the understanding and knowledge of members of the public about financial matters. Financial education in schools is one way of improving financial capability and reducing the likelihood of debt problems arising. The Personal Financial Education Group (pfeg), a financial education charity, told us that:

Prevention is better than cure. Personal finance education is a fundamental building block for life. pfeg believes that by educating children and young people to understand and manage their finances, we can build a generation of empowered consumers able to deal with financial challenges such as student debt, unemployment, pregnancy, negative housing equity and loss of income due to ill-health.25

19. While witnesses differed in their views of whether the Money Advice Service should have a greater role in financial education, there was broad agreement that financial

22 Ev w26

23 Treasury Committee, Fifteenth Report of Session 2010–12, Retail Distribution Review, para 79

24 Q 2

25 Ev w43


education for young people was an important strand in improving financial capability and debt problems in the UK. Since this inquiry began, the Government has announced that financial education will be included in the National Curriculum for secondary schools.26 Financial mathematics will form part of the maths curriculum and, under the draft proposals, citizenship classes will teach:

• the functions and uses of money, the importance of personal budgeting, money management and a range of financial products and services at Key Stage 3 (years 7–9); and

• wages, taxes, credit, debt, financial risk and a range of more sophisticated financial products and services at Key Stage 4 (years 10 and 11).27

The Money Advice Service has indicated that it intends to develop its work on financial education in schools, which has the potential to help address low levels of financial capability in the long term. We have therefore considered this matter as part of our inquiry.

Changes in the course of our inquiry

20. We announced our inquiry in May 2012 and concluded our evidence gathering in June 2013. During that period, some of the key office holders have changed:

• In November 2012 it was announced that a new Chief Executive of the Money Advice Service, Caroline Rookes CBE, had been appointed in place of Tony Hobman. Ms Rookes took up her post in February 2013.

• In September 2012 Sajid Javid MP was appointed as Economic Secretary to the Treasury, the Minister responsible for the Money Advice Service, in place of Mr Mark Hoban MP, who had held the post of Financial Secretary to the Treasury. On 7 October 2013, Mr Javid was appointed Financial Secretary to the Treasury.

• It was announced in March 2013 that the Chairman of the Money Advice Service, Gerard Lemos, would be standing down. Andy Briscoe took over as Chairman on 2 September 2013.

26 Department for Education, The National Curriculum in England: Framework document for consultation, February

2013, p 149

27 Department for Education, The National Curriculum in England: Framework document for consultation, February 2013, pp 150–151


2 Review of the Money Advice Service

21. In its written evidence, the Money Advice Service told us that it would be “subject to an HM Treasury-led review of the Service to ensure that it remains a suitable model to deliver consumer financial education and support the wider consumer protection agenda. This will take place in 2013–15.”28 The Economic Secretary to the Treasury told us that his intention was to have a review “before the end of this Parliament”.29

22. We asked the Economic Secretary whether he believed that the Money Advice Service was the best platform for providing debt advice. He told us: “I think MAS has an important role in this area and, from what I have seen so far, it is carrying that out effectively, although it is early days with this new mandate.”30 We also asked him about the effectiveness, and in particular the cost-effectiveness, of the Service. He responded:

I have looked at their business plan. I do think it is effective. It is important to bear in mind, of the total budget they have, which is approximately about £80 million this financial year, they are spending about £35 million or thereabouts on debt advice and, of that £35 million, my understanding is that well over 90% is money being given to third organisations to provide debt advice, often face-to-face. I think that is probably one of the most effective ways, but not only face-to-face. I think that it is effective.31

23. We are concerned on two fronts about HM Treasury’s planned review of the Money Advice Service. First, given the then Minister’s endorsement of the role of the Service and of its effectiveness, we are concerned that the Treasury may already have decided that the Service should continue to exist in its current form. We therefore recommend that, rather than conducting a review itself, HM Treasury commission an independent review of the Service. Secondly, we consider that 2013–15 is too long a timescale for a review. This should be considered a matter of urgency and an independent review should be completed, and its findings published, by the summer of 2014.

24. In addition, the National Audit Office is expected to publish a review which will “assess how effectively the MAS uses its resources to engage with its customers and stakeholders in order to achieve its statutory objectives.”32 We would expect the NAO’s work to inform the independent review of the Service.

28 Ev w26

29 Q 434

30 Q 425

31 Q 426

32 National Audit Office, Work in Progress, Money Advice Service: Empowering consumers of financial services, www.nao.org.uk/press-releases


3 Money advice and debt advice

Introduction

25. In our initial hearings in this inquiry, witnesses raised a number of concerns about the way in which the Money Advice Service was developing. The consistent themes were that it was not clear what the Service was for, that it had not yet successfully carved out a role for itself, and that, where it had, this was not necessarily the right role. As Gillian Guy, Chief Executive of Citizens Advice, told us, “it is perhaps undertaking the wrong job with the wrong focus”.33

Effectiveness of a “primarily digital” strategy

26. The “money advice” provided by the Money Advice Service is known as “generic financial advice”. The Treasury sdefines this as “unregulated advice which takes account of the specific financial circumstances of an individual, but which does not result in a product recommendation. Generic advice helps individuals to understand their current financial position, their available choices, and how to take steps to meet their needs.”34

27. In its 2012/13 Business Plan, the Money Advice Service explained that “The extensive new elements of our Service will be primarily digital, and increasingly mobile, reflecting the growing prominence and relevance of digital media in people’s lives. We remain committed to advice in person and over the phone”.35 This digital service centred around the Service’s website, which included “budgeting and planning tools[, ...] action-orientated articles [and ...] comparison tables”.36 The strategy to develop a predominantly web-based offering was the result of an attempt to provide generic advice to a huge number of people. The Money Advice Service told us that:

Whilst our research suggests that up to 19m people could benefit from generic money advice annually, we are configuring a transformed Service to reach more than 11m people each year by 2016–17, recognising that other information and advice will continue to be available.37

Gerard Lemos, the then Chairman of the Service, explained that anything other than a web-based service would limit the number of people who could access its services:

If we spend our entire budget—except for staff and operations, which comes to about £9 million or £10 million—which is £36 million, entirely on giving face-to-face advice, we would reach—and we have calculated our unit costs, which are extremely good compared to other people’s—around 600,000 people. If we put all our funds in

33 Q 330

34 HM Treasury, Financial capability: the government’s long term approach, 2007

35 Money Advice Service, Business Plan 2012/13, p. 1

36 Ev w26, paragraph 17

37 Ev w26


the same way into telephone advice, we would reach about 3 million people. I think the choice we have to make—I entirely accept it is a choice—is whether we want to invest at this stage in reaching a lot more people with a much better service, or whether we want to concentrate on smaller numbers but fill much less of this huge advice gap.38

28. However, some of our witnesses expressed concerns about the likely effectiveness of this approach. Some suggested that any attempt to provide advice to such a large number of people would not have a significant impact on those it was trying to reach. The Association of Independent Financial Advisers told us that it was:

keen to see more evidence of who MAS is reaching and the longevity and effectiveness of its relationship with its users. We remain unconvinced MAS will develop sufficient relationships with the 11.3 million people a year (from 2016/17) to have a material impact on their behaviour.39

Similarly, the UK Shareholders Association pointed out that:

The word ‘reaching’ has never been defined. It is not clear in what way the ‘reaching’ of 11 million people in 2016 differs from the ‘reaching’ of 10 million people in 2011 sufficient to justify a likely spend of £250million (excluding debt advice) in that time.40

29. A number of bodies expressed concern that those most in need of advice might not be able to access it. Moneysavingexpert.com commented upon:

the lack of resource being directed at those groups who need most assistance, e.g., the financially excluded and the financially incapable.41

Delroy Corinaldi of Step Change, a debt advice charity, suggested that those seeking advice needed a more personalised service than that proposed by the Money Advice Service. He told us that:

When they are in that crisis zone and they feel like bricks are falling on their heads, what they want is help. I think they associate advice and help as being one and the same, and what they look for is a trusted advisor to take them through that.42

Adam Philips, the Chair of the Financial Services Consumer Panel, also suggested that, while there were many instances where general information was sufficient, “At various points in those periods you may well need face-to-face or some kind of human interaction with somebody to help talk you through your particular issues.”43

38 Q 163

39 Ev w37

40 Ev w15

41 Ev w60

42 Q 11

43 Q 13


Financial Health Check

30. The Financial Health Check is an online questionnaire which generates generic advice based on the answers given. The Service’s 2012/13 Business Plan referred to the Health Check as “a major gateway into our Service”.44 Mark Hoban MP, while Financial Secretary to the Treasury, singled out the Health Check as a particularly useful feature of the Money Advice Service, saying:

last year I launched the Money Advice Service to offer free and impartial guidance on financial matters. In particular, through its Financial Health Check, individuals and families have the opportunity to identify their financial needs, understand the range of products available and find out where to get further advice.45

31. However, evidence received by the Sub-Committee suggests that the Health Check had serious flaws. Martin Lewis of Moneysavingexpert.com told the Sub-Committee that “If the product wasn’t crap, I would think it might be a good idea, but the product is abominable, and I would be embarrassed to put most of their tools on my website.”46 He believed that 80,000 people had taken the Health Check since it was launched. By comparison, he told us that an online product his company had produced in association with Trading Standards had been downloaded 150,000 times in one day.47 Adam Phillips, the Chair of the Financial Services Consumer Panel, told us that the Health Check might be “very useful” for a customer who was “interested”, but that for the “uninterested”:

[the MAS] do have to do more thinking about how they can help people who don’t want to spend a lot of time reading through stuff but nevertheless have a question like, “I have £8,000 in my deposit account, it is not producing any income at the moment, it is what I supplement my basic pension with. What should I do?”

32. A study carried out for the Money Advice Service by an external body concluded that:

Most of the outcomes tested for at either the Immediate or Longer-term stage indicated that the Health Check has had no impact. The only two outcomes that showed a difference between the test and control groups across the two experiments showed a negative impact with the control group more likely to have taken action than the test group.48

Despite this evidence, the Economic Secretary to the Treasury defended the Health Check, saying it was “very good”, and “a very useful tool”.49 He did, however, add that “to be fair, I did not feel that I needed financial advice myself.”50

44 Money Advice Service, Business Plan 2012/13, p.5

45 Speech by the then Financial Secretary to the Treasury, Mark Hoban MP, Simple Products launch, 8 February 2012

46 Q 68

47 Q 70

48 Research Report: Health Check Evaluation, prepared for Money Advice Service by IFF Research and the Policy Studies Institute, p. 6

49 Q 453


Spending on marketing

33. In our hearings with the Money Advice Service, we repeatedly expressed concerns about the large amounts being spent by the Service on marketing. In its 2012/13 Business Plan, the Service published plans to spend £20.084 million of its £46.255 million budget on “Consumer communications and marketing”.51 Lord Turner explained that the large amounts spent on marketing:

almost automatically come from a decision to go down a web-based route. Having decided to go down a web-based route, you do need to build initial awareness of that so that people come to those websites and use them but, broadly speaking, the approach that Gerard Lemos and Tony Hobman have pursued is to reduce the element of direct labour cost through—indeed—making a number of people redundant and investing more in web delivery and communication.52

Gerard Lemos defended spending this amount on marketing, explaining that it was as a result of the decision to attempt to reach as many of the population as possible, which necessitated a web-based approach. He said that:

We are spending a lot on marketing and that goes back to this massive advice gap. [...] In its model, the CAB currently reaches 2 million people, [...] and only one in seven of the population has an IFA, so there is the huge gap in the middle, and that is the one we are seeking to address. That is the rationale for our marketing spend and also for beefing up our digital strategy.53

34. However, several witnesses were sceptical of the need for the Money Advice Service to build a brand. Credit Action told us that:

If it is to succeed in the digital arena, MAS is likely to need to expend substantial resources on advertising and marketing, in order to drive traffic and take on more established brands. Given that the concentration of online providers means that there is significant potential for unnecessary duplication, we would question the wisdom of such expenditure.54

Citizens Advice questioned the wisdom of building a brand when consumers were already aware of existing bodies:

In 2012/13 MAS will spend circa £20 million on consumer communications and marketing. There are already many existing providers of advice and financial education with strong brands and good public awareness of the services they offer—

50 Ibid.

51 Money Advice Service, Business Plan 2012/13, p.13. £20.084m figure is the total of the three sums spent on consumer communications and marketing.

52 Q 99

53 Q163

54 Ev w99


97 per cent of people in the UK have heard of the Citizens Advice Service and 76 per cent trust us.55

Gillian Guy, Chief Executive of Citizens Advice, elaborated on this view, suggesting that the Money Advice Service had the wrong focus. She told us that:

the fundamental issue here is the focus of the Money Advice Service [...]. That is about building a separate and new brand, and marketing financial capability, particularly. Our argument, which is quite clear to the Money Advice Service, is that that is not the right focus. There are plenty of things that can be done in this area that an organisation that does not deliver could do.56

Moneysavingexpert.com also argued that the brands with which the Money Advice Service might be competing “substantially exceed the offering of MAS,” and suggested that “Instead of reinventing the wheel and spending millions of pounds in brand building to unnecessarily compete with these sites, it would be more efficient for MAS to evaluate the information provided on such sites to ensure it is of benefit to the consumer.”57 The Building Societies Association (BSA) pointed out that the Service’s efforts to build a brand were in fact a “re-branding”, as a service was already provided by the FSA under the brand moneymadeclear.58 The BSA continued:

We are concerned that significant time and money has been spent on re-branding, rather than on embedding MAS as an organisation, getting the infrastructure right and importantly, agreeing on the action plan to deliver the core objectives over a period of time.59

35. Lord Turner indicated that the FSA board had had some doubts about the Service’s strategy, saying:

we did go through that in the FSA board. We asked questions about it. There was an acceptance that there was a reasonable case in principle of why that was the correct way to go, but we are not the board of the MAS itself, so we did not subject it to the same degree of precision that you would expect of the MAS board itself.60

Developments in 2013

36. In June 2013, the Chief Executive of the Service, like her predecessor, defended a predominantly web-based service for money advice, saying that this was the only way to reach a sufficiently large number of people.61 She did, however, also emphasise the fact that

55 Ev w95

56 Q 333

57 Ev w60

58 Ev w102, para 5

59 Ibid.

60 Q 99

61 Q 528


the Money Advice Service provides money advice over the phone and face-to-face. She argued that this strategy meant that it was necessary to carry out marketing or engagement work because “It is essential as a way of getting people to our site for us to help them.”62 In this respect, the Service’s approach is very similar to its strategy when we first launched our inquiry. Ms Rookes told us that the Service planned to spend £12.5 million on marketing in 2013/14.63

37. The Money Advice Service appeared in our later hearings to have adopted a more targeted approach which was based to a greater extent on research into where help is needed most. Ms Rookes told us that:

We have assessed the size of the three particular groups we are focusing on to try to get real behaviour change, because we need to assess the size of the challenge in front of us. That is the group that we have estimated to be around 10.2 million. You will have seen that we have estimated our starting point this year as half a million outcomes towards effecting behavioural change.64

She said that the three groups identified by research as being of most concern to the Service were “young people; families with young children; and [...] those with older children.”65 While the 10.2 million target appears to be a highly ambitious number, we also note that the Service has carried out more work to determine where its resources should be focused. Ms Rookes gave two examples of pieces of research that were being carried out:

What that has done is it has surveyed 5,000 people to ask them about their money and how they manage it. Of those 5,000 people, 800 of them are Money Advice Service customers, and our intention is to continue to carry that survey out on a quarterly basis so that we can build up a picture of the financial capability of the UK.

[...]

We have carried out [...] an ethnographic survey, where 72 families have been followed [...] for a year, and filmed in their money dealings, so that we can get a better understanding of what people do with their money and why they do it, rather than what they say they do. The idea for us is to pull all that together into a research report into a baseline survey of the financial capability of the country, which we will then use going forward to assess how effective we are being.66

38. While we note the planned reduction in marketing costs for 2013–14, the amounts spent on marketing by the Money Advice Service have been a source of concern throughout our inquiry. This spending arises from the Service’s decision to adopt a “primarily digital” approach to the provision of advice. While we accept that some

62 Q 585

63 Q 541

64 Q 483

65 Q 479

66 Q 477


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 rebrand as the Money Advice Service when the moneymadeclear brand was already in use, was misguided.

Debt advice

39. The Money Advice Service took over the role formerly performed by the Department for Business, Innovation and Skills of commissioning and co-ordinating debt advice in April 2012, very shortly before our initial hearings in this inquiry. It was not therefore possible to make an assessment at that time of the Service’s debt advice role. In its 2012/13 Debt Advice Business Plan, the Service summarised its work on debt advice as follows:

All but a modest proportion of the £34.5m budget in this plan will go to ensuring continuity of frontline service. We will fund six delivery organisations across England and Wales that provide debt advice face-to-face and contribute funds proportionately towards debt advice provision in Scotland and Northern Ireland. The remaining £2.2m will be used in development work towards a new and more coordinated system for the delivery of debt advice—one that will enable more people in debt to find the right sort of help for their needs more quickly and easily.67

40. When the Money Advice Service published its annual report for 2012/13, we noted that of its £34.5 million debt advice budget, £30.2m had been spent on delivery of face-to-face debt advice.68 We are concerned that, at a time when there is a huge and urgent need for debt advice, some £4.3 million was not spent directly on providing that advice. Moreover, we are concerned by the lack of flexibility available to the Service in determining what proportion of its funding to allocate to debt advice. We have already noted in paragraph 15 above that debt advice and money advice form “a whole package” in which money advice is preventative, and debt advice is needed for crisis intervention, and that debt problems appear to be exacerbated during economic downturns. Indeed, we heard that in recent years some advice centres had had difficulties meeting demand.69 However, funding for money advice and for debt advice is raised by means of two separate levies, and the Money Advice Service’s spending on each is allocated accordingly.70 In our view, it is unnecessarily prescriptive separately to ringfence spending on debt advice and on money advice. We were pleased to hear the then Economic Secretary to the Treasury advocating some flexibility in the allocation of funding between money advice and debt advice.71

41. During economic downturns, demand for debt advice is likely to increase. We recommend that during difficult economic circumstances such as those following the

67 Money Advice Service, Debt Advice Business Plan 2012/13

68 Money Advice Service, Annual Report, Accounts and Financial Statements for 2012/13, p 39–40

69 Q 332

70 Financial Conduct Authority, How we raise our fees, July 2013, para 7.29

71 Q 460


financial crisis of 2008, the Money Advice Service’s resources should be focused on helping those in crisis. Funds may therefore need to be reallocated from money advice to debt advice. In more favourable economic circumstances, it may be preferable to focus more on the prevention of future financial problems through money advice. We recommend that the Service be given greater flexibility on the proportion of its budget that it spends on money advice and debt advice respectively, responding to changes in demand.

42. In our early hearings, we heard concerns about the way in which the Money Advice Service was working with those from whom it commissioned debt advice services. Gillian Guy, Chief Executive of Citizens Advice, told us that:

we had some difficulty in a contract that was presented to us that had a 50% increase in output with no additional resources. Looking underneath that, it was quite clear it was less contact with individuals that was to give that rise in throughput.72

We were therefore concerned when Caroline Rookes listed as a “real achievement” that: “On the debt advice side, last year we increased productivity by over 50 per cent”,73 and we note with caution the Service’s objective “to raise standards across free debt advice.”74 Taken together with the evidence from Citizens Advice, Ms Rookes’s statements may indicate that the Service intends to continue with an approach to the commissioning of debt advice which risks reducing the quality of the service provided.

43. Efficient provision of debt advice services is a laudable aim. Nevertheless, when seeking to increase productivity, the Money Advice Service must be mindful of the need to maintain the quality of the service it provides. The Committee is sceptical that productivity can have been increased by 50 per cent in a single year without some resulting reduction in quality of service. We urge the Service to be mindful of its relative inexperience in the sector compared to many of the bodies from which it commissions services, and to seek to agree common standards in collaboration with those bodies. We recommend that the Money Advice Service establish a working group, composed of representatives from the debt advice sector, to agree a set of service standards for debt advice and a strategy for achieving those standards.

72 Q 373

73 Q 473

74 Q 480


4 Engagement with existing providers of money and debt advice

Introduction

44. In his Review of Generic Financial Advice, Otto Thoresen wrote that:

I believe that Money Guidance can be delivered most cost effectively in partnership with existing service providers. The third sector has responded enthusiastically to the review—they are eager to see progress. I envisage a central organisation, setting policy and strategic goals for the service, managing relationships and working with delivery partners. With a network of partners and referral agencies delivering Money Guidance locally face-to-face, over the telephone, through the web and as technology evolves, through other media. And I envisage a bigger network of intermediaries, people trusted by local communities, who would be able to ensure that those who would benefit most have access to the service.75

45. In both its role as a provider of money advice and a co-ordinator of debt advice, the Money Advice Service must engage with other providers or money and debt advice. This is for a number of reasons: it needs to learn from more established providers; it needs to avoid unnecessary duplication of services; and it needs to ensure it has effective professional relationships with those bodies with which it has formal relationships, for instance bodies from which it commissions debt advice services. It is clear from the evidence we received that the Service embarked on an approach very different to the “partnership” described by Otto Thoresen. He told us that in the early stage of the Service’s development, “I was very disappointed in the level of engagement and the openness and the transparency around what was going on.”76

Consultation

46. Witnesses almost all suggested that the Money Advice Service had started badly when engaging with the existing advice sector, but in our early hearings in 2012 many felt there had been a recent change. David Haukes, of Advice UK, summarised the view of a number of witnesses when he said “There has been a lot of talk about constructive engagement with stakeholders. I am not convinced that that has been borne out in practice until [...] recently when there seemed to be more signals.”77 Delroy Corinaldi, of StepChange, supported this view, saying “at the beginning the level of engagement was not that great, but I think most organisations that we talk to would say there has been a noticeable change over the last

75 HM Treasury, Thoresen review of generic financial advice, March 2008, p. 2

76 Q 73

77 Q 20


month to two months”.78 Some witnesses felt that the Service had begun to engage more constructively with other advice providers following the announcement of this inquiry.79

47. When we put these concerns to Gerard Lemos, the then Chairman of the Service, he told us that “We will certainly consult more than in the past. We have learned that lesson for sure.”80 Shortly after giving evidence, Martin Lewis described a meeting with the Money Advice Service in the following terms:

I’m pleased to say we actually ended up having a really positive meeting, focusing on shared aims and brainstorming where there was room to work together or just support good work being done on important projects.81

48. In June 2013, Caroline Rookes, Chief Executive of the Service, told us that part of its role was “to draw the organisations that are working in this space together and to try to ensure that we are moving forward as efficiently as we can, without too many overlaps and gaps, so that we are actually working together.”82 The Service also published a draft of business plan for consultation in December 2012 before publishing a final version in March 2013.83

49. The way in which the Money Advice Service initially engaged with the wider advice sector was a matter of grave concern to the Committee during the first phase of our inquiry. As a newly-created statutory body, entering a sphere in which there were already a number of well-respected, well-established and successful bodies in the private and voluntary sectors, it should not have begun its work without properly consulting those bodies and without taking the work of those bodies into account.

50. We welcome the emergence of an approach which appears to be more firmly based on forming constructive working relationships with existing advice providers. We recommend, however, that the independent review we have recommended of the Money Advice Service should seek the views of other bodies in the sector on the way in which the Service is engaging with them and take account of these views in reaching its conclusions.

Duplication

51. A number of witnesses raised concerns about the Money Advice Service duplicating the work of other advice providers. The Financial Services Consumer Panel told us that:

[T]he Money Advice Service [...] inevitably threatens to duplicate existing services. Having multiple ‘competing’ organisations in this area offering similar advice to

78 Q 19 [Delroy Corinaldi]

79 See Q 83 [Otto Thoresen] and Q 76 [Martin Lewis]

80 Q 214

81 http://blog.moneysavingexpert.com/2012/08/06/smoking-peace-pipes-with-the-money-advice-service/

82 Q 481

83 Money Advice Service, Draft Business Plan 2013/14


overlapping groups of people would be wasteful. Given that the bodies providing the advice are often industry, taxpayer or charity funded, there is an opportunity to consolidate, improve outcomes and reduce costs.84

Martin Lewis of Moneysavingexpert.com suggested that the private sector was providing better resources already, saying “the so called advice gap won’t be solved by adding another website to an already crowded marketplace”.85 Gillian Guy of Citizens’ Advice suggested that the duplication of provision represented a missed opportunity to bolster services that lacked resources, saying “we do not really need another telephone service and we do not really need another web service. We need capacity within the existing services.”86

52. Witnesses told us that, rather than duplicating existing provision, the role of the Service should be to co-ordinate and fund this work. 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.”87 Gillian Guy, of Citizens Advice, said: “No one is currently operating effectively, including Citizens Advice, on bringing the whole sector together”.88

53. Gerard Lemos, then Chairman of the Service, denied that it was duplicating resources that were already in existence. He told us that:

We do hand off to lots of other websites, including MoneySavingExpert and the CAB service. We do not want to compete or duplicate. A challenge was put to you last week, was it not, that we are competing and duplicating things that already exist? I do not think that is true, frankly. The issue is that we are seeking to fill this advice gap and to reach people.89

54. The National Association of Student Money Advisors (NASMA) gave an example of where constructive engagement had been effective, saying that “The frequent and on-going discussions between the Money Advice Service and NASMA ensured that work undertaken by both parties contributed to and complemented each other, rather than a duplication of effort and resource provision.”90 A number of witnesses suggested that the Service might play a greater role in co-ordinating and signposting other services.91

55. 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. The independent review

84 Ev w78; see also Ev w9.

85 Qq 68–70

86 Q 362

87 Ev w99

88 Q 362

89 Q 165

90 Ev w47

91 See, for example, Q 44, Q 70


we have recommended should examine the extent to which the work of the Service unnecessarily duplicates existing provision and should establish clearly what the role of the Service should be in each of the areas in which it operates.


5 Financial education in schools 56. Many witnesses spoke about the importance of financial education in schools. Martin Lewis of MoneySavingExpert.com told us: “If you look at the general financial and debtor literacy across the nation, we need [financial literacy] to be taught and we need it to be taught to every child.”92 Adam Philips, the Chair of the Financial Services Consumer Panel, Delroy Corinaldi of StepChange and Joe Garner, the Chair of the Financial Services Practitioner Panel all agreed that financial education in schools was crucial to avoid problems in the future. Mr Corinaldi added that, “if you educate children, they can educate their parents”, a view supported by Mr Garner.93 Written evidence from pfeg, a financial education charity, told us:

pfeg believes strongly that if we are to enable future generations of young people to manage their finances well, those under 16 years must be given high quality financial education in school so they can make informed choices and take responsibility for their own actions. Prevention is better than cure, being both cheaper, effective and potentially less damaging.94

Role of the Money Advice Service

57. At the time of our early hearings, the Money Advice Service had a very limited role in contributing to financial education in schools, although it was already undertaking research into the services that were currently being provided.95 Tracey Bleakley, Chief Executive of the Personal Financial Education Group (pfeg), a financial education charity, suggested that the Money Advice Service could play a role in co-ordinating the delivery of financial education in schools. She told us:

I think the Money Advice Service is incredibly important in terms of giving us a national voice and giving us that feed into the Department for Education and informing exactly how that curriculum should work and what the content should be.

[…]

[…] The role that MAS can do is to pull all of the different projects together to make sure that they all fit into a coherent strategy, so that we are not picking off some bits and pieces but leaving a whole big area over here that is not addressed.96

On the question of the standard of provision, she told us that she would like “to see that we are measuring finance education in schools year on-year, because I would like to be held accountable in my organisation [pfeg] that we are helping and that standards are

92 Q 58

93 Q 39

94 Ev w43

95 Money Advice Service, Annual Report and Accounts for 2012/13, p. 7

96 Q 59, Q 60


improving in schools.” The then Economic Secretary to the Treasury echoed this view, saying:

I have discussed this with the Chair [of the Money Advice Service] and I would like to see what they come back with in terms of how they can work with organisations. They pointed out to me, if I remember correctly, that there were about 25 financial organisations that are involved with schools on a voluntary basis and providing help with financial capability to school children. MAS sees their role as being one where they can co-ordinate that and make sure it is being done more effectively and also to have some basic standards, code of conduct, so there are some basic principles that everyone can meet. I think all that is a good thing.

58. In its written evidence, pfeg said that the Service should have “a greater role in financial education in schools by:

• Offering national leadership on a financial capability strategy which is internationally credible; advising the Department for Education on curriculum content, delivery, initial teacher training and continuing professional development

• Spearheading a drive for the UK to participate in the 2015 PISA assessments of financial literacy without delay

• Providing UK wide guidance, oversight and coordination of personal finance resources aimed at children and young people in schools.”97

59. The then Economic Secretary to the Treasury suggested a number of co-ordinating and guiding roles the Service could play in financial education, including: co-ordinating the numerous financial institutions active in schools, banks and other companies; providing a voluntary code of best practice; and discussing with Ministers in the Department for Education whether elements of financial education could be inserted into other core subjects, such as mathematics. 98

Training of teachers

60. During our hearings we heard evidence about the need to train teachers to deliver financial education in schools. Martin Lewis, of MoneySavingExpert.com, told us:

We talk about the capacity of teachers. It is not right to assume that teachers you think may be able to teach this subject, perhaps because they do economics or mathematics, have an easy read-across.

[...]

What we have to understand is this is a new subject. There are certain skills and abilities such as mathematical numeracy and understanding of business remits that

97 Ev w43

98 Q 462


are important, but it is something new and challenging. It is not enterprise, and it is not business studies; it is consumer finance.

In written evidence, MoneySavingExpert.com told us: “Teachers need to be properly trained and resourced to teach the subject effectively and MAS could play a role here.”99 Tracey Bleakley, of pfeg, said that “this should be a finite project because the schools network should be self-sustaining in a few years’ time, if we can get this right—if we can get teacher training, continuous professional development, the resources that we need, the evaluation embedded.”100

61. We also heard evidence about the funding of teacher training. Tracey Bleakley did not argue that such training should be wholly funded by the Money Advice Service, but did say that: “We have some very keen industry funders, but I think there is a place for funding and certainly to embed this in schools it is going to need to be paid for, so I would like to see MAS take a role in that.” For her part, Caroline Rookes, the Chief Executive of the Service, told us:

Our view is that the Department for Education probably should be funding teachers’ training for that, and that is what we have been talking to it about. So far we have not had any success in getting them to sign up to that.101

Developments in the course of our inquiry

62. As we have noted in paragraph 19 above, the Government announced in the course of our inquiry that financial education would be included in the National Curriculum for secondary schools.102 In its Business Plan for 2013/14, the Money Advice Service said:

“We will work alongside the Department and providers of financial education in the run-up to the implementation deadline of September 2014 to equip secondary schools to deliver this. We will also work with academies, independent and free schools, that are not required to deliver the National Curriculum, to help embed financial literacy in their own curricula.

We will work with the Department for Education and others on how best to deliver the financial education component of the new Curriculum as well as strategies that ensure that the knowledge delivered by curricula across the UK is effective in enabling people to develop positive financial behaviours in the long term.

We will work with partners and convene a national forum of stakeholders to promote best practice and innovation in delivery and assessment.

99 Ev w60

100 Q 60

101 Q 560

102 Department for Education, The National Curriculum in England: Framework document for consultation, February 2013, p 149


We will also map existing provision and seek to identify gaps based on geography, age and need to inform future investment and support the development of resources and projects by ourselves and partners.”103

We were encouraged to note that the Service planned to play a co-ordinating role rather than attempting to deliver financial education in schools itself.

63. Financial education for young people is vital. If pupils receive high-quality financial education, then the next generation may not suffer many of the financial capability problems that are experienced by the adult population of the UK. We welcome both the recent inclusion in the National Curriculum of financial education in mathematics and citizenship classes, and the stated intention of the Money Advice Service to develop its work on financial education in schools as a co-ordinator of provision rather than as a direct provider. The Service should work with providers of financial education in schools and with the Department for Education to establish standards to be met by all providers. We also recommend that the Service should provide funding from its existing budget for the training of teachers to deliver financial education in schools, in addition to the funding already provided by the private and voluntary sectors.

103 Money Advice Service, Business Plan 2013/14


6 Accountability and governance 64. The Financial Services Act 2010 set out the legal responsibility of the FSA (“the Authority”) for oversight of the Money Advice Service (“the consumer financial education body”). This responsibility has now been transferred to the FCA. Schedule 1 of the Act provides as follows:

1(1) The Authority must take such steps as are necessary to ensure that the consumer financial education body is, at all times, capable of exercising the consumer financial education function.

[...]

Budget

7(1) The consumer financial education body must adopt an annual budget which has been approved by the Authority.

[...]

Annual plan

8(1) The consumer financial education body must in respect of each of its financial years prepare an annual plan which has been approved by the Authority.

15(1) The Authority may appoint an independent person to conduct a review of the economy, efficiency and effectiveness with which the consumer financial education body has used its resources in discharging the consumer financial education function.

(2)The Authority must consult the Treasury before acting under this paragraph.104

65. The Act also provides that the board members of the Money Advice Service are appointed, and can be removed, by the Authority. For the Chair and Chief Executive, such action requires the additional approval of HM Treasury. The Authority also approves the remuneration of all board members.105 But the Act also provides that the terms of appointment of members of the board, and in particular those governing their removal from office, must be “such as to secure their independence from the Authority in the exercise of the consumer financial education function”.106

66. The evidence taken by the Sub-Committee in June 2012 suggested that the arrangements for the Service’s accountability to the FSA were, in practice, confused and ineffective. Lord Turner, then the Chairman of the FSA, told us that:

104 Financial Services Act 2010, Schedule 1

105 Financial Services Act 2010, Schedule 1, para 2

106 Financial Services Act 2010, Schedule 1, para 2


there is also concern on the part of the FSA board, which I expressed in a letter to Mark Hoban immediately after the board meeting in December, that our responsibilities at the moment put us in a sort of betwixt and between stage, and the board has clearly expressed the view that, going forward, we would like either to move in the direction of the MAS becoming a fully independent body directly accountable to this Committee and the Treasury, or to have more oversight at an earlier stage. We have clearly expressed the view that we would like to head in one or other of those directions.107

In a letter of 14 February 2012 to Mark Hoban, then Financial Secretary to the Treasury, Lord Turner wrote:

Existing legislation requires the FSA to take necessary steps to ensure MAS is capable of exercising the financial education function but powers to support this duty are limited. We are required to approve the MAS business plan but are not empowered to question operational issues such as outsourcing proposals, provided those proposals appear reasonable, and the Financial Services Bill did not increase those powers.

In his response to that letter, Mark Hoban MP, Financial Secretary to the Treasury, wrote that:

MAS will remain directly accountable to the FSA, and in future the FCA, including for approval of its budget and annual plan. I am confident that incentives on MAS to provide efficiency and value for money will be strengthened by subjecting the MAS to NAO audit. The FSA will, of course, have the option to notify the NAO of any areas of concern regarding MAS’s efficiency and economy.

67. The Sub-Committee heard from Lord Turner on 20 June 2012. Shortly afterwards, on 26 July 2012, the FSA Board established a sub-committee “for the purpose of providing support and advice to the [FSA] Board on its relationship with MAS and its obligations under FSMA in respect of MAS.”108 In November 2012, the Economic Secretary to the Treasury indicated to us that the problems we had observed with accountability existed not because, as the FSA had told us, the powers given to the FSA were not sufficient, but because the FSA had not used them properly:

They have put more staff in the FSA working on the MAS mandate. They have increased scrutiny of the information they get from MAS and they have conducted their own internal risk review. I am pleased that they have done this, but they could have done it before. I did not need to give them more powers to do this. I think, with the powers that they have, there is a lot that they can do.109

He was clear in his view that the FSA’s powers were adequate:

107 Q 97

108 Financial Services Authority, Committee of the Board for the oversight of the Money Advice Service, Terms of Reference

109 Q 430


I am satisfied that the powers that already exist for the FSA to oversee MAS and its functions are adequate. Just to summarise, FSA has always had the powers since MAS was created. It had to sign off on its budget. It has to sign off on its business plan. It has the power to appoint and dismiss directors. I think that in itself is sufficient power.110

68. The Financial Services Act 2012 made some changes to the governance arrangements for the Money Advice Service. It provided for the transfer to the Financial Conduct Authority (FCA) of the oversight role previously carried out by the FSA. It imposed a duty of co-operation on the FCA and the Service. It required the Service and the FCA to prepare and maintain a memorandum describing how they intended to comply with this requirement. To this end, a framework document setting out the roles and responsibilities of the Money Advice Service, and the roles and responsibilities of HM Treasury and the FCA in respect of the Service, was signed in March 2013.111 In addition, the Act provided for the Service’s accounts to be audited by the National Audit Office and laid before Parliament. The FCA established a sub-committee of its Board to “to provide support and advice to the Board on its relationship with the Money Advice Service (MAS) and its obligations under FSMA in respect of MAS.”112

69. In June 2013 we asked Caroline Rookes, the Chief Executive of the Service, whether there was now clarity about the accountability arrangements. She told us that:

There is a clear understanding between the FCA, the Treasury and ourselves. One of my directors meets regularly with the team that is responsible for oversight of the Money Advice Service and we exchange information on a monthly basis. We have very, very close working relationships. I am satisfied that the relationships and the accountabilities are clear.113

70. The new Chief Executive of the Money Advice Service articulated a clear understanding of the accountability of the Service to the FCA and HM Treasury. This is welcome. However, it does not seem plausible that arrangements which the FSA considered inadequate in June 2012 became adequate with no change other than the appointment of a sub-committee of the FSA’s board. It is clear that the FSA’s Board believed that it did not have sufficient powers effectively to hold the Money Advice Service to account. The independent review we have recommended should therefore consider specifically whether the FCA needs additional statutory powers to hold the Money Advice Service to account—for example, whether the FCA should have powers to intervene on operational matters and whether it needs additional powers to scrutinise the Service’s budget.

110 Q 429

111 http://www.fca.org.uk/static/documents/mou/mas-fca-hmt-framework-document.pdf

112 Financial Conduct Authority, Corporate Governance of the Financial Conduct Authority, April 2013

113 Q 484


Remuneration and staffing

71. Concerns about the high pay of the then Chief Executive of the Money Advice Service, Tony Hobman, were raised by the Business, Innovation and Skills Committee in March 2012.114 The Committee noted that the Chief Executive of the Service received total remuneration in excess of £350,000, and concluded that “At a time of pay restraint we do not believe that the head of a comparatively small organisation should receive a salary £100,000 in excess of the Prime Minister.”115 Lord Turner explained that the Chief Executive’s salary had been set:

in the light of his previous remuneration and with a point of view on what was required to persuade him to move to this job. It was also set by cross-reference to the then salary and remuneration of the head of the FSCS, which was seen as the nearest comparable body.116

72. Mr Hobman’s basic salary for the last year in his previous role as Chief Executive of the pensions regulator was £175,000 to £180,000, meaning that his salary at the Money Advice Service represented a considerable pay increase.117 The Chief Executive of the Financial Services Compensation Scheme (FSCS), described by Lord Turner as “the nearest comparable body”, earned approximately £275,000 in 2011–12.118 However, the logic of this comparison with the FSCS is not clear: in our view, a more appropriate comparison would be with other bodies in the advice sector, where pay is generally lower than in the financial services sector. For example, in 2010–11 the five Executive Directors at Citizens Advice earned in the region of £80,000 to £110,000.119 We also note that the Permanent Secretary of HM Treasury, the Government department with responsibility for the Money Advice Service, earned between £175,000 and £180,000 in 2012–13.120 In this context, the decision to pay the Chief Executive of this organisation such a large amount seems to have been ill-thought out.

73. In November 2012 it was announced that a new Chief Executive of the Money Advice Service, Caroline Rookes CBE, had been appointed. Ms Rookes took up her post in February 2013. Alongside the FSA’s announcement of the appointment, it was announced that the new Chief Executive would receive a base salary of £140,000 and a package of benefits comprising life assurance, private medical insurance and a pension. A “performance-related reward” could be recommended on an exceptional basis, but there was “no expectation that any bonuses will be considered or awarded.”121 We note that this is still a considerable salary for the Chief Executive of a comparatively small body whose

114 Business, Innovation and Skills Committee, Fourteenth Report of Session 2010–12 Debt Management, HC 1649

115 Business, Innovation and Skills Committee, Fourteenth Report of Session 2010–12 Debt Management, HC 1649, para 143

116 Q 100

117 The Pensions Regulator, Annual Report and Accounts for 2010/11, p. 69

118 Financial Services Compensation Scheme, Annual Report and Accounts for 2011/12, p. 113

119 Citizens Advice, Annual Report and Accounts for 2010/11, p. 37

120 HM Treasury, Annual Report and Accounts for 2012/13, HC 34, July 2013

121 Letter from John Griffith Jones to Andrew Tyrie and George Mudie, 23 November 2012


total budget in 2012/13 was £80.7m, and that it is only £2,500 below the salary of the Prime Minister.

74. We also noted from the Annual Review published in June 2013 that two members of staff continued to be paid more than the Chief Executive.122 Ms Rookes explained that this was “[b]ecause they were recruited some time in the past on those terms. I cannot alter those.”123 She added that “As and when directors leave and come to be replaced, we will look at the prevailing conditions and the job, and then consider what the rate of pay should be”.124 Commenting on pay at the Money Advice Service more generally, the then Economic Secretary to the Treasury said that he expected the Service “to show proper sensitivity to pay and to take into account that many people who are paid either directly or indirectly through taxes are subject to public sector pay restraint.”125

75. In appointing a new Chief Executive on a salary considerably lower than that of her predecessor, the Money Advice Service, the FSA and the Treasury appear to have recognised that the remuneration of the former Chief Executive of the Money Advice Service was excessive. We welcome this. We regret, however, 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. We urge the Service, the FCA and the Treasury to exercise the appropriate restraint when determining the future remuneration of senior staff. The independent review we have recommended should examine the remuneration of the Service’s senior staff and should seek legal advice, which should be published with its report, about whether existing salaries could be reduced.

122 Money Advice Service, Annual Review, Directors’ Report and Financial Statements for the year ended 31 March

2013, June 2013, p. 46

123 Q 519

124 Q 520

125 Q 446


7 Conclusions 76. The Money Advice Service was created in a well-intentioned attempt to address a serious problem: many people lack the financial capability and the guidance they need to help them to manage their money. We are, however, unconvinced that the Service has adopted the right strategy or that it currently performs the correct role. The evidence we heard in our initial hearings caused us to question whether the Service should continue its work at all, and we have considered carefully whether we should recommend its abolition. We recognise, however, the attempts of the Service in recent months to improve its service and the way it works. In view of this, we will await the findings—which should be no later than summer 2014—of the independent review we have recommended.

77. The independent review must seek to answer the following questions:

• Should the Money Advice Service—or something like it—exist as a statutory organisation?

• If so, what should the role and strategy of such a body be? Should it be a co-ordinator, commissioner or direct provider of advice? What channels should it use?

• If not, should the FCA take responsibility for the objectives of the Service?

These questions are in addition to those we have already set out in this report, namely: • Does the FCA need greater statutory powers to hold the Money Advice Service to

account?

• What are the views of other bodies in this sector about the way in which the Money Advice Service is now engaging with them?

• To what extent does the work of the Money Advice Service unnecessarily duplicate existing provision? What should the role of the Service be in each of the areas in which it operates?

• Is the remuneration of the Service’s senior staff set at an appropriate level?


Conclusions and recommendations

Review of the Money Advice Service

1. We are concerned on two fronts about HM Treasury’s planned review of the Money Advice Service. First, given the then Minister’s endorsement of the role of the Service and of its effectiveness, we are concerned that the Treasury may already have decided that the Service should continue to exist in its current form. We therefore recommend that, rather than conducting a review itself, HM Treasury commission an independent review of the Service. Secondly, we consider that 2013–15 is too long a timescale for a review. This should be considered a matter of urgency and an independent review should be completed, and its findings published, by the summer of 2014. (Paragraph 23)

2. We would expect the NAO’s work to inform the independent review of the Service. (Paragraph 24)

Money advice and debt advice

3. While we note the planned reduction in marketing costs for 2013–14, the amounts spent on marketing by the Money Advice Service have been a source of concern throughout our inquiry. This spending arises from the Service’s decision to adopt a “primarily digital” approach to the provision of advice. 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 rebrand as the Money Advice Service when the moneymadeclear brand was already in use, was misguided. (Paragraph 38)

4. During economic downturns, demand for debt advice is likely to increase. We recommend that during difficult economic circumstances such as those following the financial crisis of 2008, the Money Advice Service’s resources should be focused on helping those in crisis. Funds may therefore need to be reallocated from money advice to debt advice. In more favourable economic circumstances, it may be preferable to focus more on the prevention of future financial problems through money advice. We recommend that the Service be given greater flexibility on the proportion of its budget that it spends on money advice and debt advice respectively, responding to changes in demand. (Paragraph 41)

5. Efficient provision of debt advice services is a laudable aim. Nevertheless, when seeking to increase productivity, the Money Advice Service must be mindful of the need to maintain the quality of the service it provides. The Committee is sceptical that productivity can have been increased by 50 per cent in a single year without some resulting reduction in quality of service. We urge the Service to be mindful of its relative inexperience in the sector compared to many of the bodies from which it commissions services, and to seek to agree common standards in collaboration with those bodies. We recommend that the Money Advice Service establish a working group, composed of representatives from the debt advice sector, to agree a set of


service standards for debt advice and a strategy for achieving those standards. (Paragraph 43)

Engagement with existing providers of money and debt advice

6. The way in which the Money Advice Service initially engaged with the wider advice sector was a matter of grave concern to the Committee during the first phase of our inquiry. As a newly-created statutory body, entering a sphere in which there were already a number of well-respected, well-established and successful bodies in the private and voluntary sectors, it should not have begun its work without properly consulting those bodies and without taking the work of those bodies into account. (Paragraph 49)

7. We welcome the emergence of an approach which appears to be more firmly based on forming constructive working relationships with existing advice providers. We recommend, however, that the independent review we have recommended of the Money Advice Service should seek the views of other bodies in the sector on the way in which the Service is engaging with them and take account of these views in reaching its conclusions. (Paragraph 50)

8. 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. The independent review we have recommended should examine the extent to which the work of the Service unnecessarily duplicates existing provision and should establish clearly what the role of the Service should be in each of the areas in which it operates. (Paragraph 55)

Financial education in schools

9. Financial education for young people is vital. If pupils receive high-quality financial education, then the next generation may not suffer many of the financial capability problems that are experienced by the adult population of the UK. We welcome both the recent inclusion in the National Curriculum of financial education in mathematics and citizenship classes, and the stated intention of the Money Advice Service to develop its work on financial education in schools as a co-ordinator of provision rather than as a direct provider. The Service should work with providers of financial education in schools and with the Department for Education to establish standards to be met by all providers. We also recommend that the Service should provide funding from its existing budget for the training of teachers to deliver financial education in schools, in addition to the funding already provided by the private and voluntary sectors. (Paragraph 63)

Accountability and governance

10. The new Chief Executive of the Money Advice Service articulated a clear understanding of the accountability of the Service to the FCA and HM Treasury. This is welcome. However, it does not seem plausible that arrangements which the FSA considered inadequate in June 2012 became adequate with no change other than the appointment of a sub-committee of the FSA’s board. It is clear that the


FSA’s Board believed that it did not have sufficient powers effectively to hold the Money Advice Service to account. The independent review we have recommended should therefore consider specifically whether the FCA needs additional statutory powers to hold the Money Advice Service to account—for example, whether the FCA should have powers to intervene on operational matters and whether it needs additional powers to scrutinise the Service’s budget. (Paragraph 70)

11. In appointing a new Chief Executive on a salary considerably lower than that of her predecessor, the Money Advice Service, the FSA and the Treasury appear to have recognised that the remuneration of the former Chief Executive of the Money Advice Service was excessive. We welcome this. We regret, however, 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. We urge the Service, the FCA and the Treasury to exercise the appropriate restraint when determining the future remuneration of senior staff. The independent review we have recommended should examine the remuneration of the Service’s senior staff and should seek legal advice, which should be published with its report, about whether existing salaries could be reduced. (Paragraph 75)

Conclusions

12. The Money Advice Service was created in a well-intentioned attempt to address a serious problem: many people lack the financial capability and the guidance they need to help them to manage their money. We are, however, unconvinced that the Service has adopted the right strategy or that it currently performs the correct role. The evidence we heard in our initial hearings caused us to question whether the Service should continue its work at all, and we have considered carefully whether we should recommend its abolition. We recognise, however, the attempts of the Service in recent months to improve its service and the way it works. In view of this, we will await the findings—which should be no later than summer 2014—of the independent review we have recommended. (Paragraph 76)

14. The independent review must seek to answer the following questions:

• Should the Money Advice Service—or something like it—exist as a statutory organisation?

• If so, what should the role and strategy of such a body be? Should it be a co-ordinator, commissioner or direct provider of advice? What channels should it use?

• If not, should the FCA take responsibility for the objectives of the Service?

These questions are in addition to those we have already set out in this report, namely:

• Does the FCA need greater statutory powers to hold the Money Advice Service to account?


• What are the views of other bodies in this sector about the way in which the Money Advice Service is now engaging with them?

• To what extent does the work of the Money Advice Service unnecessarily duplicate existing provision? What should the role of the Service be in each of the areas in which it operates?

• Is the remuneration of the Service’s senior staff set at an appropriate level? (Paragraph 77)


Formal Minutes

Wednesday 20 November 2013

Members present:

Mr Andrew Tyrie, in the Chair

Mark Garnier Stewart Hosie Andrea Leadsom Mr Andrew Love Mr Pat McFadden

Mr George Mudie Mr Brooks Newmark Jesse Norman David Ruffley John Thurso

Draft Report (Money Advice Service), proposed by the Chair, brought up and read.

Ordered, That the draft Report be read a second time, paragraph by paragraph.

Paragraphs 1 to 77 read and agreed to.

Resolved, That the Report be the Seventh Report of the Committee to the House.

Ordered, That the Chair make the Report to the House.

Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No. 134.

[Adjourned till Tuesday 26 November at 9.45 am


Witnesses

Wednesday 13 June 2012 Page

Joe Garner, Chair, Financial Services Practitioner Panel, Adam Philips, Chair, Financial Services Consumer Panel, Delroy Corinaldi, Director of External Affairs, Consumer Credit Counselling Services, and David Hawkes, Advice UK Ev 1

Tracey Bleakley, Chief Executive, pfeg (Personal Finance Education Group), Otto Thoresen, Director General, Association of British Insurers, and Martin Lewis, MoneySavingExpert.com Ev 10

Wednesday 20 June 2012

Lord Turner of Ecchinswell, Chairman, Financial Services Authority, and Martin Wheatley, Managing Director, Conduct Business Unit, Financial Services Authority Ev 19

Gerard Lemos, Chairman, Money Advice Service, and Tony Hobman, Chief Executive, Money Advice Service Ev 28

Wednesday 5 September 2012

Gillian Guy, Chief Executive, Citizens Advice Ev 46


Sajid Javid MP, Economic Secretary to the Treasury, and Alison Cottrell, Director of Financial Services, HM Treasury Ev 56

Monday 24 June 2013

Caroline Rookes CBE, Chief Executive, Money Advice Service Ev 68


List of written evidence

Published on the Committee’s website www.parliament.uk/treascom

1 Money Advice Trust Ev w1

2 Advice UK Ev w9

3 Unbiased.co.uk Ev w13

4 United Kingdom Shareholders’ Association Ev w15

5 Money Advice Service Ev w26; Ev w114 & 115

6 Sue Lewis, stl consultants Ev w30

7 Ifs School of Finance Ev w33

8 Partnership Assurance Ev w36

9 Association of Independent Financial Advisers Ev w37

10 TaxAid Ev w39

11 Pfeg Ev w43

12 National Association of Student Money Advisers (NASMA) Ev w47

13 Association of British Credit Unions Limited Ev w48

14 Institute of Chartered Accountants in England and Wales Ev w50

15 Council of Mortgage Lenders Ev w53

16 AgeUK Ev w56

17 Moneysavingexpert.com Ev w60

18 Toynbee Hall Ev w63

19 Marketguard Ev w67

20 Financial Services Practitioner Panel Ev w68

21 Investment and Life Insurance Group Ev w71

22 Investment Management Association Ev w73

23 IFA Centre Ev w75

24 The Financial Services Consumer Panel Ev w78

25 National Housing Federation Ev w83

26 Arrow Global Ev w84

27 British Bankers Association Ev w86

28 British Insurance Brokers’ Association Ev w89

29 Consumer Credit Counselling Service Ev w90

30 Citizens Advice Ev w95

31 Credit Action Ev w99

32 Building Societies Association Ev w102

33 Association of British Insurers Ev w106

34 Which? Ev w108

35 Otto Thoresen, Director General, Association of British Insurers Ev w110


List of Reports from the Committee during the current Parliament

Session 2010–12

First Report June 2010 Budget HC 350

Second Report Appointment of Dr Martin Weale to the Monetary Policy Committee of the Bank of England

HC 475

Third Report Appointment of Robert Chote as Chair of the Office for Budget Responsibility

HC 476

Fourth Report Office for Budget Responsibility HC 385

Fifth Report Appointments to the Budget Responsibility Committee HC 545

Sixth Report Spending Review 2010 HC 544

Seventh Report Financial Regulation: a preliminary consideration of the Government’s proposals

HC 430

Eighth Report Principles of tax policy HC 753

Ninth Report Competition and Choice in Retail Banking HC 612

Tenth Report Budget 2011 HC 897

Eleventh Report Finance (No.3) Bill HC 497

Twelfth Report Appointment of Dr Ben Broadbent to the monetary Policy Committee of the Bank of England

HC 1051

Thirteenth Report Appointment of Dr Donald Kohn to the interim Financial Policy Committee

HC 1052

Fourteenth Report Appointments of Michael Cohrs and Alastair Clark to the interim Financial Policy Committee

HC 1125

Fifteenth Report Retail Distribution Review HC 857

Sixteenth Report Administration and effectiveness of HM Revenue and Customs HC 731

Seventeenth Report Private Finance Initiative HC 1146

Eighteenth Report The future of cheques HC 1147

Nineteenth Report Independent Commission on Banking HC 1069

Twentieth Report Retail Distribution Review: Government and FSA Responses HC 1533

Twenty-first Report Accountability of the Bank of England HC 874

Twenty-second Report Appointment of Robert Jenkins to the interim Financial Policy Committee

HC 1575

Twenty-third Report The future of cheques: Government and Payments Council Responses

HC 1645

Twenty-fourth Report Appointments to the Office of Tax Simplification HC 1637

Twenty-fifth Report Private Finance Initiative: Government, OBR and NAO Responses

HC 1725

Twenty-sixth Report Financial Conduct Authority HC 1574

Twenty-seventh Report Accountability of the Bank of England: Response from the Court of the Bank

HC 1769

Twenty-eighth Report Financial Conduct Authority: Report on the Governments Response

HC 1857

Twenty-ninth Report Closing the tax gap: HMRC’s record at ensuring tax compliance

HC 1371

Thirtieth Report Budget 2012 HC 1910


Session 2012–13

First Report Financial Services Bill HC 161

Second Report Fixing LIBOR: some preliminary findings HC 481

Third Report Access to cash machines for basic bank account holders

HC 544

Fourth Report Appointment of Mr Ian McCafferty to the Monetary Policy Committee

HC 590

Fifth Report The FSA’s report into the failure of RBS HC 640

Sixth Report Appointment of John Griffith-Jones as Chair-designate of the Financial Conduct Authority

HC 721

Seventh Report Autumn Statement 2012 HC 818

Eighth Report Appointment of Dr Mark Carney as Governor of the Bank of England

HC 944

Ninth Report Budget 2013 HC 1063

Session 2013–14

First Report Appointments of Dame Clara Furse, Richard Sharp, and Martin Taylor to the Financial Policy Committee

HC 224

Second Report Appointments of Dr Donald Kohn and Andrew Haldane to the Financial Policy Committee

HC 259

Third Report Spending Round 2013 HC 575

Fourth Report Re-appointment of Professor Stephen Nickell to the Budget Responsibility Committee

HC 688

Fifth Report Appointment of Sir Jon Cunliffe as Deputy Governor of the Bank of England

HC 689

Sixth Report Re-appointment of Dr Martin Weale to the Monetary Policy Committee

HC 313

Seventh Report Money Advice Service HC 457

Treasury Committee: Evidence Ev 1

Oral evidenceTaken before the Treasury Sub-Committee

on Wednesday 13 June 2012

Members present:

Mr George Mudie (Chair)

Michael FallonMark GarnierMr Andrew LoveMr Pat McFadden

________________

Examination of Witnesses

Witnesses: Joe Garner, Chair, Financial Services Practitioner Panel, Adam Philips, Chair, Financial ServicesConsumer Panel, Delroy Corinaldi, Director of External Affairs, Consumer Credit Counselling Services, andDavid Hawkes, Advice UK, gave evidence.

Q1 Chair: Good afternoon. Thank you very much.Sorry we are slightly late. I apologise in advancebecause there is a very important vote at 4.00pm andwe have two panels, so I have asked the members—Ifear it is an impossible task—to be brief, but I wouldalso ask you if you could be brief. I am sorry abouttrying to squeeze you all in. If any of you find that youwant to go further on a point we would be delighted tohear from you, and I would even be open, ifcollectively you thought we had not done you justice,to ask for more time later on again. We would be veryhappy, because we have had some very interestingwritten evidence, and I am sure you are going to addto it. Mr Tyrie is starting.Mr Tyrie: Could I start with you, Mr Philips, andperhaps others can chip in. Do you think that thedecision of the FSA to go ahead with the RDR hascreated an advice gap, as many put it, as big as peoplesay, and do you think that there is anything that canbe done about it?Adam Philips: I think the first thing to say is thatthere has always been an advice gap. It has becomemore important as people are expected to take moredecisions about their financial health and, inparticular, about saving for their retirement, for theirold age. There is no doubt that the RDR has affectedpart of the market because in bringing in transparentcharges and clear professional standards it will havethe effect of withdrawing a certain kind of advicefrom the middle part of the market. However, ourview as a panel has always been that that is a spacethat can be better filled by a different kind of businessmodel. I think our view is that whenever the RDRfinally goes through, or went through, there would bea change but that the problem it would create alreadyexisted and it had to be addressed in any case. Itcleans up the market, in other words.

Q2 Mr Tyrie: Can the Money Advice Service playa role?Adam Philips: I think they definitely play a role. Wedid research five years ago, talking about the initialconsultation on the RDR, where we said it wasessential that generic advice was brought in if theRDR was to go ahead, simply to deal with this issue.

Teresa PearceJohn ThursoMr Andrew Tyrie

Q3 Mr Tyrie: Can you elaborate in a little moredetail how you think it could help?Adam Philips: The key issue is that people who havelimited amounts of money find it difficult to justifythe cost of full service advice. There are two possibleways that that demand could be met. One is that theindustry moves to a more efficient business modelwhere they can provide advice more cheaply, and wepressed on the idea of simplified advice. The otherapproach is that financial education and genericguidance are made available to people to help themchoose the sorts of products that they should bechoosing without actually selling to them. That is notregulated advice. Our view was that the CFEBoperation would provide a catalyst and a service thatwould help to fill that middle part of the market.

Q4 Mr Tyrie: Would others like to add anything towhat has been said?Joe Garner: I think I should reflect that there aredifferent views on RDR within the Practitioner Panel.Everyone is united around the objectives andabsolutely supports the objectives. Some see it asleading to a withdrawal of advice from somesegments; others see it as an opportunity and areinvesting in that space. So there are different views,but it is very early days, and I think what is importantis to take a review a bit further down the track andsee what has happened.

Q5 Mr Tyrie: Were you as concerned at the startabout the size of this gap?Joe Garner: Yes.

Q6 Mr Tyrie: And about the risk that RDR wouldpose to it?Joe Garner: Yes. That is my view.Mr Tyrie: Any other comments? No.

Q7 John Thurso: Can I just come back to you, MrPhilips, and pick up on one comment. You talkedabout people with limited budgets who do not see thepoint of or cannot afford a full service. To what extentshould there be a number of very simple, “it does whatit says on the tin” financial products that do not need

Ev 2 Treasury Committee: Evidence

13 June 2012 Joe Garner, Adam Philips, Delroy Corinaldi and David Hawkes

either generic or regulated advice, because they doprecisely what they are meant to do, to deal withprecisely those people?Adam Philips: I think it would be a very good idea.The panel has done research in this area. We havebeen actively pursuing any kind of consultation group,workshop, whatever it may be, and indeed in extendeddiscussions with the Treasury about the opportunitythat this change creates, and the need to bringproducts into this space.

Q8 John Thurso: I just wanted to be clear that it isnot an either/or generic advice or “does what it sayson the tin” products?Adam Philips: No.

Q9 John Thurso: They go together. Thank you verymuch. Mr Hawkes, could I come to you and just askthe question to what extent is generic financial advice,as opposed to regulated advice, useful to individuals?How do individuals perceive the difference?David Hawkes: It certainly is useful. There are lowlevels of knowledge and understanding and so there isdefinitely a role in generic financial advice. I think itneeds to be part of a whole package though, what wecall like a “whole person” approach so that you arelooking at generic financial advice as part of apreventative agenda in addition to debt advice as partof crisis intervention.

Q10 John Thurso: I know this is a slightly difficultquestion, because I am asking you to quantify theunquantifiable, but how great is the need? How muchdo we need to address this and ensure that this typeof advice is available?David Hawkes: I think there is definitely a need butit depends how you look at it, what sort of timescalesyou are looking at. In terms of immediate need, thenI think the immediate need is for crisis intervention—that is to say, debt advice—but there is clearly a needto reduce the demand for debt advice, and thereforepreventative work has a very important role to playin that.

Q11 John Thurso: Can I come to you, Mr Corinaldi,and ask do you think the general public understandthe difference between generic advice and regulatedadvice, or do you think this is a sort of pretty alienconcept to them?Delroy Corinaldi: Again, I think it very muchdepends who you ask. Certainly, for the individualswe are in regular contact with who need debt advice,they are in the situation David has just pointed out;they are in that crisis zone. When they are in thatcrisis zone and they feel like bricks are falling on theirheads, what they want is help. I think they associateadvice and help as being one and the same, and whatthey look for is a trusted advisor to take them throughthat. Therefore it is important that we haveorganisations like MAS with a co-ordinating role inthat space but also organisations like ourselves andAdvice UK and Citizens Advice providing some levelof advice to take them through that difficult period intheir lives.

Q12 John Thurso: Do you think that the publicmight be frustrated by the limits of MAS?Delroy Corinaldi: It presupposes the additionalquestion, to what extent do the public know about theMoney Advice Service? I think the Money AdviceService can have a role, if I may answer it in this way,as a co-ordinating force. It can look at filling in thegaps, but it has that role if it works with theorganisations that are in the space and are effective atthe moment. You have organisations like Advice UKand ourselves that see 1,000 people a day who arestruggling with debt difficulty, who are working withcreditors, who are not funded through the taxpayer, orwho are honest brokers trying to get them out of acrisis situation and back on their feet. I think MAS,as an organisation, has a role that can fill the gaps,should be looking to promote the free debt advicesector and it should be looking to work with providerslike ourselves that are very effective.

Q13 Mr McFadden: I will come back to you, MrPhilips. The Money Advice Service targets 19 millionpeople, we are told. By my rudimentary arithmetic,that is around a third of the population. Do you thinkthat is a reasonable estimate of the number of peoplewho need hands-on money advice?Adam Philips: It might even be an underestimate ofthe number of people who need advice. We come backto the issue about when people need advice. Whenyou are young you need guidance and education abouthow to deal with money. I think as you get older thereare particular issues, for example getting married orhaving a family, where you need to start thinkingabout protection, and then as you get older still youneed to begin to think about your retirement anddecumulation. At various points in those periods youmay well need face-to-face or some kind of humaninteraction with somebody to help talk you throughyour particular issues. For much of the rest of the timeyou will have questions, and sometimes thosequestions will be answered by a leaflet or a brochureand sometimes they will be very specific. As I look atthe Money Advice Service, they believe that they cananswer most of those questions online. I wouldquestion whether that is the case, but I think theycould do a lot more in that space, given time.

Q14 Mr McFadden: Is it realistic for anyorganisation to think they can offer advice to a thirdof the population?Adam Philips: I think that if you look at any kind ofmass-marketing organisation it is something that theyaspire to do. Let’s take teaching people to drive; Iguess roughly a third of the population has a drivinglicence. I think it is quite conceivable to do that. Inorder to do that you have to be very carefully targetedand focused and clear about what you are trying toachieve. Where I would agree with the general line ofyour questioning is that I think that target group isvery unfocused. They need to be much clearer aboutwhat they are trying to achieve with more limitedobjectives.

Q15 Mr McFadden: That is what I was going to askyou. Putting it simply, are you in favour of this broad,



very wide target, or do you think that that is too wideand they ought to be targeting the most vulnerablegroups more?Adam Philips: I think they ought to be focusing downwithin that group. There are clear groups of need ofwhich we have heard one, the people who needimmediate help now, but there are a lot of people whoneed some kind of advice. I think the issue for us, orcertainly the panel, is about the effective use of theresources they have, and that requires more focus.

Q16 Mr McFadden: What proportion of thepopulation do you think have heard of the MoneyAdvice Service?Adam Philips: I have no idea, actually. It is a questionyou should ask them. They do collect figures onawareness, but I am not sure where they have got tonow.

Q17 Mr McFadden: Let me move along a little bit;Mr Corinaldi first, I think. If we are talking abouttargeting, one of the areas we might think about isyoung people and financial awareness in schools. Doyou think the Money Advice Service should try to bemore active about educating people on money mattersbefore they leave school?Delroy Corinaldi: I think financial education is a goodthing. I think the Money Advice Service needs to beinvolved. Just as in the debt advice space, the questionfor the Money Advice Service is to what extent itneeds to deliver these services itself and the extent towhich it needs to work with charities that are alreadywell known, that are already working in this space,and that can also deliver that advice.If I can narrow it into the debt advice world, which iswhere we are, and talk about it a little bit, we are anational charity. We deal with people all around thecountry, and what we find is that people want help,and they want it early. They want to work with trustedorganisations. Citizens Advice, the Consumer CreditCounselling Service and Advice UK are organisationsthat fit into that trusted brand. I think the MoneyAdvice Service needs to find that mechanism ofengaging in a trusted way with these organisations toget help for those people who need it in a face-to-face way and for those who need help by telephoneand online.I make that point because face-to-face is needed by anumber of people, and I am sure you see them in yourconstituencies, but the cost, according to the figuresthat we have done, is about £265 per person.Telephone is around £51 per person; online is £3 aperson. We, as a charity, have capacity in thattelephone and online space, so what I think the MoneyAdvice Service needs to do is make sure the face-to-face sector is properly funded, and that is essential,but at the same time try to help to move people outof that face-to-face provision where possible into thetelephone and online space where organisations likeus have capacity. That way you can help more people,help them early, avoid their falling into the trap of, insome cases, ending up with high-cost lenders likepayday loans. In the end if they stick with anorganisation like us that helps people repay their debt,

you may be able to get them into a financialplanning situation.

Q18 Mr McFadden: Finally, there are a number ofwelfare changes happening or under way or about tocome in, for example changes in tax credits for part-time workers, changes in housing benefit for peoplewho are deemed to live in accommodation that isbigger than their needs and so on. Do you think thereis going to be a greater need for debt advice as thesechanges come in?Delroy Corinaldi: I think so. At the height of thecredit crunch, 2008–2009, we saw 500,000 people indifficulty. Now it has gone down and we are seeingabout 370,000 people, partly because they are payingdown their debt but also because the banks are lendingless money. We have done some research, and theresearch points to about 6.2 million people eitherbeing in debt or at risk of being in debt, and, withwages not going up and the cost of living rising,clearly that puts more and more people in jeopardy.Just based on hard evidence, the people coming to usare coming to us for major reasons. Unemployment isa factor. The second reason is under-employment is afactor, and you will know under-employment is nowabout 2 million; two years ago it was about 1.6million. Then you have other issues like health anddivorce that are having an impact. So it is not aboutbanks lending more money and lending in a recklessway. It is because of those other factors that peopleare falling into difficulty.

Q19 Chair: Have you taken any early steps to havediscussions with MAS about the expected upturn inyour workload next year? The housing benefit changescome in in April next year, and they sound horrifyingfrom what I am hearing on the ground—therepercussions could be horrifying. There is going tobe a stampede of people needing help. Has MASstarted a dialogue with you to shape their next year’sbusiness plan to meet this, and did they havediscussions about their present business plan withyou?Adam Philips: The answer is no. We had discussionsat the end of last year about their business plan,because that is when they prepared the plan. At thatstage, it was still not clear whether they would getthe debt advice responsibility, so essentially we werefocusing on their plan for giving money, guidance andeducation. We felt at that time that the draft plan wesaw was not clear enough, the targets were tooambitious and that the evaluation that they had put inplace was, in our view, rather over-simplistic, in thatit depended just on people having used the service andbeing satisfied.As a result of those discussions, they revised the plansomewhat as it went to the FSA board, and we saidthat although we remain concerned about theambitious nature of their targets we had to accept thatthey believed that they could do it. They were puttingin place evaluation, they were committed to anincreased involvement in thinking what they could doabout financial education, and so we agreed.Joe Garner: It is a fairly similar story with thePractitioner Panel in terms of mixed degrees of



engagement over a period of time. We have hadvarious interventions over the period, and expressedsome concerns around clarity of objectives,accountability, measurability. Some of those wereaddressed. In comparison, by the time it went to theFSA board we were probably a little bit lesssupportive than the Consumer Panel at that particularpoint, but we continue to engage with them.Delroy Corinaldi: I think there is some clarificationrequired over the role of MAS, and we put it in oursubmission. Is it there to provide services, is it thereto be a sort of regulator, or is it there to work in co-ordination with the sectors that exist in this area? It isfair to say at the beginning the level of engagementwas not that great, but I think most organisations thatwe talk to would say there has been a noticeablechange over the last month to two months. I think thatis part of that—

Q20 Chair: They knew they were coming here, ofcourse.Delroy Corinaldi: You may argue that, but to be fairto them, certainly in the debt space, it is early days.They only assumed funding for face-to-face advice inApril this year, so it is going to take a while for themto deliver on their strategy, but your point is taken onboard. It is required that they work effectively withthe providers that are out there because otherwise—and I am sure they will not want this to happen—ifthey are going to look to provide services, then theywill need to get funds in order to do that.David Hawkes: I would certainly echo those points.The Money Advice Service is a new organisation andI guess it is on a learning curve. There has been a lotof talk about constructive engagement withstakeholders. I am not convinced that that has beenborne out in practice until, as Delroy says, recentlywhen there seemed to be more signals. We are keento work much more collaboratively with them becausethere is a huge amount of existing knowledge,expertise and resource available within my sector—the debt advice sector. We think that in terms ofachieving what we want to achieve here we can getmuch more effective outcomes if we work moreclosely.Can I just pick up on a couple of the other issues? Interms of demand, there has been very interestingresearch commissioned by the Money Advice Trustand Dr John Gathergood at Nottingham University.That has confirmed what Delroy was saying, that therewas a drop-off in demand after the peak of therecession, but all the indications are that demand fordebt advice is going to increase in the coming years.I have absolutely no doubt whatsoever that welfarereform changes will exacerbate that demand and thatis something that certainly needs to be planned for.

Q21 Michael Fallon: Mr Garner, have you seen theMoney Advice Service’s business plan?Joe Garner: I have not looked at it recently. I havediscussed it but I have not physically gone throughthe document.

Q22 Michael Fallon: You have physically gonethrough it?

Joe Garner: No, I have discussed it with MAS.

Q23 Michael Fallon: But you have seen businessplans before in your life as a banker?Joe Garner: Yes.

Q24 Michael Fallon: Is it not odd that in 24 pagesthere are only 10 numbers?Joe Garner: The comment about “clear successcriteria, accountability, measurability” is one that wehave expressed a number of times to MAS. I thinkthat is an important point.

Q25 Michael Fallon: Are you satisfied this is reallya business plan?Joe Garner: We have expressed some concerns atvarious stages through the process that it does notcover all the questions that we would have. It is stillearly days, but we have a number of times requestedmore clarity on what are the specific objectives, howwill we measure progress against those objectives andhow the money itself will be spent.

Q26 Michael Fallon: But this is a business plan forthis year; it has already started.Joe Garner: Yes.

Q27 Michael Fallon: Do you share my surprise that,excluding the debt advice stuff, of the mainstream £46million some £16 million is being spent on staffingand operational issues, over a third of the budget?Joe Garner: Yes, and the marketing component alsohas been commented on as looking like quite a largeamount on marketing. I think it is fair to say that thequestions that have been raised by the PractitionerPanel are not so much around the detail of theexpenditure. It is about where is the overall value thatwe are getting for the expenditure, and it is more thebigger picture that we have focused on than nit-picking on the detail of the business plan—can weunderstand how MAS’s activity fits in the broaderdebt advice and advice landscape?—and that is wherewe have had most of our attention. I agree with you;I think there are some important specifics that we havealso raised a number of times through the process.

Q28 Michael Fallon: Why do you call it nit-pickingto ask why a third of the organisation’s budget is beingspent on itself? Why is that nit-picking?Joe Garner: Okay, that is probably too extreme aterminology. Where we have tried to focus is lookingat the bigger picture of how does MAS fit in theoverall landscape.

Q29 Michael Fallon: Mr Philips, have you looked atthe business plan?Adam Philips: Yes, and you are quite right, it islacking in any history, which would be quiteinteresting, and it also makes some fairly sweepinggeneralisations that are not well supported, and thereis not sufficient detail in it, I absolutely agree. We didget additional information from them about some oftheir targeting in order to try to understand moreclearly what they are doing.



I think there are two points that are worth making.First, they are very committed to producing aneffective web-based service in order to reach a largenumber of people at a relatively low cost and that doesrequire considerable upfront investment. Our questionto them was had they got the balance right betweenthe very ambitious target of reaching 11 millionpeople per year by 2016 and 2017 and getting whatthey were providing to them in a satisfactory way? Inother words, was there too much focus on the webcompared with what might be done with telephoneand face-to-face?The third issue, which is not really an issue that so farwe have discussed with them, is about how they fitinto the landscape of other advice services where wethink that they should consult more widely on theirbusiness plan in order to make sure that what theyare providing is additional rather than competing withexisting services.

Q30 Michael Fallon: Yes, I understand that. I wantto be clear whether you are satisfied with the level ofdetail in this business plan?Adam Philips: No.Michael Fallon: You are not?Adam Philips: No.

Q31 Chair: Delroy, do you want to add something?Delroy Corinaldi: Just one point on that. One thingwe thought should happen is it should start from howthey are going to measure the fact that they havehelped more people. Secondly, they should calculatehow they are going to help people early. One of thesurveys we have carried out shows that 45% of thepeople who come to us wait a year until they do andwe think they may be looking to provide someanalysis about how they are going to help those peoplequicker. Also, as I said to you earlier on successcriteria, how many people are going to pay their loancompanies and other similar providers? We have seenan increase from 2% to 13% of people going topayday loan companies in the last two years andwhether MAS can have a role in making sure thatpeople are looking after their finances a little better,because people who come to CCCS with problempayday loans debts typically have other unsecureddebts totalling over £10,500. MAS needs to seewhether or not it can be involved in that. I think whenit looks at its success criteria it should be able to buildthe business plan around that. It should then belooking to consult widely on its strategy and on itsbudget with all stakeholders so that we can get a senseof whether or not it is going in the right direction.Mr Fallon, on your point about last year’s businessplan: I think we would expect that this year’s businessplan will be much more thorough because again,certainly in our space, they only got debt adviceearlier this year, so I think they should be looking tobe more detailed as they move into this year’sbusiness plan and present it to the FSA, so the FSAwill have a key role to play.David Hawkes: A concern that we have in terms ofthe business plan is just how much money is beingspent on branding, on marketing, on communications,including television campaigns, and that is about £20

million. When you compare that with the £30 millionbeing spent on direct frontline face-to-face advice, weare not convinced that that is right at all. We thinkthat there is no need to stimulate further demand.There are already capacity issues, certainly whereface-to-face is concerned, within the debt advicesector and we feel that that money would be muchbetter spent on expanding frontline delivery ratherthan on television campaigns.

Q32 Mark Garnier: My questions are mainly toDavid Hawkes and Delroy Corinaldi. The MAS hasidentified its target audience as people with a moneyadvice need where they are facing an expected orunexpected life event or financial decision for whichthey are not fully prepared. Both of you have talkedat reasonable length about the fact that we arespending an awful lot of time on debt advice andtrying to help people through catastrophes. Would younot agree that to a certain extent everything has beenfocused on a problem that is already created and verylittle has been focused on trying to prevent theproblem happening in the first place, and that weshould spend more time tackling financial education?David Hawkes: I would certainly agree that financialeducation is important, and I completely agree withyou in terms of what you are saying about preventingdebt problems occurring in the first place. Advice UKhave done a lot of work in this area and we haveidentified that in terms of presenting demand foradvice, about 30% to 40% of that demand is what wewould call preventable or failure demand. What needsto happen is that you need to analyse what is thedemand for debt advice—what are the reasons whythese are occurring and what can you do at a systemiclevel to address those. We have done work inNottingham, we are doing work at the moment inPortsmouth that is putting these ideas into practice andshowing that by designing from the needs of theperson, analysing demand and working from that youcan prevent problems occurring in the first place, andthat has benefits across the board.

Q33 Mark Garnier: Mr Corinaldi, would you agreethat possibly one of the solutions is to put financialeducation on to the curriculum and have it throughprimary schools and secondary schools?Delroy Corinaldi: I think one of your guests comingup will be talking about that loud and clear, and wesupport him in that. Absolutely, I think there is a rolefor financial education on the preventative side, but Ithink we have to be a little bit careful in putting allour eggs just in that basket, particularly at this time,and you will have all the analysis in front of you. Upto 2007, the extent of personal loans and credit carddebt that was out there for people was significant sothe legacy of debt is still pretty high.The difficulty that we have as a charity in this sectoris that we know—and I have pointed to our 6.2million figure already—there are people out there whoare in difficulty who are not acting or getting into aservice like our own, and that is a lot to do with thelegacy debt and a lot to do with a change incircumstance. So yes, financial education has a keyrole to play but for us—we are mainly a telephone



and online provider of debt advice—we need to havethe capacity, which is what we have, because if theMoney Advice Service can co-ordinate and workeffectively with the sector we would expect to seemore people coming in because of their debt adviceproblems.

Q34 Mark Garnier: You identified a bit earlier thatunemployment, under-employment, health anddivorce are key reasons for problems, but one you didnot identify was the fact that at some point interestrates will start going up from a super low level evento just a low level. With £1.46 trillion worth ofhousehold debt in this country, do you not see that asa catastrophe waiting to happen?Delroy Corinaldi: Yes. There are these uncertainties.What will happen to interest rates? When will they goup? To be fair, for the last two years there have beenissues about when will interest rates go up. We haveseen some movement now in SVRs, for example, forthose people in debt, but let’s not forget housingtenants who are paying housing rent are also findingit very tough at the moment. Private landlords areincreasing rents at a level that they are finding difficultto cope with. We should not forget those people. Thenthere is this other uncertainty, which none of us knowthe outcome of at the moment, which is what ishappening in the eurozone and what the implicationsof that will be. I think there is a lot of talk about themacro side of things, but there is not much talk at themoment about when it actually impacts on people andwhat should be done when it impacts on people.

Q35 Mark Garnier: MAS is also targetingapproximately 19 million people across the UK.Adam Philips, you may want to come in on thisbecause you have mentioned a couple of times theweb-based approach and the online approach.Presumably, there must be huge numbers of peoplewho are being missed out by this approach, who areilliterate, who do not have a computer, who are fearfulof computers, or who are uninterested. Let’s face it,an awful lot of people are so uninterested in theirfinances they do not open their bank statements fromone month to the next. Do you think the MAS isreplicating an awful lot of what is out there and nottackling an unmet need?Adam Philips: I think the answer to that is no, in ageneral sense. There is considerable need for generalinformation such as the information they providearound when you have a child or as you areapproaching retirement. Some of the calculators thatthey have, which we think could be improved but arestill really helpful, are very useful for people and Ithink the health check is beginning to move in adirection that for people who are interested is veryhelpful. Then we get on to the uninterested—and Ithink that that is an area where they do have to domore thinking about how they can help people whodon’t want to spend a lot of time reading through stuffbut nevertheless have a question like, “I have £8,000in my deposit account, it is not producing any incomeat the moment, it is what I supplement my basicpension with. What should I do?” At the moment, thatis extremely difficult information to get out of the

MAS, and that is exactly the sort of thing they shouldbe thinking about how to provide.

Q36 Mark Garnier: Do you not think there is aconcern that MAS is to a certain extent going to beduplicating a great deal of what is being done by otherorganisations? We have another witness coming inlater with moneyadvice.com. Would MAS be betteremployed in acting as a judge of excellence amongthe other sites and as a signpost as opposed to tryingto replicate, or what it appears to be replicating, whatis going on for example with your organisations?Adam Philips: Just talking from my perspective—andDelroy has already mentioned this a couple of times—I do think there is a real opportunity for them to co-ordinate more effectively than they do at the moment.There is a real need in this sector. There is quite a lotof competition between the various providers ofmoney to different target groups. There is a need fora trusted independent resource, which is well-fundedand provides good advice and, as I say, provides co-ordination for other actors in the sector. So I think theanswer is I would be sorry to see them not providinginformation that fills a space that no one else isequipped to do.David Hawkes: We think there are well-establishedexisting providers out there, members of Advice UK,Citizens Advice, CCCS who are out there, so buildingupon existing service provision, building uponexisting brands I think is the key. In terms of yourquestion around the 19 million and are they reachingthe people they need to reach, I am not convinced thatthey are. In a perfect world, yes, 19 million would begreat, but in hard times we need to focus on the peoplewho have the most complex problems and who havethe highest support needs. One in four of ourmembers—so we are talking about a membership of800, 400 organisations providing debt advice—targettheir services. They work with niche client groups, sopeople for whom English is not the first language,people who are single, young, homeless with drug andalcohol problems, people who are offenders, ex-offenders and so on. We welcome web, online,telephone service, but many of these clients do needface-to-face advice and it is essential that that is notforgotten.Joe Garner: If you were to take all our totalinvestment in people and money in this area throughall the different organisations and a blank sheet ofpaper, you probably would not design what we havetoday. What we have today has grown up in good faithbut in different areas; and I think the Money AdviceService is one piece of this jigsaw, but who is lookingat the picture on the overall box? We have had someclear articulations of what we know about the needsof customers in this area. Is there not a piece of workto be done to map out the total needs of people in thisspace, map out the total service provision of all thesedifferent service providers and then see where theoverlap or underlap is? That should shape where wedeploy resources, potentially in MAS or others.

Q37 Mark Garnier: That would be the job of MAS,though, or a function of it.



Joe Garner: I think there are a number oforganisations that are quite well placed to do that andto provide some oversight so I think it could be donefrom a number of areas. But I think it would be aworthwhile piece of work to satisfy ourselves not justthat there is not duplication around MAS but that weare making the most of the opportunities across allthese organisations.Delroy Corinaldi: I think that is absolutely right. Ithink genuine partnership is what it is about. MAS isin a good position to have that strategic lead in termsof helping to co-ordinate. In terms of information, yes,MAS can provide information but a lot of thechallenge, particularly in our area, is about action, andwhere we sit is people in crisis and people who needhelp. In order to get them to plan for the future, youneed trusted intermediaries that provide that action.For us to be able to help 400,000 people a year, for120,000 people, we pay £300 million back to thebanks and other creditors. It is the kind of action thathelps people know that they can trust organisations tothen help them plan for their future. I think that iswhere MAS needs to look. Not duplicating, notmaking creditors pay twice, maybe broadening out thecreditors that are not currently paying in this sector Ithink is an important place to be. It has to be builtaround that genuine partnership, which I think is whatThoresen said when he did his review many years ago.

Q38 Mark Garnier: One very quick last question.Can any of you think of a good reason why you wouldnot put financial education on the school curriculum?Joe Garner: Far from it. From my HSBC life, Wespent five years working with pfeg on what moneymeans, and the value of getting in early in a structuredway is just fantastic.

Q39 Mark Garnier: My second final question iswould you agree that it is absolutely crucial that inorder to avoid in 20, 30, 40 years’ time the sameproblems we have now that you have to do that inorder to avoid those problems in the future?Adam Philips: Absolutely.Delroy Corinaldi: I think people forget the other side;if you educate children, they can educate their parents.Joe Garner: That is exactly what we saw with pfegwhen we started with the children and some of themcame back with their parents.Mark Garnier: Nods all round, for the record.

Q40 Teresa Pearce: We are pushed for time so I willtry to be quick. One of the things that bothers me isthe payment model for them is based on the numberof people they see but with no regard to thecomplexity of those people or their vulnerability. Doyou fear that if they are paid just on the number ofpeople they see then the more difficult cases will endup with the organisations like your own that arepushed and pressed for staff and funds at the moment?David Hawkes: The short answer to that is yes,absolutely, we do have a concern around that. Thereis a real problem around having, if you like, arbitrarytargets, and then the changes that an advice servicehas to make to deliver those that may mean they are

not really delivering the service that people want andresponding to those needs.

Q41 Teresa Pearce: Do you see the Money AdviceService as a welcome addition to your industry, forwant of another word?David Hawkes: We definitely welcome the role of theMoney Advice Service; there is no question aboutthat.

Q42 Teresa Pearce: What would you want to see itdo?David Hawkes: What we would like to see it do isbuild upon the existing strengths, identify where thereare gaps, fill those gaps but not duplicate any existingprovision that is out there. We have a particularinterest in what we call a whole-person systems-thinking approach to support a systems-thinkingmodel or approach for the delivery and design of debtadvice in the UK.

Q43 Teresa Pearce: Do you agree?Delroy Corinaldi: Yes, I do agree but I may berepeating myself. MAS and all of the providers haveto help more people, you have to help them early, youhave to stop them falling into high-cost credit thatperhaps is not in their best interests when they have alot of unsecured debt. MAS also has to help peopleplan for their future, because saving and investment isgoing to be key to getting people back on track aswell. That is very important. We need to ensure MAShas a role to co-ordinate and to commission, to getsome resources in to fund face-to-face advice. Face-to-face advice is essential for people with complexcases. MAS also has a role to make sure that thosepeople who are contributing know that they are notpaying twice and that there is some value for moneyin that. You need to be looking very much at makingsure those in face-to-face, if they can go to a telephoneand online where there is capacity, actually go there,and that frees up resource for the face-to-faceproviders to see more people. MAS does have acrucial role to play in that regard but, reiterating whatDavid said, it is not about duplication; it is aboutgenuine partnerships.

Q44 Teresa Pearce: It seems to me that money andfinance is complicated, and now it seems even morecomplicated for people to know where to go to getadvice. It is similar to the Work Programme; we havelots and lots of organisations all doing similar thingsand all overlapping, and it is very confusing to knowwhere responsibility lies. Do you think there needs tobe more joined-up thinking, for want of a—Delroy Corinaldi: This again is where MAS couldhave a role. If we are saying there are all theseproviders on the ground doing good work, what MASshould be looking at doing is not only co-ordinatingbut promoting those organisations so that they arethere meeting the needs, they are there reaching outto the hard-to-reach groups, because that is veryimportant.

Q45 Teresa Pearce: More as an umbrella and asignposting organisation?



Delroy Corinaldi: I think so. They have alreadystarted doing some good work in signposting becauseon their web pages, for example, you can get throughto us, through to other charities. They just need tolook more at, I would say, not being a provider, andthey have made public noises on that, that they don’twant to be that, not being a regulator, and they havemade public noises that they do not want to be that.Now it is just about finessing what co-ordinationmeans and I think that is where we have to help themto deliver that. Also creditors have to help them todeliver that, because creditors are funding MASthrough the creditor levy.

Q46 Chair: That sounds very worrying. If they donot want to be a signpost and then they do not wantto be this, that and the other, does anybody at the tableknow for a certainty what their role is? They have notjust arrived. They came from the body that wasrunning under the FSA. I did not hear screams then.This body has been set up with this money and itseems to me, from reading all the papers and all theevidence, they are scrambling around to find a role ata very sensitive time. Does anybody there know whattheir agreed role is?Adam Philips: I think you should ask them thatquestion.

Q47 Chair: We will, but it would be helpful if yougave me some advice. If you were happy, I would nothave to ask that.Adam Philips: The role that the Consumer Panelwould like them to play is a role—

Q48 Chair: No, I understand you all have—that isthe problem. They have business plans and so on, theyhave got a hell of an amount of money, but all I pickup is fear, from the written evidence I have got, aboutthe damage they might do. They are searching for arole instead of just being a signpost, instead of justdoing the consultancy work that you spelled out, Joe,in the first instance, to see where there were gaps oroverlaps and get it tidied up and the gaps completedand then give some of the millions that they haveeither into that service or disappear, or just act as asignpost and keeping their eye on things. I think thatis a decent role, but I am not sure they seem to becontent at that.Adam Philips: I think the word “signpost” isperhaps—when we talked about generic guidance orgeneric advice, we were trying to separate it frominformation and signposting, because you do need alittle bit more than that to help you take action. Theissue at the moment is that there is uncertainty. I haveread a number of submissions to the Committee byvarious consumer groups—they were kind enough tosend a copy to me—and there is real uncertainty aboutwhere they are trying to go. They may have a veryclear idea about it but they need to articulate that toother people. That is perhaps where we have said inour submission that in preparing their next businessplan we would like them to see what the OmbudsmanService does, which is to go out early and consultother organisations about what they think they should

be doing and about the plans that they should have.Perhaps that answers your question.

Q49 Mr Love: George, you have had a theme. I thinkwe have all had a theme today on this relationship.Looking at the definition, the Government asked MASto undertake a new co-ordinating role. That seems tobe the word on everybody’s lips, but we are allinterpreting it in different ways. When I look out thereat the debt advice sector, first of all, they all work insilos. CCCS, as I understand it, never speaks toCitizens Advice and Advice UK. I have no idea whothey speak to, but I suspect probably not much. Youhave already mentioned that there is a great deal ofcompetition. I would understand co-ordinating in thatsense to mean, at least as a minimum, bringingtogether some of these services and at least helpingthem understand how they interact with each other.The question I want to ask advice organisations is dothey recognise that this is a complex area—I think theword that was used was “landscape”—that the MoneyAdvice Services is being asked to co-ordinate and dothey recognise that it will not be just a case of workingin partnership, as has been suggested, but there mightbe some quite tough decisions if they are to fulfil theremit of co-coordinating debt advice services? Can Iask Mr Hawkes first?David Hawkes: You certainly can. What I would sayis it is a difficult task, I don’t deny that, but I wouldn’tagree with the idea that we work in silos. In terms ofmy own role, I work with Delroy and his colleagues,I work very closely with Citizens Advice, I work veryclosely with the Money Advice Trust. We all do at anational level. That sort of working together alsohappens at a local level as well. We do know eachother, we do understand each other and we do worktogether. So I am not sure that it is such a problem asyou present.I think there is another kind of risk, which is that ourmembers exist because they have responded to localneeds from their local communities. They are drivenby what their clients and their users want. That createsa complex landscape and I think there is a realtendency to want to tidy that up, but that is the wrongway of looking at it because it is about responsivenessto local need, to local demand. That is why ourmembers are out there. That is the role that they arefulfilling on behalf of their communities. What weshould be doing is supporting that and strengtheningit by doing a bottom-up approach rather than a top-down one.

Q50 Mr Love: Delroy, as I understand it, you areentirely funded by the financial services sector on thebasis that you will do a proper job and in effect savethem money at the end of the day. Are you almostquasi-independent on all of this? Is there anything thatthe Money Advice Service can do to persuade youthat you might be able to work more effectively?Delroy Corinaldi: We have been around for 20 years.We are based up in Leeds in the Merrion Centre,which George Mudie will know very well, and weemploy about 900 people who work in the debt adviceand debt management world, and we are a nationalcharity. You are right, for a period of time the charities



did work in silos, but that is changing. The world outthere has changed; the climate has changed; thefunding environment has changed.For example, just to deal with your point about ourrelationship with Citizens Advice and others, for thelast year or so we have had a contractual relationshipwith Citizens Advice at Myddelton House, its headoffice, but also with 80 or so of its bureaux, trying tosee how face-to-face provision can work seamlesslywith telephone and online provision. The key focus ofthat—and our previous Chairman, Malcolm Hurlston,set this up—was to get people out of what is anexpensive space, if they can move from that spaceinto a less expensive space, which is telephone andonline, so that you can help more people and helpthem early. I think more of those partnerships need tohappen between ourselves, Advice UK and others toensure that we are getting more help to people.Your point around how we are funded through thevoluntary contribution that the banks provide at themoment, then we are in a position to share some ofthat funding. It is crucial, therefore, that—because weare highly efficient, very effective, I would say, and Ithink the research points to that—we can work withthe charitable sector and others to help more people,help them early and the other success criteria I talkedabout earlier, which is to help deal with some of thosepeople who have massive amounts of unsecured debt,who are falling into the hands of payday lenders andothers where perhaps they should not be. That is notto say payday loan companies should not exist. It isjust that sometimes their aggressive marketing putsthem in a position where they are getting clients whoperhaps need to be thinking about dealing with theirbudgeting circumstance and not taking on more debt.

Q51 Mr Love: If I can put it this way, are we seeinga development that there will be one organisation toprovide telephone, another for internet, another foractual face-to-face interviews? Is that the direction weare moving in in terms of provision?Delroy Corinaldi: You need capacity. If there is onething the Consumer Credit Counselling Service has atthe moment it is capacity and we have it in thetelephone and online space. What you need to do isfund face-to-face effectively and make sure those whoare providing face-to-face are able to do it in an aseffective and efficient way as possible so there isvalue for money there. Then if we can work togetherwe can all help more people. That is where I think theMoney Advice Service can have a role in terms of co-ordination, bringing the sectors together to fill thegaps and make sure we are helping more people andhelping them better.

Q52 Mr Love: It is an interesting discussion, but Ineed to move on to the costs; how the MAS is funded.Is it entirely fair that all of the cost falls on thefinancial services industry? Mr Garner?Joe Garner: Is it fair? The industry—Mr Love: Let me extend that a little bit. In theoriginal proposals from Otto Thoresen it wassuggested that the Government would fund part of it.There are those who suggest that since it is benefiting

a wider industry group, whose debts are reduced, thatthey should make a contribution.Joe Garner: I think the industry has no argument overfunding this. My hesitation was that in the discussionearlier it was around the risk of rising interest ratesleading to stress for customers. I think the more likelyshort-term risk is rising fuel and energy and utilityprices squeezing affordability. My hesitation was,while I think it is absolutely appropriate for thefinancial services sector to be funding this, there areother sectors that have responsibilities in this spaceand maybe they should also be contributing to thisarea, as both contributors and beneficiaries.Talking specifically about the industry position, I donot think there is an issue over the price tag. There isa question over value for money for that investment,which comes back to exactly as you summarised it:are we optimising that investment? If it were abusiness, it would be more closely co-ordinatedbetween the various activities going on.

Q53 Mr Love: I would have to say they have onlytaken over since July last year, so perhaps it issomewhat premature, but I think there is anexpectation that this work will go on. Your memberstherefore accept the argument that if people are betterinformed financially that will have a net benefit toyour industry?Joe Garner: Absolutely. On both sides, because oneis about avoiding debt and debt problems and theother is more financially literate and capablecustomers end up as larger consumers of financialproducts. There is a big savings gap. There is a bigpensions gap in this country. Between us we can’t doenough in this area, and the industry absolutelybelieves it should be contributing at least its fair share.

Q54 Mr Love: Of course the other group thatbenefits are the individuals themselves. There hasbeen some talk about whether or not there should besome form of fee structure, perhaps on a means-testedbasis. Mr Philips, does that have any meritwhatsoever?Adam Philips: I am disinclined to support it. One ofthe problems we have at the moment is that it is veryhard to persuade people even to seek advice. Thedebate about the RDR was the extent to which peoplewould be willing to pay for advice. If what we aretrying to do is raise people’s financial capability, andparticularly if we are trying to get them to learnenough about what they should be doing and not tofall into desperate situations, then providing that freelooks like a good investment. I would say that the bestincentive we can give people to use it is to make itavailable and to promote it but initially certainly notto charge for it. It may well be that as people see thebenefits they may be willing to pay for better andmore advice, and that is probably a reasonable way inwhich many markets operate.

Q55 Mr Love: Let me come back to you, Mr Garner.I was slightly surprised you did not mention the factthat many of your members give their advice free.They do pro bono work, if I can call it that, and manyare saying, “Well, we are funding it and we are also



providing services free. We won’t do both”. Are younoticing any tail-off in their willingness to providetheir expertise for a limited time free and do you thinkthat this should be recognised somehow in thesystem?Joe Garner: I haven’t picked that up, but I shouldstress that the Practitioner Panel does not haverepresentation from all the retail banks and is not anindustry association as such. I would be verysurprised, though. From everything I detect there is areal sense of responsibility around this issue. At theend of the day, any debt that goes bad for a bank alsohits the bottom line. There is a very strong alignmentof interest in this area, so I have not detected that.

Q56 Mr Love: Let me ask one final question. Theyallocate the debt advice levy on the basis of 15% of


Witnesses: Tracey Bleakley, Chief Executive, pfeg (Personal Finance Education Group), Otto Thoresen,Director General, Association of British Insurers, and Martin Lewis, MoneySavingExpert.com, gave evidence.

Q57 Chair: Good afternoon. Martin, if we are notfinished taking evidence, are you happy to let us voteand come back?Martin Lewis: I am, yes.Chair: Lovely, thank you very much. Depending onhow quickly we do it—but I never set a good examplemyself so I cannot criticise. Andrew, you are first on.

Q58 Mr Love: All of your submissions suggestedthat you were in support of teaching financial literacyin schools. I think all three of you were in theaudience for the last session. The question is should itbe a part of the national curriculum in schools?Perhaps, Mr Thoresen, you have a long history here,so you might begin.Otto Thoresen: I have a long history indeed. I thinkthe simple answer would be yes. The only piece ofcontext I would put that in, though, is that for me,financial capability is about financial capabilitythrough life, and at different life stages there aredifferent requirements about how that financialcapability needs to be maintained and developedfurther, but I think the education piece is absolutelycritical. We were very close to having it in thecurriculum and then just at the last minute itunfortunately fell away. Having seen in schools howenthusiastic and engaging it is for the kids to begin todeal with these matters and knowing how it can alsofeed through into families and parents and theirunderstanding, I think it is a very obvious and criticalthing for us to do.Martin Lewis: It is an absolute no-brainer and Icannot work out who would disagree with it. Certainlywhen we have asked our users, 97% of them are infavour and the others had a view that it should beparents. If you look at the general financial and debtorliteracy across the nation, we need it to be taught andwe need it to be taught to every child. pfeg do awonderful job but until it becomes a part of thenational curriculum—when you talk to head teachersabout it, and we all know from the all-party

unsecured debt to 85% secured debt. A number ofquestions have been raised about whether that is anappropriate allocation. I am getting some quizzicallooks from you. Is this an issue in any of yourdiscussions?Adam Philips: It is not an issue that we havediscussed.Mr Love: No, okay.Chair: Thank you very much. That has been a mostthought-provoking evidence session and I am verygrateful. Thank you.We will move on quickly to the next panel. We aregoing to vote at 4.00pm so if we are still halfwaythrough the evidence, we have enough people to comeback and resume with a quorum, if the next panel ishappy with that. I don’t want you coming in andhaving 40 minutes on this very important subject.

parliamentary group report, which I commend to youand I hope that you have seen it, that head teacherssay, “We would like to but it is not on the curriculum.We have to prioritise other things”.That is the blocker, and I think it should be on thebasic curriculum not just the national curriculum. Itneeds to be on the basic, underlying curriculum. Whenyou hear there are mild objections from mathsteachers who say, “It isn’t purist”, well, we have a bigproblem in mathematic capability. I have worked withCarol Vorderman on it and we have had largediscussions about this from our two angles and weboth agree that we want improvements in maths. Oneof the great ways to get people to understand mathsis by using practical problems. The best mathematicpractical problems that kids understand are financialones. I think this is an absolute win.What I have never understood—and I will throw backto you—is we have all been saying this for so verylong; why isn’t it there already? So yes, of course, weneed it but, please, somebody needs to do somethingabout it. We have a commitment that it will beconsidered in the curriculum review at least.

Q59 Mr Love: I take your point and I have greatsympathy for it. Let me ask Ms Bleakley, since youare very directly involved in this. Decisions as to whatsubjects go in and out of the national curriculum arevery much of an educational nature. It is not just abouthow important a subject is but the balance that youput inside the national curriculum and those that youleave outside. Effectively, these decisions at the endof the day will be taken in the Education Departmentfor educational reasons. What is the role of the MoneyAdvice Service, and indeed other organisations, inpromoting the need to have this subject, financialcapability, in rather than out?Tracey Bleakley: I think the Money Advice Serviceis incredibly important in terms of giving us a nationalvoice and giving us that feed into the Department for


13 June 2012 Tracey Bleakley, Otto Thoresen and Martin Lewis

Education and informing exactly how that curriculumshould work and what the content should be.One of the things I would like to go back to is equityand trying to make sure that every young person hasaccess to a compelling finance education. One of thethings that we have been talking about nationallyrecently is social inequalities and social mobility. Ifyou don’t teach young people about finance educationyou are potentially condemning them to generationalsocial inequality because often very poor parentsknow how to manage money very well, in terms ofthe context in which they are living, but they don’tknow how to make money work for them, and I thinkit is very important. Certainly when young people aremaking life decisions for themselves, taking on risk,how they approach that and how they approachdecisions like going to university, it is going to bevery important for them to be able to make thosedecisions, and finance education will give them thecapability to do that.

Q60 Mr Love: Of course there have been schemesin various schools. Indeed, I had schools in my ownconstituency who were supported by financial servicesorganisations. However, when the FSA came toevaluate these schemes, they didn’t seem to think thatthey had added much value in terms of deliveringchildren who were more acquainted with the basics offinancial literacy. Why was that and what do we needto do to make sure that next time we get a betterresult?Tracey Bleakley: There are a couple of answers tothat question. First of all, financial education is fairlynew in schools, so a lot of the work that has beendone in the past has been about educating teachersand helping teachers to gain the skills and confidencethat they need to be able to teach finance education.A lot of the programmes in the past have really helpedthat behaviour change in schools, so it is moreaccepted now that teachers believe that they can teachthis and in the context of other subjects and, as Martinsaid, to help contextualise and help with other learningas well as finance education. What MAS can do, andwhat MAS can take forward now, is to pull togetherthat governance framework.What we have been talking to them about is if weembed finance education in schools, this should be afinite project because the schools network should beself-sustaining in a few years’ time, if we can get thisright—if we can get teacher training, continuousprofessional development, the resources that we need,the evaluation embedded. The role that MAS can dois to pull all of the different projects together to makesure that they all fit into a coherent strategy, so that weare not picking off some bits and pieces but leaving awhole big area over here that is not addressed.

Q61 Mr Love: Let me stop you there. You hinted atit, but whenever I go into the subject they always tellme there is significant teacher resistance tointroducing financial literacy, that teachers who wouldmove seamlessly into that feel that they are ill-prepared. How do we address that? Are there ways inwhich we can provide courses that will allow teachers

to feel more confident in providing this sort ofeducation?Tracey Bleakley: I think it is shifting, so a lot of thegood work that has been done in the past has shiftedthat perception. Certainly of the teachers we haveworked with, 93% of teachers and parents believe thatfinance education should be taught in schools. I thinkwe have to work with teacher training colleges andwe need to have continuous professional developmentas well. Teachers do not necessarily know how toteach finance education. They are in the same positionas parents. It is very different for the young generationcoming through. There is increasing complexity infinancial products but increasing risk as well, soteachers need to feel confident that they can teachthese subjects, that they can have discussions aboutvalues and decisions without necessarily giving theirown viewpoint or steering pupils down a particularpath. It is about being able to teach that decisionframework.We have had very good results in teacher trainingcolleges in our pilots, and we want to take thatforward. Because everything is changing, the world ischanging and becoming more complex, having thatcontinuous professional development, whether it isonline e-training that is easy to access, whether it is atelephone support line that pfeg currently provides, orwhether it is networking in peer-to-peer conferencesto keep the education ongoing, is important to addressthat problem.

Q62 Mr Love: That is not the only problem we haveto address. Mr Lewis, you touched on it earlier. Wehave a lamentable record on numeracy and literacy inthis country. There are many children in myconstituency, to my great embarrassment, who leaveschool without really being able to count or read andwrite properly. How do we combine financialeducation in a way that will help them with theirnumeracy as well?Martin Lewis: There are two issues here. There arethe, let’s say, 25% who are struggling with the verybasics, and there is the 75%. I have heard argumentsfrom people who say we should not introducefinancial education until everyone is literate andnumerate, but I do not think we should penalise the75% while we are still trying to struggle with thosepeople who haven’t learnt. I don’t think there is auniversal approach here. Those people who arestruggling with basic numeracy and literacy,depending on whether that is because of pooreducational access or because that is perhapseducational capacity issues of the individual, issomething that needs analysing. I do think the basicapproach to finances, when I have been in schools andtaught it—now admittedly I have the big advantagethat I tend to do it with television cameras, which getsthem pretty interested.We talk about the capacity of teachers. It is not rightto assume that teachers you think may be able to teachthis subject, perhaps because they do economics ormathematics, have an easy read-across. There aremany people who work in the City who are great withfinance but who are crap with their own personalfinances, and the two are not the same subject. When



I taught a class for a day, a money makeover class,and there was a television programme where I waschallenged to turn them into money saving experts,the person who saved the most money was the teacherwho had to sit in there to supervise me, who saved£2,500 after the day’s activities, and she was thebusiness studies teacher.What we have to understand is this is a new subject.There are certain skills and abilities such asmathematical numeracy and understanding ofbusiness remits that are important, but it is somethingnew and challenging. It is not enterprise, and it is notbusiness studies; it is consumer finance. We live inone of the world’s most competitive consumereconomies, and what we have at the moment is a realmismatch between the marketing, advertising andsales strength of companies and buyers’ training,which is very poor, and whether that is consumerproducts or credit products we are very weak at it.This is something that people are genuinely interestedin, thank heavens. It is why I have made a career outof it. If you talk about it with the right language, ifyou talk about it as an enabling factor to give youmore and spend less, to be able to have a better lifebecause you are in control of your finances rather thanthem controlling you, that is as appealing for an 11-year-old as it is for a 55-year-old. You just have towork out how to target and approach it. We have toget rid of some of the po-facedness. I do think thatonce we start to teach these practical skills they arenot just for the individuals; they are very vocationallyadvantageous afterwards. If you are an employer,whether you work in retail or finance or any sector,someone who understands money is a good employee.It has a real spread across but it also should draw theminto other wider educational needs.Otto Thoresen: Yes, and I think—

Q63 Mr Love: Let me just ask you, and you can addthis to your response. In your original objectives forthe service that was going to be set up, can theypossibly achieve it without a breakthrough in thisarea?Otto Thoresen: I will say what I was going to say andmove on to that question.The financial education piece sometimes suffers alittle from a conversation that drifts into, “This isabout helping people understand products”, and it isnot at all. It may lead there eventually, but it startswith the basics of understanding how you live yourlife and how you are going to make things add up toa positive outcome, if you can, at the end of the monthor the end of the week. The review was aiming at thesame stuff. It is about the basics of making ends meet.It is about the basics of being in control of yourfinances, as Martin said.I do not think you can achieve that across all the lifestages or all the age groups that are relevant herewithout cementing in the financial education piece.Apart from anything else, the connectivity betweenpeople emerging from the education system into theworkplace, and a pension reform agenda, which isbeing pushed through strongly from this yearonwards, is so obvious that if you don’t have peopleunderstanding the tradeoffs they are making and

understanding what they might be losing by optingout from the pension reform deliverable, then you runthe risk of having a far less positive outcome fromthat very important change than would otherwise bethe case. So I think all the forces are pushing us tothe same conclusion.

Q64 Teresa Pearce: I am very interested in what youwere just saying about auto-enrolment and how youget people involved, because I am on the Work andPensions Committee, and it is an absolute barrier.What you are saying is that it is not just aboutnumbers and interest rates, it is about the concept ofmoney. Some of the resistance from some of theteachers I have spoken to is, “Where does it sit in thecurriculum? Is it maths? Is it business studies? Is ithumanities? Is it citizenship? Where is it?” and it isalmost a cross-curricular subject. Tracey, where wouldyou think it would best sit in the curriculum?Tracey Bleakley: Interestingly, what we have talkedabout is having financial literacy in maths, so aboutconcepts such as APR and the calculations and thatkind of thing, but PSHE being the place where youwould have attitudes to finance, plans, goals, needs,aspirations, that kind of thing, so that you can thenstart making those plans and decisions in PSHE. Whatwe have found at pfeg is that it is not just limited tothose two subjects. Teachers have taken financeeducation and embedded it in maths, geography,history, foreign languages. It has been quiteinspirational seeing the children talking about how ithas helped them in those subjects, because we havesome startling stats. I think something like 90% of 14to 18-year-olds worry about money every day. So it ison their minds and it is a very practical subject.Talking in geography about why a bank is placed in acertain place, singing songs in music about feelingsand worries and issues, it just contextualises lots ofother subjects. But to answer the question, the maintwo subjects is maths for financial literacy andattitudes to planning, budgeting and values aroundmoney in PSHE.

Q65 Teresa Pearce: Martin, at what age do you thinkthis should be brought in; at primary, secondary?Martin Lewis: I think we have a bit of a cabal hereas we both work together on the APPG, so I am notgoing to differ there. Although the one thing I wouldadd is that it is one of the APPG recommendations,which I was very much in favour of, that you have itin maths and you have it in PSHE, but you also havea financial education co-ordinator in the school whois responsible for making sure that the marriage iscorrect. After you have done APRs in maths,hopefully that week you do the “Good debt, bad debt,should I borrow?” so that the two are linked up.Personally, I think that I am less worried aboutprimary. In primary, it is about understanding basicconcepts of coins and cheques and bank accounts andwhat they do, and maybe even interest; you know, “Ifyou put your money in the bank, because it can giveit to other people it has to pay you for it”, and thattype of stuff. For me when you really start to get theferocious interest is 14, 15 onwards, and it should becapitalised on from that point. That is where we are



getting to the point where you are four years awayfrom hopefully going to university, which you wantto encourage.With another hat on, I head up the IndependentTaskforce on Student Finance Information. We havestudent loans; we have had them for 20 years, and tohave educated a nation into what is called a debt—whether it actually is is another question—and nevereducated them about debt is a national disgrace. Weneed that preparation coming up in those years beforeindependence, whether going to university or not.That is when the children at school are really gettinginterested in it. For me, the power age is 14 onwards,but what you need is when they get there they shouldhave the basic building blocks, they understand coreconcepts, so you can start to teach them the slightlymore complicated stuff.Tracey Bleakley: Can I just jump in? This is one ofthe few areas where I might slightly divert fromMartin. We are seeing children younger and youngerwho are exposed to decisions around finance. Statsshow that the average age for getting a mobile phonefor the first time is eight. For those children buyingproducts online with their parents’ credit card, whichis now 20%, the average age where they start doingthat is 10. We see advertisers are bombarding children,through television, through internet, through theirmobile phones, with advertising about products tobuy. We see 98% of children from the age of seven to11 have their own money, so I believe absolutelyfinance education should start from four and build allthe way through the curriculum, but that key age isgetting younger and younger.Martin Lewis: Don’t get me wrong, I would love that,but if we are going to push a button and we are goingto change policy on it, my point is the really importanttime is 14 onwards, not that we shouldn’t be doing itearlier. I think we are saying the same thing butperhaps in a different way.

Q66 Teresa Pearce: The Money Advice Service,what role do you think they should play in this? Doyou see them as an organisation that would provideteacher resources or actually going into schools? Whatdo you see that they can add?Otto Thoresen: The principle that they should adoptis the partnership principle. The model originally wasset up on a partnership basis. It was about providingthe glue that held things together, filling the gaps thatneeded to be filled—a preventative service. I think forme it is very much about operating on that basis andbuilding on the capability that already exists.Tracey Bleakley: Yes, I would agree. There are acouple of other specifics as well. I would like to seethat we are measuring finance education in schoolsyear on-year, because I would like to be heldaccountable in my organisation that we are helpingand that standards are improving in schools. One ofthe things that we are looking at in partnership is theOECD PISA (Programme for International StudentAssessment) 2012 Financial Literacy AssessmentFramework as a framework for finance education. Itmay be that there is something else more specific toUK schools, but I would like to see that put in place.

The other thing that we never talk about really—andwhen we talk about finance education necessarily it ismoney—is that all of this needs funding and I am notgoing to sit here and say that MAS should fund all ofthis. We have some very keen industry funders, but Ithink there is a place for funding and certainly toembed this in schools it is going to need to be paidfor, so I would like to see MAS take a role in that.

Q67 Mr McFadden: Martin, I would like you to tellus in simple terms the size of the problem, and Isuppose I mean this in two dimensions. There will bepeople in financial crisis who really struggle to makeends meet month to month. That is one part of theproblem. Then there will be another broader groupwho are not necessarily in financial crisis but who arewasting money and with a bit more financial literacycould be saving. You are very well known for tellingpeople how they can save on different parts of theirfamily budgeting. How big is this problem really? Youtalked about 75/25. Can you tell us a bit more aboutwhat you mean by that?Martin Lewis: The 75/25, and that is sort of out ofmy range, is how many people are struggling withliteracy and numeracy rather than this. It is reallyinteresting because some of the people who are in debtcrisis occasionally can be quite financially literate andhave an understanding. There is a commonmisunderstanding that debt is about overspending ormismanaging money. One of the biggest causes ofdebt is change of circumstance, and we could allstruggle if that were to hit us at the wrong time,having made legitimate decisions. I have a debt test Ido for 15-year-olds, and the last question is a scenariothat you could go for the borrowing and you wouldn’tbe wrong to do so or you could not do so and youwouldn’t be wrong to do so, and we can all makemistakes.Right across society, we struggle from genuineconsumer illiteracy, if I can take the broadest termpossible, where I would say 60% to 70% of thepopulation simply do not understand many of theproducts that they have. We know people don’t readsmall print. I am less worried about that. I sometimesdon’t read the small print myself, but they don’t readthe terms and conditions. If you actually think aboutsome of the basic day-to-day products—I won’t askyou guys the question, I won’t be that mean—whenyou have a credit card summary box and it says onthere, “Interest-free period 56 days”, I think that is acrucial thing people should know but I suspect manypeople, even in this room—I will not look behind toyou lot—would not know that isn’t the same as yourintroductory interest-free offer. The interest freeperiod actually means, if it’s got one, and if you paythe card off in full at the end of the month, you won’thave to pay any interest if you are spending on it.Those types of complexities and confusions are rife.We talk about auto-enrolment coming. There are manypeople out there who have companies withcontributory pensions who do not realise that they aregiving away, effectively, a pay rise by not puttingmoney in. But financial ignorance—people who get0% deals and then think they do not have to make theminimum repayment each month, people who when



they are told the minimum repayment is going lowerfrom the credit company think it is generous ratherthan the fact it is going to leave them in debt for anextra 10 or 15 years.I am dealing at the moment with a £9 billion paymentprotection insurance mis-selling scandal. If you wantevidence of the size of this and the sheer tiny amountof money that we are talking about here that wouldmake a big difference in terms of financial education,let us start with that one. An entire nation of millionsof people who were conned or mis-sold into gettingan insurance product that was often worthless forthem and at best was hideously expensive. The fewpeople who got it right either got standalone productsor avoided it. The product itself isn’t bad, I shouldnote while we are on the record so nobody tells meoff afterwards for giving evidence saying so. That isevidential of the trust in our financial institutions,which is unmerited and undeserved, and the lack ofpersonal equipment that we have.If you ask me what my first lesson to a 10-year-old infinance would be it is that, “A supermarket’s job is tomake money from you. That is why they havesweeties by the till so when you go you remindmummy and daddy to buy something more. Theperson who has the sign saying ‘advisor’ in your bankis actually a salesman, not an advisor. Their job is totry to sell you products, not necessarily to help you”.That is where I would start. Sadly, there are manyadults out there who do not even have those basicbuilding blocks. In terms of percentages, I can’t helpyou, I will be absolutely honest, but vastly over 50%.

Q68 Mr McFadden: The Money Advice Service, togo to that, is talking about a target audience of 19million people, which is roughly a third of thepopulation. It seems to me on one level it is difficultto think of any organisation that can target 19 millionpeople effectively, but you have a very big website.Do you think it is right for them to go to a broadapproach like that when you are saying, “Actually, amajority of the population could be doing with somehelp on this”?Martin Lewis: If the product wasn’t crap, I wouldthink it might be a good idea, but the product isabominable, and I would be embarrassed to put mostof their tools on my website. The financial healthcheck, I am going to read to you. Let me read fromFacebook, okay? Before I came, I deliberately did notask a leading question. Are you ready? “I am givingevidence on the Government’s Money Advice Serviceat Parliament today. Ever used it? Try its health check.Does it provide any help? I am not going to cherry-pick. Not cherry-picking. ‘Only for paupers.’ ‘It’suseless if you’ve already got a bit saved up.’ ‘Lookedat it several times.’ ‘Not finding it very helpful as itseems very basic.’ ‘It looks very basic.’ ‘There’s a fabresource already in existence calledMoneySavingExpert.com.’ I liked that one.

Q69 Mr McFadden: Did you write that?Martin Lewis: No. You can prove this.Mr McFadden: Just checking.Martin Lewis: ‘I’ve just looked and it has nosuggestions for where to get a replacement washing

machine.’ ‘No, it states the obvious.’ ‘I know what Ishould be doing but, for example, it’s useless tellingme I should save for emergencies if I have no cash inthe first place.’ ‘Useless.’ ‘Looked at it a few times,however the advice seems to be contradictory. Forexample, saving money for emergencies and payingoff debt. Assumes you have spare money.’ ‘Notrelevant.’ ‘No, just says do all the things I tick ‘no’ toon the financial health check.’ ‘Would like to echothe above sentiments, it’s useless.’ ‘Another waste ofmoney and resources.’ I did also ask on Twitter butthey weren’t as nice about it. Can I, on that financialpoint—

Q70 Mr McFadden: It is a narrow point. Do youthink broad is right?Martin Lewis: I think what the Money Advice Serviceshould be doing with that amount of money is actuallylooking at—there are some amazing editorial websitesand not just mine. This is Money has good stuff,lovemoney has good stuff, and the commercialcomparison sites have good stuff as well. What itshould be doing is signposting and improvingstandards in those. I believe we are absolutely ethical,we do it with integrity and we work on a system oftelling people what is best for the consumers, butcome and test us. Come and give me a stamp that sayswe do do that, rather than trying to spend £20 millionof what is effectively public money on building abrand that is bland, boring, unnecessary andunproductive.I will just give you an example. I don’t know howmany people have used its financial health check sinceit launched. I think it was something like 80,000. Wedid something with Trading Standards on the site twoweeks ago, a “no cold caller” sign. It was a jointpartnership—nice word. When I spoke to the MoneyAdvice Service and they came to me they seemed tobe very firmly minded what they wanted to do. Theywere not that interested in hearing what I thoughtwould be important for them to do, and I have quitea good track record on building money websites. Wedid a partnership with Trading Standards on day oneof our “no cold caller” sign that we got out. We had150,000 downloads. How much money has been spentfor that financial health check? I would have loved tohave linked to it but I just did not see any value in itat all so I did not give it a link—I was not consultedon it.We build tools. I am currently investing a lot of moneyin building a benefits checker. We already have onethat gives you a five-minute benefits check-up. We arenow doing one that says, “What would happen if yoursituation changed?” We are working with Entitled Toand the charity Turn2Us. It is expensive, it is difficultand we are taking a long time to get it right. I don’tknow why I am building that, which has nocommercial revenue, when the Money Advice Serviceis doing financial health checks that is just a checklistand at the end tells you, “Here’s all the things youanswered ‘no’ to. You need to sort them out”. Thepeople at the top end seem to be more interested inbuilding a brand.The fact it’s creating a website, doesn’t seem apriority, the so called advice gap won’t be solved by



adding another website to an already crowdedmarketplace. Those people who can and do read itfor themselves. The real issue is who answers thosequestions. I have to say, I don’t know where it hasgone wrong in the last couple of years, but it is atragic shame. If you gave me £20 million to spendon improving financial capability, I would not build awebsite. You say that, I have just given £10 million tocharity, and let me tell you I have a fund that ispartially going towards financial capability. I wouldnot be spending it on doing what they are doing. Thisbrand-building, narcissistic exercise of trying tocompete with things that are already being done verywell out there needs to stop. Rant over.

Q71 Mr McFadden: Okay. I did ask. I have only onemore. I think I will ask the other two. I want to knowyour view on the trajectory of demand. We have a lotof welfare changes coming in. We have housingbenefit changes, meaning people’s benefits are goingto go down because their house is deemed to be toobig. We have had tax credit changes for part-timeworkers, and so on. Do you think more people aregoing to be getting into financial trouble in the nextcouple of years as a result of these changes?Otto Thoresen: I will go back to the core that was inthe review, which was about a preventative service,and just a side comment. The debt advice part, ofcourse, was an addition after and it is quite a differentkind of service, so I think some of the challenges theyhave had organisationally relate to that stretch. Goingback to the preventative service, the whole point is toget to people at a point where they can take decisionsthat will avoid their falling into dependency andlosing control. The demand for that already is waybeyond the resources that are able to serve it. Theproblem is engagement, of course, and getting peopleinterested. The whole idea was that you used trustedintermediaries, midwives, others, and there were allsorts of models that you can adopt. I agree with you,Martin, it is a bit of a complementary activity to whatexists elsewhere.But to go to the question, of course it is going togrow. You can see the impact of ageing, not just onthe pensions need but on social care and relatedservices. You can see the impact of higher interestrates, which was mentioned in the earlier session:energy costs; the unemployment rate is probablygoing up; the difficulty of people having the incomethey need to cover their existing position. One way oftrying to mitigate the damage that can be created thereis to get people to try to stay ahead of crisis, andthis service is a potential way of trying to create anenvironment where more of that happens. However,the demand will go up and the need will go up.Tracey Bleakley: One of the things that I thought wasinteresting about MAS’s remit, and it was alluded toby the gentleman from Advice UK, is that debt adviceservices are seeing on the ground what is happeningand the changes that are happening, which you alludedto in your question. It would be interesting to see howthat could be fed back into finance education, becausewe don’t have that feedback loop at the moment. MASwould be in a unique position to be able to effect that.

Q72 Chair: Before Mark comes in, I thought, Otto,that you were very cautious and generous in yourwritten evidence to MAS. But Martin said what Ihoped you would say, because he said you had donea great report and in the early stages ofimplementation it was going in the right direction.What we hear this afternoon, what I get from all theevidence, is nobody knows what direction it is goingin. So you are being generous, aren’t you, in terms?That sort of generosity is nice, but it is not helping thepeople that you wanted to help in your original report.Otto Thoresen: No. The reason I was temperate in mycomments is partly it is four years later. We publishedin 2008 and the world of 2012 is a different world.That is the first overview. I have not had muchengagement directly with them during that period,partly because I felt the right thing to do was to letthem get on with it. They are the management whoare trying to make it happen. They have gone throughorganisational change. The resources were taken fromthe FSA—

Q73 Chair: Were those changes necessary? It is adifferent world, but it is not too far away.Otto Thoresen: No.Chair: You did a report. It was set up. The FSAassessment of it was very, very good. At one stage itwas called world leading, and suddenly it is handedover to new hands with a pot of money and nobodyknows what the hell is going on.Otto Thoresen: I think even I was clear that I wasvery disappointed in the level of engagement and theopenness and the transparency around what was goingon, but I do detect—and I heard in the earliersession—a change in the last couple of months. Thereis a change. There is more openness now; informaldiscussions around the fact that we should beconsulting ahead of the business plan being created,not after; far more visibility around the trustedintermediaries’ work, which I had begun to thinkwasn’t getting done at all but it actually is gettingdone. Some of the workplace stuff is still being done.It just doesn’t get the profile that the brand buildingdoes, that the web does. The other piece was thehealth check. Of course, the health check was newtoo. It has been something that has drawn resourcesaway from some of the other things that needed tobe done.

Q74 Chair: It needs a health check itself.Martin Lewis: A few days’ work, that, for my team.Otto Thoresen: I continue to have a passion that thispreventative service is vital and can make a hugedifference to outcomes for citizens in this country. Ibelieve that many of the components are still there,but I do think that the way we work and the way itworks with us needs to change, and I think I waspretty clear about that in my evidence.

Q75 Mark Garnier: Martin Lewis, you have beenpretty clear about what you think about MAS.Martin Lewis: I haven’t actually. What I need to stateis I genuinely support the concept of MAS. It is theway it is delivering it that I don’t.



Q76 Mark Garnier: What I want you to expand onis it seems at the moment to be an organisation thathas lost direction. It seems to be pretty clear aroundthe table that nobody quite knows that the point of itis. What should the point of it be? What space will itfit into where it will provide value for the consumer?Martin Lewis: First, on the back of what Otto said,one of the reasons things are getting better is becauseyou are doing this, so well done. They knew this wascoming and they knew people like me were going tocome and give them a kicking, so they have tried toimprove things. This is a good thing in itself and itshould be applauded that someone is finally taking alook at this organisation.As for what they should be doing, I think, first of all,this target of reaching 19 million people is just wrong.What we want to do is reach the people who are notbeing reached. When it comes to the web we reach alot of people, as do many other websites. If you thinkthat building a website is going to attract people thatthe other websites don’t already reach you are bonkersand it is a silly plan. What people come to me and askme when they see me in the street or on Twitter andFacebook is, “Who do I ask? I don’t understand. Whodo I ask?” My problem is I can send them to mywebsite; “I have read it and I don’t understand it, andI’ve read elsewhere and I don’t understand it. I justwant to ask someone”. Where I would start on thisis, “I just want to ask someone”. That was the initialprovisions of the MAS, setting up generic advice.I am not the greatest fan of generic advice because itis too generic. People want answers, not issues, but itis better than nothing; just having somebody to talkto. We look at payment protection insurance. It is areally good example of looking at a mix of capabilitylevels. We have many people who do it through mysite and through Which? and we have a partnershipon that at the moment. There are many who pay 30%to go to claims handlers. They may not understandhow much they are paying, but a lot of those do itbecause they don’t understand how much they arepaying. That is a problem. Some do it because theywant to talk to somebody about it. What I think theMAS is in a unique position to do is to provide face-to-face or on-the-phone real people you can talk towhom nobody else is ever going to be able toresource. I taught for years. I have been—

Q77 Mark Garnier: How would they capture thosepeople? If you are a person who is not on the internet,chances are you are illiterate, you are very poor andyou have a problem. How would you be connected tothe MAS?Martin Lewis: First of all, I would have televisionadverts that talked about the phone service, not aboutthe website, and start by saying, “There is somebodyyou can talk to” rather than, “There is somebody youcan go online to”. Also, exactly as you said, maternitynurses, social workers, mental health caseworkers, allof those people need to know and understand what theservice does. One of the great chicken and eggsituations is when I talk to them and ask, “Why don’tyou recommend MAS?” they give a similar answer tothe one I gave you earlier, “Because it doesn’t seemto be that good”. Unfortunately, I think the website is

leading to the deterioration of the brand reputation ofwhat was a relatively good phone service. I have metsome of the people, and the phone workers, manypeople in MAS who genuinely are passionate, careand give good answers, but I think some of it is drawnaway from that.It is never going to be easy to reach those people butCitizens Advice, Christians Against Poverty,Consumer Credit Counselling Service, NationalDebtline, do reach people who are in debt crisis. Theproblem we have is that we have nobody to ask whenyou are borrowing in the first place as a preventativemeasure to stop you getting into debt crisis. That iswhat I always thought MAS was there to do for thosepeople who are not on the internet, and it has not donethat. So what we need is a preventative service. I havealways thought that is what MAS is there for. Yes,it can co-ordinate the debt advice—that is great, anddefinitely helping with financial education, as part ofprevention. Giving people the ability to ask questionswill take years to build, but you may find it has moresupport from people like me if it were doing a decentjob and providing those provisions, rather than tryingto replicate things that already exist.

Q78 Mark Garnier: Who regulates your website?Martin Lewis: Apart from very basic FSA regulationfor insurance, and consumer credit regulations, about14 million people a month or 39 million a year.

Q79 Mark Garnier: Good answer. Do you thinkthere is a role for the MAS to give a flag of excellenceto certain websites where they are doing anoutstandingly good job and supplement thatsignposting function to one of giving credit to a goodsite worth going to?Martin Lewis: Very much. I think the FSA and otherorganisations are there to regulate, and I don’t thinkthe MAS should be regulating. But I believe, and Imay be wrong, that we have some great informationand tools that are substantially good, as do otherwebsites, including the newspaper money sites whodo a very good job as well. What I would not say isthat MAS should come and give my website a stampof approval because I don’t think there is auniversality there. I think it should create—I havenever liked Kitemarks, but let us call it that for easeof phraseology at the moment—a Kitemark systemthat says, “If you’re looking for information aboutbenefits MoneySavingExpert is great. If you’relooking for information about credit cards This isMoney is great, or maybe both are great for thosethings”, and to try to drive standards up.MAS says the reason it is building a website isbecause there needs to be an independent trustedsource. Well, I believe we are exactly that, but I amhappy to prove it, and I am happy to prove it to MASif it would come and talk to me and give us someguidelines that we could follow so it could say we arean independent trusted source rather than duplicatingour work. We are already used by 14 million a month,many millions more if you count it over a year. If ithas any questions about what we do, why not have asystem that gives us some standards we have to meetso that we know those 14 million people are getting



decent information? Of course, let me say on therecord I think they are but I am happy to prove it, asI am sure are the editors of the other major websitesand the price comparison services, who at the momenthave bottom-up regulation from the FSA. We all talkabout the fact that we want them to be balanced andwork forwards. Why not have something that we canaim at and achieve and then MAS can signpost it?We already have this in energy comparison services.It used to be Energywatch; it is now the ConsumerFocus confidence code, and what it says is thesecomparison services all work in a certain way thatmeans they are not biased against companies thatdon’t pay them. They don’t change the order of tariffsand various other factors. It seems to me that if whatwe want is decent web information it is already beinggiven out there. Let’s make sure that those standardsare right, right across the board, people know who totrust and who not to trust, and then spend that £20million rather than competing with the hundreds ofmillions in the brand-building television adverts fromthe big comparison sites, which MAS does not havethe money to do, on decent financial education, on atelephone call centre that people can call, on face-to-face advice and giving talks around the vulnerablegroups so that we go and reach people in housingassociations and on council estates that are not beingtouched at the moment, where the money would doreal good. I don’t believe a lot of that money is doingreal good at the moment, apart from a relativelynarcissistic brand building exercise.

Q80 Mark Garnier: A final question to each of youin turn. How effective has the MAS consultation beenwith various organisations and how effective has itbeen with each of your organisations? Tracey, do youwant to start?Tracey Bleakley: I am very pleased with the recentconsultation with pfeg. I feel like we are workingtowards a national cohesive strategy, so it has beenworking very well with us recently.

Q81 Mark Garnier: So you are happy? Otto?Otto Thoresen: It was non-existent for a long time.

Q82 Mark Garnier: But they are engaging now?Otto Thoresen: But they are engaging now.

Q83 Mark Garnier: Is that as a result of the fact thatwe are giving them a bit of a kicking?Otto Thoresen: I am sure that was part of it, yes.Mark Garnier: Fantastic. Martin?Martin Lewis: I met them in the very early days. Iwas talked to rather than listened to about what wasgoing on, and pretty much the warnings I have justgiven you I warned against at the time and they werenot listened to. Apart from people who work in theorganisation contacting me to leak information to sayhow unhappy they were with the direction and “Pleasecan you do something about it”, I have had no talk atthe top end. Basically even when I was running theIndependent Taskforce on Student FinanceInformation, when we asked for details of all thedifferent groups and their reaches and things, becausethey were so worried about me—apparently I am a bit

of a demon figure there and I have maybe just provedthem right—they were scared about giving usinformation about how much web traffic they had incase I used it in a negative way for the taskforce.Freedom of information requests to see howeffectively this money is being spent would be great.So not at all, non-existent apart from in the early daysand then they basically ignored everything I said, andI have not spoken to them since.

Q84 John Thurso: Martin, can I come to you first?You have answered most of what I wanted to ask youin your wide-ranging answers earlier on. Thank youvery much indeed. You talked about the incrediblylopsided nature of the massive scale of advertising onone side for the producers and the miniscule help forthe consumers on the other. This is a question I putto the last panel, which is to what extent should theconsumer expect a range of simple products thatsimply do what it says on the tin before you get intothe more complicated stuff? Are there not productsthat need to be produced where if it says it doessomething, it does it, and that is that?Martin Lewis: I think things should do what they saythey do. I would probably disagree with Otto on thisone, to be absolutely honest. As someone who studiesthese products, and we study in great detail how theywork, the simple ones are rarely the best ones. Theones that are best for most people are the—if you wanta savings account right now, anyone who gets astandard rate savings account is a fool. The bestsavings accounts right now are the ones that giveintroductory bonuses for a year. What you have to dois diarise in a year to ditch and switch. If you trydoing a simple system you are not getting the bestdeal. So I am very torn with your question. I wouldlike simplicity but it does not exist and it does notwork. We are always going to have an unequal systemwhereby those who have financial knowledge andinformation can do relatively well and those who donot can do relatively poorly.The one big advantage over the last 10 years since Istarted is the internet has made a change in thatbalance. There are far more information haves thanthere used to be. It is still nowhere near big enough,it is still less than 50%, but there are people who nowrealise that on every transaction you do, if you thinkabout it, do your research, you can improve what youare getting.Every time I have seen simple products, even the earlycap-marked ISAs when that first came out,unfortunately what happens is the companies who sellthem know that they will sell because they have thesimplicity standard and therefore they give very poorrates. I don’t ever remember saying one of theseproducts is any good because the rates are so poorbecause they sell on the back of simplicity. So I thinkthere would be a real problem in that.

Q85 John Thurso: If you look at car insurance, forexample, what we know is the law says you have tohave third party, fire and theft and you know that thatwill be delivered, you will meet the legal standards.So there is a basic product that you can buy withouttalking to anybody for advice. You can be advised as



to which ones offer the best deal, but you will knowyou get what it says on the tin, whereas if you look atPPI, it never did what it said on the tin, ever, andnever had a hope of doing it. That is the point I amdriving at.Martin Lewis: I would certainly agree that for aproduct to call itself a name it should define what itdoes. We have this with critical illness where we allknow that companies have sold them on the back ofit will cover you if you get cancer. Well, it will not; itwill cover you if you get certain cancers that are on apre-marked list. I think it would be very interesting tohave a definition of what a product is rather than anyother standard, “You can’t call yourself PPI unless youdo the following minimum”. So I would agree withyou there.On car insurance, the problem with car insurance isfor many people if you do a quote, comprehensive canbe cheaper than third-party because the actuarial riskcharts mean if you are opting for comprehensive youare a lower risk than third-party. So we always tellpeople, “Check third party and comprehensive if youwant the cheapest because it won’t necessarily be thelogical one”. That lack of logic, whether it is trainfares or car insurance, is one of the things we need togive people a degree of attractive scepticism in whenthey are choosing anything, that you have to do yourresearch.Otto Thoresen: It is a wonderful thing, experience. Idid expect my experience this afternoon to be exactlyhow it has been, Martin, and I have really enjoyedlistening to your answers.

Q86 John Thurso: My question was to ask all of youvery quickly, MAS is a fairly young organisation, howhas it performed? I think you have already answeredthat so let me ask you this, because I think there wasa genuine desire to see it perform. What three thingswould each of you want it to do to get on track todeliver what you would like it to do deliver? Perhapsstart with you and just go quickly along.Tracey Bleakley: I would like to see a nationalstrategy for finance education, so pulling togethereverybody in the area to this cohesive strategy so wecan get it embedded in the school system once and forall. I would like to see year-on-year testing in schoolsso that we can prove that we are getting better andbetter at it and long term evaluations so we can proveit is worthwhile. I think that MAS has a part to playin helping to fund that.Otto Thoresen: I think some of it is about going backto basics, to be honest. I think the refocusing on thepreventative piece, I think the refocusing on thepartnership piece and working with partners, and Ithink a strong emphasis on engagement with otherswho have already acted around the boundaries hereand make that real, because it has not felt real and asa result there is waste. I think the final one, if I amallowed a fourth—I know it is a cheek—somebodysaid earlier it was £40 million of public money. In factit is £40 million of financial services organisations’money. There was an attitude in the earlier years thatit was theirs by right and it was just a question of howthey were going to spend it. I think that has to flip

over. Somebody said if this was a business it wouldbe run a different way and I think there is anattitudinal change that says, “If you are spending £1,why are you spending it, and what alternatives arethere to that?”Martin Lewis: I would ask that it focuses on mostneed, not most numbers. I would also go with anational strategy for financial education in schools,which I think is absolutely crucial. Finally, it needs tofocus on person-to-person not mass mainstream and itneeds to be giving one-on-one help, whether that beby phone, whether that be person-to-person, whetherthat be on the internet. In that version it would be agreat website. People need, when they are vulnerableespecially, someone to ask and to give themconfidence, even if it is just to say, “Am I allowed toreclaim PPI because they did this?” “Yes, that soundspretty good, you’ve probably got a decent chancethere.” It is interesting, £40 million you say; theclaims handling industry looks set to make about £1billion out of PPI. Let’s just put it in context. That iswhat we are asking for, that money goes into one-on-one help so vulnerable individuals have someone theytrust and they can ask rather than read and have to doit themselves when they lack the confidence to thenact. A lot of people have financial phobia and I thinkMAS is a brilliant opportunity for helping thosepeople rather than trying to compete with newspapersand websites.

Q87 Chair: Just on the question of the three thingsin terms of email and the call centre, I am hard pressedto see how they can, even with that budget, have face-to-face. Citizens Advice Bureau has 400 outlets, Ithink it could be 500 but it is in that region. If youthought this national service of MAS was going togive face-to-face, what about Leeds, what aboutWolverhampton? How do they do that? They have towork with partners and they should confinethemselves to some sort of point of contact that allowsthem to send them to the most appropriateorganisation.Otto Thoresen: I think Martin’s point on this is a verystrong point. I think it is understood by MAS, becauseit is a very powerful medium for the types of peoplewe are talking about.Martin Lewis: If you look at Christians againstPoverty, which teaches church groups to help otherpeople out of debt, or you look at CCCS, which hasits own courses—I have a charity, the MSE charity,we try to give financial and consumer education grantsto people to go and do courses. MAS could have aqualification that it helps volunteers who then workout of CABs, if it did partnership, get thatqualification and give preventative information asopposed to debt-based information.Chair: You envisaged that. You had people going intoprisons and into firms who were trained to train otherpeople, so it was a beginning. It just needs back to thebasics, really.Thank you all very much. It is a major miracle thatwe have finished before the vote, and you will begrateful you do not have sit around for us to comeback from voting. Thank you very much.


Wednesday 20 June 2012

Members present:


Michael FallonMark GarnierMr Andrew Love

________________


Witnesses: Lord Turner of Ecchinswell, Chairman, Financial Services Authority, and Martin Wheatley,Managing Director, Conduct Business Unit, Financial Services Authority, gave evidence.

Q88 Chair: Good afternoon. I will hand you over toMr Tyrie to begin with.Mr Tyrie: Thank you very much, Chair. Before wego any further, just a couple of things that relate towider Treasury Committee business. Lord Turner, Iwould be very grateful if you would pass on theCommittee’s appreciation to Hector Sants for the hugeamount of work that he has done, the commitment heshowed to public service while he was in that job. Heengaged with the Committee vigorously—formallyand informally—and very helpfully over a number ofyears, which we appreciated. He was alsoexceptionally diligent in everything he did, and wewish him very well for the future.Lord Turner: I will certainly convey that message tohim. Indeed, at about 6 pm, we are having a small,appropriately modest drinks party to say goodbye tohim, so I shall mention it at that stage.

Q89 Mr Tyrie: Thank you very much, Lord Turner.The second thing is that the main Committee wrote toyou—or I wrote to you on behalf of the Committee—about interest rate swaps. The reply told us that youare looking into it. We wondered what progress therehad been, if any. We don’t need a lengthy report now,but it would be helpful for you to give us someindication of when you think there might be anoutcome.Lord Turner: Well, we are taking it very seriously.We are making sure that we fully investigate what isgoing on, and on that basis will decide whether thereare sets of actions that we need to take. I think itwould probably be best if Martin Wheatley describesin more detail what we are doing.Martin Wheatley: There are a number of stages to theoutcome. The first stage is that we said that we wouldupdate the Committee—the public—by the end of thismonth, so that is a commitment to give a progressupdate. Needless to say, the situation is complex. Therange of contracts that people have entered into, andthe time period in which they entered them and theprevailing economic conditions, will have varied, andthe practices were quite different between the differentbanks involved. There were four banks that soldaround 95% of the product, so that is where we havebeen focusing our energy. We think there are a numberof questions to answer, and what we intend to do bythe end of the month is to give an initial indication ofwhere we think there are questions to answer and astatement on a way forward.

Teresa PearceJohn ThursoMr Andrew Tyrie

Q90 Mr Tyrie: Thank you very much. With yourpermission, Chair, to return to the subject of the day—the Money Advice Service—could I begin with LordTurner? Given that you have been with the FSA forseveral years now and that the FSA has been on thecase of financial education for well over a decade, doyou think we are getting best value for money fromthis, or do you think that there might be merit inpressing more vigorously to try to improve the qualityof financial-related maths education in schools?Lord Turner: Well, that is a very good question.When I joined the FSA, I looked at the relativelysmall amounts that we were then spending on theconsumer education side and the websites that we had,and I asked myself, and others, “What do we reallyachieve with this? How many people do we reach? Isit making a difference?” I will come back in a minuteto the story of what has happened since then and howI presently see it. What is absolutely clear is thatunless you are going to spend an enormous amount,there is no way it can make up for, as you say, a lackof basic capability on behalf of people coming out ofschool and into society, so I don’t think we should seethese things as alternatives. There is a lot of evidencethat standards of basic maths, basic understanding,and basic understanding of finance are inadequatecoming out of school, and I think we should place asignificant concentration on that. Now, whether thatwould ever be good enough so that you could thensay that there is no value in spending money of thesort we have, I rather doubt. I suspect there is a usefulancillary role for what we have ended up with, but itis worth while explaining where we have ended up.In my first year at the FSA, the authority devotedapproaching £20 million to this activity. Thatfundamentally increased to the £45 million or so thatis currently spent on the Investment Advice Serviceas a result of the Thoresen review, which came upwith the idea that there should be generic financialadvice. Although that was not driven in itself by theFSA, when I looked at the outcome of that, I thoughtthere was a reasonable prima facie case that there wasa set of a capabilities that would be helpful in gettingpeople—even if they did have basic maths skills—tonavigate the complex set of investment offers that areavailable. I agree that we could debate the real valueof that, but my key point is that the core of wherethat comes from was the conclusions of the Thoresenreview, and the conclusions that the Government thenreached, rather than a set of conclusions that weredebated within the FSA board itself.


20 June 2012 Lord Turner of Ecchinswell and Martin Wheatley

The other aspect of the MAS budget that I suspect ismore clearly and obviously justifiable—I would bevery surprised if we ever concluded it was notnecessary—is the debt advice budget, which garnersabout £27 million, where, to be clear, what has reallyhappened over the last year is not a new set ofactivities, but essentially just a shift of somethingfrom public expenditure to a levy on the industry—something that was already ongoing and has beenpicked up and given to MAS, essentially as a deviceto move something from public expenditure to thelevy. In that area, I would be very surprised if we everconcluded that there wasn’t a role for advice to peoplewho had got into trouble, because even if we do getto the stage where everybody understands—as weought to aim to get them to understand—thedangerous role of compound interest, and the way thatonce you start borrowing money, it can roll up and up,there will be people who get into a mess, and thosepeople will require a degree of handholding andadvice about what to do in those circumstances. Thatis how I would think about the different categories ofthe budget we now have.

Q91 Mr Tyrie: Just on the first part, which you saidwas debatable, you said that this was partly an effortto transfer some public expenditure to the levy, sowhat you are really saying is this is a publicaccounts fiddle.Lord Turner: Well, let us be clear what happened. Onthe about £45 million spent by MAS on things that arenot the debt advice—essentially the investment advicestuff—the story was that the FSA board expressedconcern at various stages, but felt that it had to goalong with the wishes of Government. This went in aseries of stages, first: “You are currently spending £20million. We want you to do a wider set of thingscoming out of the Thoresen review. The propositionis: will you levy another £6 million on the levy payers,and we will pay £6 million for it out of publicexpenditure?” It then expanded to £12 million and £12million, and then after a while it became, “Well, whydon’t you just pay for the whole £25 million?” To beblunt, that was the sequence of stages that I think allmembers of the FSA board would recognise between2009 and 2011. Essentially, the increase of the FSAlevy payers’ budget from about £20 million to £45million fundamentally arose from the Thoresenconclusions that we ought to have generic financialadvice being accepted by the service, accepted by theGovernment, and then a set of decisions by theGovernment that it did not want to pay for this out ofpublic expenditure, but wanted the FSA to levy for it.That is the essence of the story.

Q92 Mr Tyrie: It sounds as if you were not veryhappy with the horse trading that took place.Lord Turner: To be honest, the FSA board expressedpoints of view at various stages, to at least twoFinancial Secretaries, I think, to say, “Look, we haveconcerns about this, although we understand thelegitimate objectives that you are after and we alsounderstand the legitimate need to understand publicexpenditure.” On a couple of occasions, I have writtenletters to Mark Hoban saying, “Look, we will go along

with this, but just be aware the FSA board would liketo record the fact that it has not made an independentdecision that this is an end it would have pursueditself. It has accepted your right to say, ‘Here is a newfunction that you would like to give to the FSA,’ butit is not an independent decision that we have madeourselves. The board, on those occasions, overtlyasked me to write to the Minister and make clear thatthat was its concern.

Q93 Mr Tyrie: But you did not think of coming tosee us.Lord Turner: We did not, but I think it is veryappropriate and I welcome the fact that you are nowdoing a bit of a “drains-up” on this fully to understandwhat is going on.The other thing I would stress is that it would bewrong to suggest that the FSA board thinks that thepresent package is a mistake. It can understand theprima facie case for it. At each stage, it said, “Look,this seems to make sense to us.” It is simply that itfelt a bit uncomfortable ending up levying the industryfor something when, although it could see the primafacie case for it, it was not the prime mover onthinking out what it should be.

Q94 Mr Tyrie: We are hearing a message that theboard is dissatisfied, and I would have thought thatthat is something—Lord Turner: It has had concerns about the processthat we have expressed, yes.Mr Tyrie:—that either the Sub-Committee or mainCommittee is going to want to look at further.Lord Turner: Yes.

Q95 Michael Fallon: Lord Turner, you have astatutory duty to approve the services business plan.Have you looked at it?Lord Turner: Yes, we did. We considered the businessplan for 2012–13. We considered it at the boardmeeting in December, when the board was particularlyfocused on the issue of whether there were metrics ofsuccess. The board’s particular focus was to say, “Weare really not in a position to second-guess yourjudgment that you should shift to a more internet-based delivery, but what we want to see clearly inplace is a set of measures that you specify in advance,and that we as the board can then look at and say,‘Well, have you met those measures?’” That led to aletter from me to Gerard Lemos immediately after theboard saying, “We are approving the plan, but subjectto a greater specification of those metrics of success”.It then led to a letter back from Gerard Lemos to mesetting out what those are, and it also led to aspecification of the time scale we want to go throughin the run-up to the 2013–14 business plan over thenext six months, for which the board wants greaterengagement at an early enough stage really tochallenge the thinking of the MAS.

Q96 Michael Fallon: Let us just stick to the plan thatyou have approved. Did it not strike you as odd thatthis plan has only nine numbers in it in 24 pages?Lord Turner: I think that precisely reflects theresponse of the FSA board in December and the desire



to see more detail, in particular in terms of themeasures of success. The measures of success withwhich we were then provided gave us greaterprecision than is in here but, yes, there was a desire—and there will definitely be a desire this year on thepart of the board—to see more detail.

Q97 Michael Fallon: But you have approved thisparticular plan. Never mind the metrics, in a normalbusiness plan, wouldn’t you have expected to haveseen a proper budget of income and expenditure?Lord Turner: We did see a more detailed budget. Thepapers that we would have seen were a bit moredetailed—although not massively more detailed, Ihave to say—than the published document of thebusiness plan, so we did see some, and the FSA boarddid ask for more detail. However, I would have to saythere is also concern on the part of the FSA board,which I expressed in a letter to Mark Hobanimmediately after the board meeting in December, thatour responsibilities at the moment put us in a sort ofbetwixt and between stage, and the board has clearlyexpressed the view that, going forward, we would likeeither to move in the direction of the MAS becominga fully independent body directly accountable to thisCommittee and the Treasury, or to have moreoversight at an earlier stage. We have clearlyexpressed the view that we would like to head in oneor other of those directions.

Q98 Michael Fallon: I understand, but the statute isclear—you have a duty to approve this plan. You aretelling me now that you have approved the plan, butyou were not particularly happy with the weak detailof it.Lord Turner: The board felt that it had enough detailto approve the direction of travel. It is such a majorchange that the essence is based on an argument thatthe more effective way forward is to use a more web-based approach. It believes that there is a reasonableprima facie case that that is the case. It askedquestions about it and challenged it. There is a beliefthat it would not be possible for the FSA board itselfto dive into huge details without becoming, as it were,the board of the MAS, which has been set up as aclearly independent body. We therefore exercised thesame oversight in relation to this body that weexercised in relation to the FOS and the FSCS, forexample, but it is, bluntly, more difficult because thewhole thing has been a moving story during which, asI mentioned earlier to Mr Tyrie, the MAS has beengiven a series of extra responsibilities over time. Wefelt we had enough material and enough verbalexplanations that we could say, “Yes, this is in linewith what the Government wanted out of the Thoresenreview. You have to make the judgments as to what isthe operationally most effective way to deliver that,but we want a clear set of metrics by which we canmeasure whether you then deliver what you say youare going to deliver”.

Q99 Michael Fallon: You are spending around £80million this year on the two different services. Do youknow what proportion of that £80 million goes onrunning costs?

Lord Turner: On the element of the Debt AdviceService, which is of the region of £30 million, the vastmajority is for a set of contracts with another set ofagencies, such as Citizens Advice, so you can’t reallybreak down what is employment cost. Theemployment cost is down in the deliverers, but I amsure that that cost will be significant, because theyare providing a face-to-face service, so by definitionemployment cost will be a large element. If we comeback to the element of the £46 million, including thatin 2012–13, the figures are set out, and the direct staffand associated costs, as I understand it, are £6.6million.The bigger issue that people have raised is that thelarge chunk of the budget is on marketing andadvertising expenditure—that is where the really bigfigures are. I think those almost automatically comefrom a decision to go down a web-based route.Having decided to go down a web-based route, youdo need to build initial awareness of that so thatpeople come to those websites and use them but,broadly speaking, the approach that Gerard Lemosand Tony Hobman have pursued is to reduce theelement of direct labour cost through—indeed—making a number of people redundant and investingmore in web delivery and communication. Again, Iwould say we did go through that in the FSA board.We asked questions about it. There was an acceptancethat there was a reasonable case in principle of whythat was the correct way to go, but we are not theboard of the MAS itself, so we did not subject it tothe same degree of precision that you would expect ofthe MAS board itself.

Q100 Michael Fallon: You approved theremuneration of the board’s members. What made youthink that a salary greater than that of the PrimeMinister, the Chief of Defence Staff or the Lord ChiefJustice was appropriate for this chief executive?Lord Turner: The chief executive salary was set onappointment in February 2010, and it was proposedby the Executive and those involved in hiring MrHobman, in the light of his previous remuneration andwith a point of view on what was required to persuadehim to move to this job. It was also set by cross-reference to the then salary and remuneration of thehead of the FSCS, which was seen as the nearestcomparable body. It was decided by our remunerationcommittee, chaired, as it is, by what is called the headof NedCo. The FSA has an arrangement where thechairman—myself—is not a member of the NedCo ora member of the RemCo, because, apart fromanything else, they set my remuneration. I was notinvolved in the detailed decision at that time, althoughI was informed of it. As I say, it seemed to fit in witha comparison of an equivalent daughter organisation,the FSCS. Having said that, I do support what MAShas subsequently done, in that I think that the boardof MAS has somewhat moderated that, because I thinkI would agree with you that, in retrospect, the decisionprobably pitched it a bit too high.

Q101 Michael Fallon: A bit too high?Lord Turner: Yes.



Q102 Michael Fallon: You spoke about the metrics.What are you doing as the FSA to ensure compliancewith the budget as the financial year unfolds? Are youtesting these metrics three-monthly, half-yearly orwhatever?Lord Turner: No, we are not testing them three-monthly—

Q103 Michael Fallon: Are you requiring budgetinformation on outcomes and out-turn?Lord Turner: No, we are not requiring month-by-month or quarter-by-quarter, because that really is therole of the MAS board rather than ours. Realistically,I would be very surprised if we end up at the end ofthe year with significant overruns, and obviously wewould be very concerned about that. As foreffectiveness, I think we are in a difficult situationhere, because they have made a strategic decision tochange quite fundamentally the model of delivery andthey are launching that now. Once they have launchedthat, it will take us some time to work out howsuccessful they are, but I think by the time we get toDecember’s discussion of the FSA board, we willwant to get detailed information on what is known sofar about it. One of the things that we do have withinour powers is to request a more detailed value-for-money audit using an external body to go into muchgreater detail than the board can simply by listeningto presentations. Our intention is to ask for such avalue-for-money audit probably in the first half of nextyear. The decision was made that there was no pointin doing a value-for-money audit for this half year ofa model of delivery that is to be fundamentallychanged. The new model has to be launched and wewill have to see how it is working. At that stage, itwill be possible to go in to determine how effectivelyit is working. We were therefore of the belief that theappropriate time for a more detailed value-for-moneyaudit would probably in the first half of next year.

Q104 Michael Fallon: So that will be after twofinancial years.Lord Turner: Yes, that will be after two financialyears, including one in which they have nowfundamentally changed the model from what it wasbefore.Michael Fallon: Thank you.

Q105 Mr Tyrie: Lord Turner, have you expressedyour view that the remuneration was set too high toanyone in the FSA?Lord Turner: No, no. I will be—

Q106 Mr Tyrie: Why didn’t you raise it with theboard?Lord Turner: I am saying it in retrospect. At the timeI was informed about it, I did not look at it. Let mebe clear, I am not saying that at the time I said, “Thisis a bit too high,” right? I did not do that. You areasking me now as I look at it in retrospect, and I cansee why I think it was pitched somewhat high, relativeto what it would and should be. I think the MAS boardhas done a good job in recalibrating it somewhat. Atthe time, I left it fundamentally to the process of theRemCo, and they seemed to have a reasonable basis

for thinking about it as comparable to other jobs inthe FSA family. To be honest, I did not dive into allthe details of operations or all the aspects of it, and itwas directly comparable with the then chief executiveof the FSCS, or very closely comparable. The figureswere £250,000 versus a figure of £235,000, and Ithink that the £235,000 then became £250,000 in thesubsequent year.

Q107 Mr Tyrie: It is still a sizeable slug of moneyfor an important post. Do you not think that this issomething that you should have raised with theboard—not at that time, but at the time that you cameto the view that it was too high?Lord Turner: But that is really thinking about thisover the last couple of days in preparation for this, Ihave to say. With that having been set at that time,and it having been handed over to the MAS, it wouldbe absolutely true to say that, for the past two years,the issue of the chief executive salary at the MAS hasnot been something that I have been focusing on atall, to be honest.

Q108 Mr Tyrie: Do you not think that the financialdetail that Michael Fallon feels is absent from thedocument, some of which was presented to the boardbut is not in the published document, should now begiven to Parliament?Lord Turner: We could look to do that, yes, althoughI think it would really be for the MAS to provide. Icannot immediately remember what extra level ofdetail there was, but my memory is that there wasmore detail than this. I have not gone back throughthe board papers, but there was more, or certainlythere was in questioning to Gerard Lemos and TonyHobman.Mr Tyrie: May I suggest, Chair, it would be helpfulfor the Sub-Committee to see that?

Q109 Mr Love: Can you just confirm, Lord Turner,that the contract under which the chief executive wasemployed made sure that he paid his full amount oftax and national insurance?Lord Turner: Yes. I do not think the FSA has everbeen involved, to my knowledge, in arrangements thatare designed to avoid tax or national insurance. As Isay that, I am hoping that nothing will emerge fromthe woodwork, but it is certainly not our intent to usethings that are tax or national insurance-avoidingmechanisms.

Q110 Mr Love: There has been some surprise thatthe budget for financial advice that went through theFSA included a not insubstantial increase. Was thereany debate in the FSA board about whether it wasappropriate to levy an increase on members, and didyou have any consultation with MAS about the levelof the increase and whether it was appropriate?Lord Turner: As I say, the commitment to theincrease came fundamentally from the Government,and it would be true to say that at various meetingsof the FSA board, when we were presented with theproposition from Government—“We would now likeyou to take responsibility for a set of proposals whichcame out of the Thoresen review”—there was a



considerable back and forward about should we bedoing this, or should it not be something that isentirely under our control. There were therefore, as Isaid, a number of letters over the years betweenmyself and Mark Hoban, and particularly one of themiddle of last year in relation to the Debt AdviceService.

Q111 Mr Love: Let me just interrupt you there. I amnot talking about the fact that the financial servicesindustry ended up paying the whole amount related tothe MAS. There has been an increase from the firstyear to the second year—I think it is £43 million to£46 million.Lord Turner: To £46 million, yes.

Q112 Mr Love: There was just a little surprise thatin the context of the overall situation with publicexpenditure and the financial services industry, theyreceived an increase. Was there any discussion aboutthis?Lord Turner: Yes, there was. My memory is that thedebate was about the proposition by MAS that therewere some one-off costs in the development of thewebsite, which you can see on page 12 and 13—theyare called “£6.6 million one-off costs”. Once theywere in place, it would be possible to proceed for anumber of years without any further increases, and theproposition to us was that you invested in technology,better websites and website delivery, rather than apeople-intensive delivery, and that it is the nature ofsuch a proposition that you tend to have upfront costs.When we went through that—and I do remember ushaving the debate—there was a feeling that it was areasonable proposition. It is, as I say, inherent in thenature of a web development that a lot of the costs areupfront and, in that context, a relatively modestincrease followed by a flat level thereafter seemed areasonable business proposition to deliver what hadbeen asked for.

Q113 Mr Tyrie: The more I hear about theseexchanges with Mark Hoban, the more I think theCommittee ought to take a look.Lord Turner: Yes. We would be very happy toprovide you with those letters.

Q114 Mr Tyrie: Perhaps you would also supply us,should it be required, with any additional informationthat you have about telephone conversations and thechronology of events that led to the decisions thatwere taken to move this on to the levy and off publicexpenditure.Lord Turner: There may not be perfect records of allthose telephone conversations now.Mr Tyrie: I understand.Lord Turner: But, certainly, yes.Mr Tyrie: With that health warning, it would just behelpful to see what happened here. Thank you.

Q115 Chair: Lord Turner, you mentioned this almostas though it was leaving you. Who is going to beresponsible for MAS in the next couple of years? Youwere trying to palm it off to us. It is not aresponsibility I would turn down, but go on.

Lord Turner: Well, let me be completely open abouthow we see it at the moment.Chair: I am hoping you are open.Lord Turner: We are always open. There is a letter toMark Hoban of 14 February from myself—it isessentially from the board, and written on behalf ofthe board. It says that we have debated two alternativeapproaches: a fully independent MAS with nooversight role for the FSA; or a much more integratedmodel where the MAS is fully accountable to theFCA. It then says, “We recognise that at the momentyou don’t want to move towards the independentroute, and as for the FSA/FCA taking greater controlof it, although is a possible option for the long term,it is not something that we would suggest over thenext year and a half”, because bluntly the FCA hasenough things to do to get going with the rest of itsactivities. What we suggested was that the options ofgoing one way or the other should be considered inabout two years. In the meantime, we are committedto making the present rather intermediatearrangements—and, to be clear, from the FSA’s pointof view somewhat unsatisfactory arrangements—workas well as possible. What we are going to do is say,“Look, this isn’t a situation that we greatly welcome.We feel we have been left in a slightly intermediateposition of having responsibility without full control,or without enough control, but we will try to work ascollaboratively and effectively as possible withMAS.” We therefore have defined more detailedengagement than before on the development of thebusiness plan for this year, and we are working on atrilateral framework document with HMT, ourselvesand MAS that will specify more clearly the differentroles that we should play. I would say that, for thenext two years, we really don’t have an alternativeexcept to make the present situation work as well aspossible, and we will do that—we will put in extraeffort and commit extra resources internally to do so.

Q116 Chair: Yes, but better than you have in the pasttwo years?Lord Turner: We will increase the intensity. Well,here is one of the challenges—

Q117 Chair: But don’t you think you should havefor the year 2012–13?Lord Turner: No, I think we have done an adequatejob in line with our formal required role, which is—

Q118 Chair: Right. Well, let’s go back over whatMichael said. If I had been sitting on the board andexpenditure was going to double, because of the waythis worked, to £43 million and up to £46 million, andif I looked at the detail, as Michael has done, anddiscovered that, out of £43 million, you were going tospend £20 million on marketing a website, I wouldhave had to say that, in this day and age, I do notunderstand why you were not tougher with theGovernment. You are representing an industry andcaring about an industry, but what the Governmenteffectively did was to throw 20 million quid at thisand get the industry to pay it, and you accepted that—that was the first thing. The second thing is, asAndrew suggested, that you let through a 5.7%



increase in the budget. Now, can you name aGovernment Department that received a 5% increasein its budget in this financial year? I know you did,but you are not Government.Lord Turner: As I said earlier in response to Mr Love,I think that the increase over the past year from £43million to £46 million, which we did pore over atlength and ask questions about it, is justified in termsof the commitment to move to a more web-basedapproach, which inherently involves one-offs.Essentially there are things that, under a differentaccounting model, you might put as capital rather thancurrent expenditure, but—

Q119 Chair: No, you are mixing it up. There areadditional sums in this budget for the digital work—for the work on the programming or whatever. Thereare additional sums. I went through it on the train thismorning, and I think the poor customers get about £15million out this £43 million. The rest is internal, soyou are allowing them to spend £20 million onmarketing themselves and then another lump ofmoney—millions of pounds—for the fundamentalchange of going digital, and you then wonder what onearth is happening to the education and the financialadvice side of affairs. If you want to know where Ithink you might get costs down, what about all theseredundancies. How much were the redundancies? Doyou know, because nobody in the public can get thefigure from MAS? What was the cost of making thestaff redundant? You are the overseer. You areresponsible for that; you look at the budget.Lord Turner: Let us be clear: we are not the board ofthe MAS. It has been set up as an independent body,subject to our ability to cast an eye over the budgetand approve it. It is not for us—or at least this has notbeen our interpretation—to dive into the details ofwhat should be the operational model and what shouldbe the balance between face-to-face and web, and ifwe had been doing that—

Q120 Chair: Long term. You do not have to delveinto the budget to see that a sum of £20 million outof £43 million is for marketing. You do not have todelve in the budget. Do you mean to say that the boardof the FSA went through that budget and businessplan and saw that £20 million, but thought, “It is toominor a matter for us to get involved in”?Lord Turner: No, there was a challenge. There was,“Why do you want to do this?” and “Let’s hear theproposition,” but once you have decided that you wantto go down a web-based route, it is in the nature ofthat that you have to make people aware of it so thatthey come to that web base.Can I pick up one question from before? You askedwhether we should we have been more forceful insaying, “Why are you shifting this stuff from publicexpenditure to the levy base?” Of course, theGovernment made a decision years ago that the wholeof financial regulation would be on a levy base ratherthan on public expenditure, as is the case in manyother countries, and they have a right to do that. Giventhat they have a right overall to say that the approachto the base load of the FSA regulation is on levypayers, not public expenditure, I think they clearly

have a right, if they want, to say, “We are going tolegislate that these are functions that are handed to thelevy payer in future”.

Q121 Chair: Let us just look at that. You thoughtthat at a time when all Government Departments andlocal government were having no increases or 1%increases, a 5.7% in budget was acceptable. You alsothought that £20 million spent on marketing wasacceptable. You thought that paying the chiefexecutive £250,000, plus another £100,000 in otherbenefits, was acceptable for an organisation of 80people. I thought that light-touch had gone.Lord Turner: Our interpretation of our responsibilityfor MAS is that it is an independent body with its ownboard, which is now fundamentally responsible. Wehave to cast an eye over it. We have to challenge andask questions, but we do not have a detailedinvolvement in the development of the plans. If weare to do that—

Q122 Chair: No, not the development, but you haveto agree it. Now, do not flannel: you have to agree it,and you agreed it.Lord Turner: We did agree it.

Q123 Chair: But now you are saying that you don’thave any responsibility for it.Lord Turner: No. We did agree it, and we thought itwas a reasonable proposition, but we absolutelyflagged that we want—

Q124 Chair: Which one are we talking about now?Lord Turner: The extra expenditure.

Q125 Chair: The 5.7%.Lord Turner: Yes, the 5.7%, because—

Q126 Chair: Why? How was that reasonable in thecontext of public expenditure at the moment?Lord Turner: Because it involved these one-offtransition costs to shift the model. Well, that was theproposition that was put, and I think it is not anunreasonable proposition.

Q127 Chair: But it is not true. You just have to spendfive minutes with the budget to see where the costsfor going digital are, but on top of that, as I say, thereis £20 million, so do not say, “Oh, they got 5.7% butthey had a lot of transitional costs”. They hadtransitional costs the year before—the transitionseemed to last a long time. They have two figures ineach year for transitional costs, so the 5.7% wasfree—gratis, for nothing. I do not know why youagreed it.Lord Turner: I don’t agree with that, because I thinkwe were presented with a case that we thought wasreasonable and that involved—

Q128 Chair: What is reasonable about 5.7% whenthe Home Office is 1%, the Treasury is 1% and theCabinet Office is 1%? What is so reasonable about5.7%? Tell me another Government Department thatreceived a 5% budget increase. Don’t you think thatthe Home Office, DECC and BIS all had good reasons



and arguments for increasing their expenditure? Butyou pluck this department out and give it a 5.7%increase; we are just asking why.Lord Turner: I tried to explain the logic, which waswe believed that they were going through aninvestment phase that would then enable them tomove to a new model—

Q129 Chair: So you made a mistake. We willaccept that.Lord Turner: No, I am not saying that on this one. Iam saying that we are uncomfortable with ourintermediate level of responsibility for this. We aregoing to make it work by greater concentration infuture, but we still thought when we went through itlast time, on the evidence and the informationavailable, that the fundamental proposition ofspending some development money on the website inorder to move to a new model was reasonable. Thatwas the judgment made by the FSA.

Q130 Chair: Lord Turner, we have heard that. Let usaccept that you do not think you made a mistake, butI think it is a scandal that this budget was allowed togo through by the FSA.Now, one of my questions was who is looking afterthis next year. Is it still the FSA, because that is howI understand it? Will you agree to look at the FinancialServices Act, see what powers you have, and makesure when you come before this Committee next year,you will have examined the budget a bit more deeply?Lord Turner: Yes, we have set out a clear programmeover the next six months of a deeper engagement. Wedo not think that that is what is implied by the termsof FSMA, and the engagement we are seeking iscloser than, for instance, we have with FOS andFSCS. Essentially, we have treated this in terms of theamount of board time that we devote to it and thedegree of information and challenge that we have. Wetreated it as equivalent to FOS and FSCS, which aremodels that have worked in the past. I think what wehave found is that when we are going through anorganisation that has been given whole new functions,the issue is that semi-independent status is a bitunsatisfactory, because it is not clear to us that wehave the ability to dive in and make the overallstrategic decisions that our judgment—

Q131 Chair: But the new functions were a differentpart of the budget altogether. We have not mentionedthat. We are talking only about money advice. Themoney that came from BIS in terms of debt advice isanother budget altogether.Lord Turner: No, but they were completely newfunctions over the previous year and a half or so. Theywere not functions that we owned back in 2008–09and, as I say, our own budget that we had set was£20 million before we transferred those people overto MAS.

Q132 Chair: Just to bring me peace, you will look abit more closely at the budget next year, won’t you?Lord Turner: Yes.Chair: Yes.

Lord Turner: We think that we will be going beyondour formal legal requirements in order to make anunsatisfactory situation work, and that is honestlywhat we will be trying to do.

Q133 Mr Love: Mr Wheatley has been sitting veryquietly so far, and I wanted to seek some reassurance,because the time scale we are talking about for thiscloser relationship, pending the final decision byMinisters on the future of MAS, is that the FCA willhave that closer relationship. However, Lord Turnerhas already indicated that the FCA has some majorissues that it has to resolve in terms of setting up andgetting itself up and running effectively. Can youreassure this Committee that those two things are notincompatible—that they can be done together?Martin Wheatley: Yes, they can. As you know, we aregoing through a fairly major change programme, andthe creation of the successor bodies is our primaryfocus at the moment. I think what Lord Turner hadsaid is that if there were an appetite for, and a decisionon, the FCA going forward to have more oversightother than that prescribed in legislation, it would besomething that we would have the capacity to take onin perhaps two years; in the meantime, we simplyhave to tighten up the oversight that we currentlyhave. We have asked MAS to provide much moredetailed metrics to us as to how we judge success. Ithink one of the points that has not really comethrough today is that it is still very much a start-up,and it is very hard to judge value for money in a start-up because we are in the investment phase. Thebenefits will come in subsequent years. What we wantto be clear about is what metrics will allow us to judgewhether we are getting value from it, so we willtighten up our oversight within the powers that wehave. It is an uncomfortable position. If there is adecision to change that, we will welcome thatdecision, but that would be, in our terms, some timeafter we have managed the transition to the newFCA body.

Q134 Mr Love: We are getting an impression ofwhat has happened today, and while I understand thereasons why the FSA took its eye off the ball inrelation to MAS, I do hope that that will not happenwith the FCA. You seem to recognise that there needsto be an enhanced role from FSA—FCA. I hope thatyou will be able to provide that going forward.Martin Wheatley: Absolutely, and it is very clearfrom this discussion and others that as it moves intoan operational body—I stress that it is still a start-up—we will need much clearer levels ofaccountability as to what the objectives are and whatthe money buys, and that is something we aredeveloping at the moment.

Q135 Michael Fallon: You said a moment ago, LordTurner, that you were not clear about theresponsibilities of the MAS, but looking at the Act,that does seem very clear. You are the only body thatis responsible for varying the plan.Lord Turner: Varying the plan. I think we areresponsible for approving the plan.



Q136 Michael Fallon: No, it says, “The ConsumerFinancial Education Body may with the approval ofthe authority vary the plan”, so you must thereforeapprove any variation to the plan.Martin Wheatley: I think that is correct. With thedraft that you have—I do not know if that is the earlierdraft with the CFEB—the powers that we have are toappoint the chief executive, to appoint the chairmanand to approve a budget—and, by definition, toapprove variations to the budget—so I think that iscorrect. However, that is different from intervening toinstruct what the plan should be.Lord Turner: I think what that is saying is that if theyset a budget at the beginning of the year and then wantto change the budget during the year, we would haveto change or approve the variation in the budget. Thatis how I would interpret that word “variation”. I donot think that means that we are in charge of re-designing the budget that is set out. That has not beenour interpretation.

Q137 Michael Fallon: It seems clear to me. It says,“The annual plan must set out how its resources areto be allocated”, and you have to approve that?Lord Turner: We do have to approve that, yes.

Q138 Mr Tyrie: Yes. Just to be clear, you wouldhave only one person allocating a budget at any giventime. You cannot have a load of people simultaneouslythinking that at one point in time they have altered thebudget and allocating any resources they like. At theend of the day, one person takes a decision, and thatcan only be the person who has the power to vary thebudget. A budget is in place until it is varied.Someone comes along and varies it and, in this case,it is absolutely clear that that person is not anybodyelse but you. It says here very clearly that the budgetis varied only with your approval.Lord Turner: Yes, but I do not think there has beenany variation. Clearly, we agree the plan that is set outat the beginning of the year, which is also the budget.If, halfway through the year, they wanted to say, “Wedo not want it to be £46 million; we want it to be £52million,” they would have to come back to us and say,“We want to vary the budget,” and we would have todo that. I am not sure that the word “vary” addsanything here to approval. We clearly have to approvethe budget that is set to us.

Q139 Mr Tyrie: Who is in charge of this budget?Lord Turner: They are in charge of this budget.

Q140 Mr Tyrie: They can do what they like with it?Lord Turner: No, they cannot. If they came back atthe end of the year and said, “Halfway through theyear we thought we would like it to be £52 million,not £46 million, so we have spent £52 million,” wewould have to say, “No, that was unacceptablebehaviour because we agreed a budget of £46 millionand if you wanted to vary it, you should have comeback to us.” That is how I would interpret what isintended by variation. I think the crucial thing—honestly, I do think that this issue of the word“variation” is a minor technicality—is the approval. Itis how much detail should we go through in the

approval, which I think is a legitimate question foryou to ask. We have used the model of the FOS andFSCA oversight, which has not involved us divinginto trying to second-guess the fundamental strategicchallenges that they have made. We have gonethrough a process of kicking the tyres a bit, askingquestions and satisfying ourselves that there is areasonable prima facie case, but with them, ultimately,it is the body that is operationally responsible formaking the decisions. That is how we have interpretedit, and that is what we have set out in the variousletters that you will see to Mark Hoban saying, “Thisis our interpretation of the limit of our powers and wefeel ourselves in a slightly unsatisfactory intermediateposition.” That is where we have been.

Q141 Mr Tyrie: Clearly you are not happy with thestatus quo, so I do not know why you aresimultaneously defending it.Lord Turner: What I am saying is that we are nothappy with the status quo, but we think that, withinthe imperfections of the status quo, we have tried toexercise our powers in a responsible fashion. Withinthe limits of the status quo, we are now going tointensify the best—

Q142 Chair: Lord Turner, you can talk for Britain,but let us just say this. MAS says its budget this yearis going to be £47 million and you close your eyesand say, “£47 million; everybody agree?” Everybodyagrees; you have fulfilled your responsibility. What isthe alternative? The alternative in the ordinary worldis that as you are responsible for that budget and, asyou are saying, you are answerable for that budget,you must look at the budget. I do not expect you to,but you must employ somebody who goes through thebudget and then passes you a note saying, “Do youknow they are putting up a faster rate of inflation? Doyou know they are intending to spend £20 million”—I think the rumour is—“for the next three years onmarketing?” Even if you do not share my view thatthat is outrageous, if you did feel that, are you aresaying to Mr Tyrie that it was not your job to say, “Goback and fix it again because our board, the FSAboard, is not approving this.”?Lord Turner: We thought it was a reasonable plan aspresented and subjected to our challenge. We do notthink that there is anything necessarily wrong with thefundamental proposition. We believe that as we moveinto implementation, it should be looked at verycarefully, and that is why—in a way that we think issomewhat stretching the definition of our powers—we have agreed that we will significantly increase theinvolvement this time round in the run-up to thesetting of the 2013–14 budget and plan. That is theway we have tried to proceed on this business.

Q143 Mark Garnier: Three quick questions, if Imay. Martin Wheatley, can I go back to interest rateswaps? When I was a regulatory compliance officerabout five or six years ago, I remember that you hadto do quite an extensive client classification to makesure that the right product was being sold to the rightlevel of client. Have the rules on that changed in thelast five or six years?



Martin Wheatley: The introduction method and theEuropean directive changed client classification to adegree so, yes, there were some changes in 2005, butthere still is a requirement. There is an absoluterequirement to categorise a client.

Q144 Mark Garnier: My question is this: as part ofyour investigation into what is going on with theseinterest rate swaps, will you be looking at theclassification of clients that have been sold thisproduct with the view to seeing if they have been mis-sold it as a result of not being the right pay grade, ifyou like?Martin Wheatley: Yes, absolutely.

Q145 Mark Garnier: Fantastic. Thank you verymuch.A question to both of you. Lord Turner, you saidearlier that you thought that financial education wasinadequate in this country. Do you think that weshould be putting financial education on thecurriculum and, if we do, should we be testingfinancial education, or do you think we should just beputting it into maths and PSHE in terms of thequalitative side of it?Lord Turner: That is asking us to speculate onsomething beyond our area of responsibility, althoughI accept that.

Q146 Mark Garnier: In your opinion.Lord Turner: In my opinion, I think it would bevaluable. It is important for people to have good basicmaths, and the reason why it is important to have goodbasic maths is for operating both in the work placeand as consumers. A crucial element of operating asconsumers that requires maths is the ability tonavigate the most straightforward elements of whatcompound interest is, how it works, what percentagesare and how to make sense of the data coming in. Ithink it probably follows that if we are going to try todevelop those skills, they have to be put into aprocesses through which we test whether those skillsexist. So, yes, I broadly agree with you.

Q147 Mark Garnier: So in the curriculum.Lord Turner: That would be my tendency.Martin Wheatley: Strongly, my personal view is thatit should be. This is a life skill, and it is increasinglyimportant given the needs of individuals and theeconomic trend of individuals having to take care oftheir long-terms savings and long-term pensions. It isirresponsible to have a system that does not equippeople with those skills when they leave school andas they start their first career.

Q148 Mark Garnier: Fantastic. Thank you.My third question is very wide-reaching, but it is morephilosophical. For the past hour or so, we have beenchatting about the MAS and a lot of fine details of it,

but it has been re-organised several times and hasbeen in its current form only in the last 18 months totwo years. It is costing so much money, and the costof regulation in this country is extremely high—Ithink the highest in the world. We are burdening firmswith yet more costs in terms of things like the RDR,which I have some views about. In addition, there arelarge numbers of existing organisations that providedebt and money advice. Given all those facts, mysimple question is this: what is the point of the MAS?Lord Turner: That is easiest to answer in relation todebt advice, because it is important to realise that thebudget it is in charge of for debt advice is notduplicating—these are people who are alreadyprovided. It is the co-ordinator, the commissioner andthe conduit for the money, but it will be giving moneyto citizens advice bureaux in the future, so we cannotargue that you are spending a separate pot of money.It is the same pot of money and it has a co-ordinationprocess, which I think that is reasonable.If you go back to the £46 million that is spent on theinvestment advice side, it is important to work outover time the relative role of that public service versusthe stuff that is privately provided or charitablyprovided. It is the case, as I understand it, that thereis an attempt to use its own website intelligently torefer to other websites that are useful sources ofinformation. That routing is a part of an intelligentdesign to use the system to best effect, but as we rollforward, I think that those are questions that we willhave to talk about. What is the correct balancebetween it doing its own generic advice versus beinga signposting to stuff that is already available?

Q149 Mark Garnier: Indeed, a kitemark—Lord Turner: Or it could kitemark it, yes.

Q150 Mark Garnier: This is an important point,because the FSA is there to require all the peopleinvolved in the financial services industry to reach aminimum standard, but there is nobody in the FSAwho looks for excellence, and there is no opportunityfor MAS to be an organisation that seeks outexcellence, rather than necessarily trying to replicatea lot of what is already going on.Lord Turner: That could certainly be the case. I thinkthat is something in our ongoing debate with MASthat we will take into account, but I think it is aboveall a question to direct to the MAS management andboard themselves, who I think are about to come in.Chair: Lord Turner, thank you very much for yourevidence this afternoon. Thank you, Mr Wheatley. Iam sure we will see you again on this subject.Lord Turner: Thank you very much.Martin Wheatley: Thank you.Chair: We will hear from MAS straightaway. We willnot have a break, because there is a strong possibilitythat there will be a vote at about 4 pm.



Witnesses: Gerard Lemos, Chairman, Money Advice Service, and Tony Hobman, Chief Executive, MoneyAdvice Service, gave evidence.

Q151 Chair: Are you sure you want to go aheadwith this?Gerard Lemos: We are delighted to have theopportunity to explain what we are doing.Chair: I see you are the man responsible. Now, I willapologise, because chances are that we will have tobreak in half an hour. We will then have a break forsomething like a quarter of an hour, and then we willcome back. I think we have the room until 8 pm, soyou are okay; we will not do an FSA on you.

Q152 Michael Fallon: Mr Hobman, Lord Turnerclearly thinks you are paid too much. Will you betaking a cut?Tony Hobman: As he mentioned, I have already hada qualification in my remuneration, and indeed waivedmy bonus in full. I continue to believe that I am takingthe job in good faith at the rate that I am paid, andthat I should and can demonstrate value for that. Myfocus is entirely on continuing to do so. I am veryacutely aware that this is a substantial sum of money;I do not take a penny of it for granted.

Q153 Michael Fallon: But he says that you are paidtoo much? Are you not going to reflect on that?Tony Hobman: I have already reflected to the extentthat, as I said, my remuneration has been reduced.Clearly we have a governance process through myboard, and if that is a discussion that it wishes to havewith me as a result of any further input to the process,I will listen to that.

Q154 Michael Fallon: Let us ask your chairman.You heard what Lord Turner said. Do you think it isappropriate that the chief executive is paid more thanthe Chief of the Defence Staff?Gerard Lemos: I am not sure that those two jobs areprecisely comparable but, as Lord Turner explained,this was all decided before the Money Advice Servicewas formed—certainly many months before I cameon the scene—and it was set in relation to benchmarkswithin the FSA’s family. I do not have anything to addto what he said about how the figure was derived. Asto whether it is too much, I think what I would sayabout that is that we would not want to set theremuneration at a level that excluded people with acommercial background. In order to make this thingwork—no doubt we will go on to talk more aboutwhether it works, and how it could work better and soon—we do need people with the right skills. If thepost was to be vacant again, which it is not and wedo not anticipate that it will be, the RemunerationCommittee—I do not chair it, but I am an ex-officiomember—of the Money Advice Service will take aview on what remuneration would be needed to attractsomebody who could make a success of the job. I amafraid that that may be more than the Prime Minister’spay, although I would not want to pre-judge it at thisstage.

Q155 Michael Fallon: But Lord Turner has judgedit. He is fairly aware of what financial skills and

commercial skills are priced at, and he thinks it is toohigh. Why don’t you?Gerard Lemos: I think it is a lot of money and weshould expect a lot for it. As I say, we were notinvolved in the setting of it, and it is not inconceivablethat if we were looking at it again, perhaps we wouldnot start at the same place.

Q156 Michael Fallon: You think it is too high aswell?Gerard Lemos: I think it is a lot of money, yes.

Q157 Michael Fallon: If you were doing it again,would it be lower?Gerard Lemos: I would not want to give you thatundertaking now, but I am very happy to give you anundertaking that we would start with a clean piece ofpaper in the event of the post being vacant, althoughthe situation at the moment is that Tony has a contractand I think it would be wrong of us to alter the termsof that contract. I think it would be wrong of me toundermine his position by now saying that those termswere wrong. I am not in the business of breakingcontracts. The other thing I should say—Lord Turnerhinted at it, and Tony mentioned it, too—is that Tonydid not take a bonus for 2011–12, and he also movedto the new terms and conditions that we establishedwhen the new organisation was set up. I think the netcost to him—this is all set out in our evidence—was£25,000 or £30,000, so his net remuneration is alreadysubstantially reduced, and that is within the terms ofhis contract. As I say, however, if the contract wasstarting afresh, we would look at it afresh.

Q158 Michael Fallon: The other funding bodies withwhich we deal are all having to reduce theirexpenditure, but your budget increases year on year.Why have you not been making savings likeeverybody else?Gerard Lemos: Perhaps a little bit of background thatLord Turner did not explain would help theCommittee. When Otto Thoresen reported to the lastGovernment on the need for preventative financialadvice service, his estimate was £56 million, whichthen came down to £50 million in negotiationsbetween the FSA and the Treasury. I think that thosenumbers are right, but we can certainly confirm them.Then the process arose of how it all came to be fundedby a levy, which Lord Turner described. In fact, whatis happening is that we are spending less thanThoresen envisaged, and indeed less than was it wasoriginally suggested was needed for preventativefinancial advice service. That said, I recognise that thebudget did rise from last year. I would want to assurethe Committee that we do not anticipate that it willcontinue to rise.The real point about all this is that there is a massiveadvice gap in this country. There are a lot of peopledoing a lot of good work. There is the CAB service onthe one hand and there is IFA on the other. Thoresensuggested that the advice gap was 19 million adults,and that is the gap that we are trying to fill. How much


20 June 2012 Gerard Lemos and Tony Hobman

it costs to fill such a massive gap is something wecould debate and, to some extent, the cost depends onhow you seek to do it—whether you seek to do itpartly online and face-to-face and so on. No doubt wewill come to all that in due course.

Q159 Michael Fallon: We will, but we just have tostick to the questions I asked. Just sticking with thebudget, are you now telling us that you are going tofreeze the budget in future years?Gerard Lemos: I think it may even come down a bit.Our forecast is that it may come down.

Q160 Michael Fallon: It may come down a bit. Youprovided very little information on the overallbusiness plan for both the service as a whole and thedebt advice service. Will you be producing more datain future business plans?Gerard Lemos: Yes, I think we will. I think we havelearned from this experience. I can explain to theCommittee how this came about. We have a lot moredetail. I understand that we have supplied some moredetail to the Committee already, and we wouldcertainly be willing to supply more, if required. Oneof the features of the statutory framework withinwhich we operate is that we are obliged not just tohave a business plan and to get it approved by theFSA, but to publish it. We took the decision—youmay say that this was the wrong decision—that weshould publish a business plan that would be forpublic consumption, rather than our own internal use.We do have a much more detailed plan for our internaluse and we did share some of it with the FSA, as LordTurner explained, but I would not want the Committeeto think that all that was available was what waspublished. As this is early days for a new service—asMartin Wheatley said, we are a start-up—we reallywanted to get the narrative out of what we wereseeking to achieve. To answer your question directly,if there is a wish on the part of the Committee, orindeed anyone else, that we should publish moreinformation and more details in our business plan—and indeed publish it in a draft form—we should bevery content to do that.

Q161 Michael Fallon: You seem to saying that youhave a business plan, but because you had to publishit, you took all the figures out of it?Gerard Lemos: I did not quite say that, if I may say.We certainly do have all the figures and, goingforward, we are certainly willing to publish more.

Q162 Michael Fallon: Why don’t you publish a planfor more than one year?Gerard Lemos: Because we have to get this approvedon a year-by-year basis by the FSA, so any plan weproduce for longer than a year would be subject toapproval by the FSA. That said, I am very happy topublish draft plans for years 2 and 3. We certainlyhave those plans and I would be very happy topublish them.Michael Fallon: Thank you.

Q163 Mr Love: Can I turn to the vexed question ofexpenditure on marketing? Something like a quarter

of your total expenditure, including that for debtadvice, goes on marketing. How do you justify thatexpenditure and, secondly, how will you measure theimpact?Gerard Lemos: We are spending a lot on marketingand that goes back to this massive advice gap. I wouldsay that the success of the Money Advice Servicedepends on closing the savings gap, or at least goingsomeway towards doing so, and making some impacton the pensions gap through auto-enrolment. Wetherefore feel—and this is the strategic decision thatmy board took, which Lord Turner described—thatwe need to reach a lot of people even to begin with,as we do not think that you can reach 19 millionpeople, which is the advice gap. In its model, the CABcurrently reaches 2 million people, I understand, andonly one in seven of the population has an IFA, sothere is the huge gap in the middle, and that is the onewe are seeking to address. That is the rationale for ourmarketing spend and also for beefing up our digitalstrategy. We want to have a web proposition that ismore than a website—very different from what wecurrently have—which allows people to take decisionsand action, and we feel that people need to know it isthere. If we spend our entire budget—except for staffand core operations, which comes to about £9 millionor £10 million—which is £36 million, entirely ongiving face-to-face advice, we would reach—and wehave calculated our unit costs, which are extremelygood compared to other people’s—around 600,000people. If we put all our funds in the same way intotelephone advice, we would reach about 3 millionpeople. Now some people would say, “Do that and doit in depth,” but it would leave this huge advice gap,and what we understand we have been asked to do byParliament is to build a national financial capabilityagency and to raise the general level of financial skillsand financial education in the population. Therefore,we need people to reach this service and use it. I thinkthe choice we have to make—I entirely accept it is achoice—is whether we want to invest at this stage inreaching a lot more people with a much better service,or whether we want to concentrate on smallernumbers but fill much less of this huge advice gap. Ithink that that is a strategic choice, and the choice thatthe Money Advice Service board has taken is the onethat has been set out.Just to be clear, there is one thing I would like to addto what Lord Turner said. We are never going to be adigital-only service. We are a service that providesface-to-face and telephone advice. We produce 3million paper products, and we will continue to workthrough all those different channels. The numbers thatwe have set out for face-to-face and telephone adviceare drawn from the Treasury’s impact assessment ofthe Financial Services Act. We are meeting therequirements that we were asked to meet for telephoneand face-to-face advice by the Treasury’s impactassessment, and going further on reaching peoplethrough the web because we want to fill this bigadvice gap. That is the strategic decision that wehave taken.

Q164 Mr Love: Let me press you on that. First, yousaid in our last hearing that there are already websites



out there reaching up to 50 million people. Whatefforts are you making to work collaboratively? If youcan, will you also answer the question of what impactyou think this expenditure on marketing is having?Do you see an increased recognition of your brandout there?Gerard Lemos: I will deal with that question and thencome to the websites. We know from our research thatrecognition of our service rises enormously when weundertake marketing activity. The usage rise on ourwebsite is 65% on average.. Two thirds of the peoplewe target through our advertising earn less than£30,000 a year, so they are on low to middle incomes.One in three people, when asked in research, “Do yourecognise the Money Advice Service?”, now say yes.Considering we have only been going for 15 monthsor something, we don’t think that is too bad. Werecognise that we have a long way to go, but therecognition is higher among people on low-to-middleincomes. I think the answer to your question is thatthe marketing does work. I entirely take the point thatMr Mudie made to Lord Turner that we couldotherwise spend that mon ey on delivery, and perhapsin years to come that will be the right thing to do.However, I go back to this advice gap. If we reallywant to get people to use this service—we are theonly dedicated, preventative, unbiased, free financialadvice service, and Parliament has given us ourunique purpose with cross-party agreement—we thinkwe have to reach a lot of people, and that requiresprofessional marketing. We do have good evidence—we will be happy to supply it to the Committee, if youwould like—of the effectiveness of the marketingplan.

Q165 Mr Love: We could certainly do with that. Theother question—Gerard Lemos: I am very happy to deal with that.There are more than 300 organisations to which werefer people, including many other websites, includingsome from which you have heard, perhaps in a morelively fashion than I can manage. We do hand off tolots of other websites, including MoneySavingExpertand the CAB service. We do not want to compete orduplicate. A challenge was put to you last week, wasit not, that we are competing and duplicating thingsthat already exist? I do not think that is true, frankly.The issue is that we are seeking to fill this advice gapand to reach people. Those people may indeed useMoneySavingExpert, MoneySupermarket,GoCompare or any of the others, but our research andother people’s shows that they still say that they donot know who to turn to for advice or how to improvetheir savings, and that they do not feel financiallyprepared for expected and unexpected life changes.One of the things you were told last week was thatpeople’s financial problems often derive from achange in circumstances. We see people all the timewho have recently been divorced or been maderedundant. All I am really saying is that I think weare different.

Q166 Mr Love: Let me just help you there, becausewhat was said to us last week was that you are notcompeting. First of all, there is not a level playing

field, because you have a very large amount of moneythat private sector organisations do not have to marketthemselves. Secondly, they are getting 15 million hitsa week, but you are getting much, much fewer. Theydo not consider you—If they had said to us, “Theseare real competitors to us,” we would have probablybeen much happier. How do you respond to thatcriticism?Gerard Lemos: We are transforming the service toreach far more people and transforming the way theservice is communicated. Over the next few months,starting in July, you will see a very different MoneyAdvice Service proposition. This is what we havebeen working up to over the last year. As I say, it willbe much more focused on encouraging decision takingand action. Frankly, I do not think that I would accept,as I think you were told last week, that our servicesare crap. Some 90% of people who use our servicessay that they would come back, while 61% say theywould definitely recommend the service to otherpeople. What we feel is that we can make them a lotbetter, and we feel that we can reach a lot morepeople. What I would say is that it is early days.

Q167 Mr Love: I think they said to us not that yourservice was crap, but that while it was very worthy, itwas perhaps not, given their experience over manyyears, as relevant to the group you are trying to reach.However, I do not want to continue on that line.Let me move on to the substantial reductions instaffing, which I suspect you will tell us were to makeroom for you to undertake this marketing effort. Tellus the numbers that we are talking about in terms ofreductions of staff. Have you been able to savemoney? Have you ended up having to employconsultants and others to fill the gap left by thenumbers of staff you have had to reduce?Tony Hobman: Just to step through that, we are takingthe organisation from about 150 people—the numberthat effectively came out of the financial capabilitydivision of the FSA when CFEB was created—andmoving to a model where we believe we need about85 people at the centre. Many of our services are face-to-face services delivered—indeed contracted—through organisations such as Citizens Advice inWales and Scotland. That remains the same.

Q168 Mr Love: Let me just stop you there. Thesepeople had left the Financial Services Authority lessthan a year before they found themselves maderedundant. Do you have any figures on how manyhave gone back to the FSA? I would have thought thatyou had a very dissatisfied group who transferred ingood faith, but then found themselves maderedundant.Tony Hobman: I do not have an accurate figure, so Icannot guess, but I believe I know of one or two whohave, although I do not know how many. I am surewe could find the figures for you.We have a model going from 150 to 85, but not onethat diminishes the front-line services giving themoney advice. Indeed, in our call centre we areupping the numbers somewhat because we anticipategreater volumes. On the question of what that meansin terms of redundancies, about 50 staff have left the



business already. We are in the process of a secondwave of consultation, so I cannot say what the finalfigure will be, but it is of an order of magnitude ofabout 50. It is certainly true that to manage thattransition, we are employing some interim resources,but I think that the total cost of those would be in theorder of £922,000, so that is much less than the gapfrom the circa £10 million that we were paying in staffcosts last year and the £7 million we anticipate thisyear. This year’s consultancy spend is about £400,000,and none of that is supplementing skills that wealready had. It is for a range of specialist input to thenew digital work that we are doing and, for example,activities such as data security.

Q169 Mr Love: You are projecting to save £3million on your staffing budget, yet there is noexpenditure on contractors or consultants to fill someof that gap.Tony Hobman: Yes, it is the interim costs that Ireferred to of about £922,000.

Q170 Mr Love: Coming back to this issue ofsalaries, can I ask you, Mr Hobman, whether yourcontract is a normal one with you paying PAYE andnational insurance in the normal way, or was there aspecial arrangement with either the FSA or MAS?Tony Hobman: No, absolutely not. It was based on astandard FSA contract.

Q171 Chair: Can you specifically tell us then if thereare any of your employees on such a contract?Tony Hobman: I can tell you there are none.

Q172 Chair: I have information that there are. Willyou go and check?Tony Hobman: Yes, I will indeed.

Q173 Chair: We would like you to give us a specificanswer one way or the other. My information is thatyou have someone who has been there a considerableperiod of time—over the 12 months that Cabinet hasdecreed is reasonable—who is on that type ofcontract.Tony Hobman: I certainly will check that. Perhaps Ishould say that I am conscious that there are peoplein our interim staff people who we get from agencies,and we pay the agency. There are none of whom I amaware who we pay in that way, but I will check, yes.

Q174 Chair: It depends on how you pay the agency.Tony Hobman: I will check it.

Q175 Mr Love: The assumption in all this debate isthat if consultants work for a limited period and havea short-term contract, it is then appropriate, but not ifthey go past that contract—and I think you may wellbe getting to that stage. If there are consultants whohave been employed by you, you may wish to lookat that.Tony Hobman: I will confirm that.

Q176 Mr Love: We would be interested in thosefigures.

Mr Lemos, Lord Turner could argue that while it wasfor the FSA to decide on remuneration, not only forthe chief executive, but for all directors—I will comeon to that in a minute—and to reference them withothers in the financial services sector, but since youhave come in, do you not find that it sits ratheruneasily with the community with which you areengaged—the debt advice and the financial advicecommunity—that senior members of staff are beingpaid so highly? In other words, are you sending a badsignal through all this?Gerard Lemos: As you know, we did not have thesedebt advice responsibilities when this contract wasestablished. I am not sure it is a bad signal, but I thinkI would accept—I daresay that Tony would accept it,too—that in the debt advice world, this would seemlike a lot of money. As we are now living with debtadvice as part of our world, I can see why thatcomparison is made. Frankly, I can absolutely see whyit does not look great, and of course it would beabsurd to suggest—

Q177 Mr Love: You would accept that there hasbeen some comment within the industry, if I can callit that—I am talking about debt advice—and innewspapers about that. As you indicated, you areproviding a support and advice service to medium andlow-income individuals, so does it not appear ratherinappropriate that such large salaries are paid?Gerard Lemos: We both accept that this is a lot ofmoney, and we absolutely recognise the concerns thatyou have described.

Q178 Mr Love: Let me ask about other directors,including yourself. I do not wish to pry too closelyinto your individual circumstances, but is thatsomething you may look at, in light of the experiencewith the chief executive?Gerard Lemos: On the other directors, let me set outthe situation for the Committee. As far as non-executive directors are concerned—this includesmyself and my remuneration—we are paid exactly thesame as a non-executive director and chairman of theFinancial Ombudsman Service and the FinancialServices Compensation Scheme. That was how it wasoffered to me, and that was what I accepted.

Q179 Chair: What does that give you?Gerard Lemos: I am paid £75,000.

Q180 Chair: How many days a week do you work?Gerard Lemos: I am contracted to do two, but it isalways more.

Q181 Chair: Two. What about the other directors?Are they on the same as you—£75,000?Gerard Lemos: No, the non-executive directors areon £24,500

Q182 Chair: Okay. How many days do they do?Gerard Lemos:. This is for such time as necessary forthe proper performance of the role, which is expectedto be in the region of 1 to 2 days per month.



Q183 Mr Love: Let me put to you the point that wasmade earlier about Mr Hobman. When these decisionswere taken, this was a £43 million to £46 millionorganisation with around 120 to 130 staff members.The reference to the Financial Services CompensationScheme or the ombudsman scheme does not seemterribly appropriate given the size of organisationinvolved and, of course, there is this issue about thecommunity to which you are referenced. Does it notseem inappropriate to you that we have such largeemoluments being given to non-executive and otherslike yourself? Is that not something you should lookat?Gerard Lemos: As I say, these figures were set by theFSA when I joined. I have explained how they wereexplained to me and how they were derived. As I havealready said, I can absolutely understand why peoplewho work in debt advice, and indeed people in debtthemselves, would look at these figures and think thatthey are very generous, but that is the rationale forthem. The only thing I would say is that, as I havesaid in relation to Tony’s remuneration, we do wantpeople with the relevant skills. I think that we havean excellent board of non-executive and executivedirectors, and we have to pay to get that. I entirelyaccept the general thrust of your questioning,however, which is that we need to justify thesenumbers in the light of now being much more closelyaligned with the world of debt advice.

Q184 Mr Love: I hope that you will provide all theinformation that we have requested. It is interesting tonote that, like others in the financial services sector,they are not covered by freedom of information, butfor them that might be related to market-sensitiveissues. There does not seem to be the same marketsensitivity for you, so would you accept, as I thinkthe Minister has already indicated, that you should becovered in future by the Freedom of Information Act?Are you relaxed about that, and are you going to beas open and transparent prior to that decision beingtaken in order to reassure the public?Gerard Lemos: This is a question, as you rightlyindicate, for the Minister to decide, not for me, butwe shall certainly comply with what we are expectedto do in relation to freedom of information. Let mebe clear: I have no reason for or investment in beingsecretive. We have met all the requirements that havebeen placed on us, statutorily and otherwise, fortransparency and disclosure. If people feel that is notenough, I must say I have some sympathy with that,from the business plan and in other areas too, and weare very happy to provide more information. As MrFallon was just exploring with Lord Turner, thecurrent arrangements are the ones set out understatute. We are responsible to the FSA, as is reflectedin the memorandum and the articles of ourorganisation. All remuneration matters, for examplefor directors, therefore have to be approved by theFSA, and so on and so forth. The natural benchmark,including in terms of transparency, would be the othermembers of the FSA family. We will certainly workwith the FSA, and indeed with the Treasury, to ensurethat there is as much transparency and disclosure as

people think is important. We are not seeking to shyaway from it.

Q185 Mr Love: I come back to the issue that in someparts of organisations there will be market-sensitiveissues, but that does not seem to apply here. We weretold by Lord Turner that he received significantlymore information on your business plan and youraccounts than the public, but still he had somedifficulty explaining the rationale for the change ofmodel that you are using. Do you not think that if youhad been a little more open and transparent about thechange in model, you might not have hit some of thedifficulties that you have encountered due to thenatural suspicion that arises from reducing staffnumbers at the same time as you are increasing thelevy on financial services companies?Gerard Lemos: In hindsight, that is absolutely right.I would not dispute that for a moment. We could havegone about this in a more open and transparent way,as you suggest. Perhaps I could just add one thing inour own mitigation, as it were. I arrived 18 months orso ago. We were, and have been, very preoccupiedwith the sizing, the strategy and this plan. It is veryearly days. We only launched the service a year ago,so that was our focus. I had to recruit a board. I hadto get them in and appointed, get the organisation upand running, get a strategy, get a plan together, andget that agreed by the Treasury and the FSA, and byBIS and the OFT. That was what we were focusingon. Perhaps it is fair to say that on keepingstakeholders and others involved, we did not put quiteso much time into it as we might have done.Overlaid on all that was the arrival of debt advice,which was not a responsibility we were expecting, sowe had to produce two business plans—two strategies.I might say that we consulted extremely widely on ourplans for debt advice; indeed, we are consulting verywidely on our plans for financial education in schools,which perhaps we will come to later, because I wouldbe very happy to talk about that.The way we went about those two, where we werenot under so much pressure of time, was we includedlots of people. It was very transparent. People are veryfamiliar with our plans for debt advice, as you heardfrom people last week from CCCS and Advice UK.They may not be happy with every detail, but theycertainly had their say. If we had done something abit more like that in relation to Money AdviceService, perhaps that might have been, in hindsight,not such a bad thing.

Q186 Teresa Pearce: We have heard a lot about theadvice gap and the 19 million adults. Who are they?Gerard Lemos: Tony, do you want to say somethingabout that?Tony Hobman: Yes. The number of 19 million wasthe one we came to. It is very similar to that inThoresen’s original work, although we applied someslightly different factors. It is a population that we sayneeds money advice. We say that because we knowthe importance of life events, and we have talkedabout how vulnerable they can make people. We knowhow those life events affect the population at large,and we can segment the market in that way. We know



from Thoresen what their basic money needs are. Heestablished that quite clearly, whether it was makingends meet, choosing financial products, getting whatpeople are entitled to and so forth. We added to thatanalysis something that he did not, because perhaps itwas not so prominent at the time, although it is oneof the most important things we found in our research:people’s attitudes to money. In other words, we haveidentified, broadly, six groups in the population; forexample, those who are worried, stressed anddisorganised, but do not know where to turn. Anothergroup—these groups will all be millions strong—maybe fairly organised, but very much lives for today, sothose people will be unlikely to think about long-termplanning. We were able to apply all those layers, as itwere, to the population and to come up with a basicsegmentation. As I say, we have six major groupingswithin the population. They are mainly defined bytheir attitudes, but they also map very closely toThoresen’s work and levels of income, as well associo-economic status.

Q187 Teresa Pearce: Given that there is this 19million gap and you are spending about a million aperson on marketing, how can you market to thatadvice gap?Tony Hobman: Having that sort of segmentationallows us to start to do that much more than if wewere just taking a blunderbuss approach and saying,“We know there are 19 million, but we do not knowwhat makes them tick, how they think or where theyare.” It is absolutely the case—any professionalmarketing operation ought to do this—that if you cansegment your market, you can buy your media,whether it is digital, broadcast or whatever, in a waythat speaks to them, in a way that is relevant, and ina way that reaches them in the places where they are.It is interesting that television, although weacknowledge that it is certainly no more than 25% ofour total marketing budget, is a relatively expensivemedium, but it is one that reaches people in socio-economic groups C to DE to a much greater extentthan other parts of the population. We believe that wecan tune the marketing in a way that resonates—

Q188 Teresa Pearce: Is your marketing in-house, ordo you use an agency?Tony Hobman: It is both. We do use agencies. We usea media planning agency to help us ensure that we putthe campaigns together in the right way and, yes, weuse a creative marketing agency.

Q189 Teresa Pearce: Given that you have thisenormous marketing budget, how will you measure itssuccess? How will you know that you have reachedanybody you would not have reached in the firstplace? How do you know it is not dead weight?Tony Hobman: We do, and will do, special trackingsurveys that take place before, during and after themarketing takes place. Indeed, we did this last year.We spent some money last year on marketing, and inthe rather unpalatable jargon of that world, there aremeasures such as prompted and unpromptedawareness, and so-called consideration, whether oncepeople have seen advertising they are more likely to

use the service. Then there are links you can makebetween being on air—let us say on television—andseeing the level of uptake on your products. We havesome of those metrics already established. I thinkGerard mentioned one earlier: when our campaignsare running, we see something like an 87% increasein visits to our online health check..

Q190 Teresa Pearce: But if somebody is using yourwebsite, it does not mean that they were helped byyour website. How do you measure that someone isactually being assisted, rather than being just a hit?Tony Hobman: That is a very good question. That iswhy, when we talk about the numbers of users of ourservice, we do not just talk about people who have hitthe website. We believe that there were something like1.3 million individual users of the site last year. Interms of the number of hits we got through the web,it was probably 4 million or 5 million, so we have aprocess where we set out the criteria for someone whocredibly has used it, and then gone on and donesomething. If I may say, that is why one of our keytargets for this year is to have a million action plans—people who come on to the site or use the service, andthen take some structured steps towards theirfinancial plan.

Q191 Teresa Pearce: But given that we are in adigital age, surely the people who are likely to comeon to a website and use that service are people whowould go to a website anyway. Isn’t it the people whoare not accessing the website who need face-to-facehelp? Those are the people in the advice gap who yourwebsite will not reach.Tony Hobman: They are not the only people—

Q192 Teresa Pearce: But they would be asignificant number.Tony Hobman: Yes, absolutely. I understand that, andthat was why we retained the commitment to thetelephone and face-to-face service. Coming back to apoint that Gerard made earlier, in terms of the originalimpact analysis that was done following Thoresen’swork, there was an expectation that by this time in theservice’s life we would be serving about 80,000 to90,000 people face-to-face. That is the number we aredoing. The number for telephone was somewhatsmaller than the numbers we currently have, and thewebsite, significantly less. We will increase thenumbers on the website, because that is relevant forpeople who need that. We are increasing our telephonenumbers; next year they will be significantly greaterthan this year. I think the answer, in truth, with faceto face is that we need to wait and see. It is relativelymore expensive, of course, as you would expect.

Q193 Teresa Pearce: Considerably more expensive.Tony Hobman: It is closer to £60 than the few pencefor when we get to the level of internet usage we want,but we absolutely have not abandoned it, and whenwe are putting together our budgets and business plansin future years, we will need to think hard about whatthe justification is. I do not think it will a case ofreducing that number under any circumstances, butmaybe increasing it.



Q194 Teresa Pearce: We heard earlier about thepensions gap and auto-enrolment. Is part of yourmarketing budget going forward to market to peopleregarding pensions?Tony Hobman: Yes, it is. We see that as a verysignificant opportunity.

Q195 Teresa Pearce: Why would you be marketingthat when the DWP already has quite a big budget, asdoes NEST? Are you working with them?Tony Hobman: Yes.

Q196 Teresa Pearce: Is this another overlap?Tony Hobman: I think it is quite a good example ofhow the service can work, going forward. We havealready worked with the DWP to produce a planningtool to help to support people who are thinking aboutauto-enrolment. It is clearly a virtuous thing that thegreater numbers who come through our site will haveaccess to such support and information. It will be thefirst time that anything like that has been produced.Equally, we are working with the DWP on universalcredit and the direct payment of benefits, because theyfeel we have some functionality and information thatcan be embedded in that process as well.

Q197 Teresa Pearce: Can we just go back to the verybeginning? At the very beginning, Mr Hobman, whenwe were talking about your salary, it was mentionedthat you did not take a bonus last year. Does that meanthere is a bonus in your contract that is a reward forsuccess?Tony Hobman: Yes. There is a set of objectives.

Q198 Teresa Pearce: What is the metric formeasuring that success?Tony Hobman: If we were to take this year, it wouldbe for the delivery of the new service—the upgradedservice; the one that we have said we are just aboutto launch. It would be for delivery of the 50% extravalue that we, with stakeholder partners, are workingto extract from the direct grants that we took overfrom BIS for debt advice. It will be to put together adetailed, coherent plan for how we take debt adviceforward on a long-term basis, and I think it is notwithout significance to say it is also to ensure that wehave a very clear and effective plan for stakeholderengagement as well.

Q199 Teresa Pearce: Given that we have a 19million advice gap, but there is so much advice outthere, the problem for people is who they trust andwhere they go.Tony Hobman: Yes, absolutely.

Q200 Teresa Pearce: Given that there is such a lotof advice out there and there are your two roles ofmoney advice and debt advice, how do you engagewith those services, and how is there differentiationbetween one service and another? What do you do?Tony Hobman: In terms of money advice, it is clearthat when talking to any of our money advisors on thephone or face to face, or indeed visiting the website,we do not provide any of what you might term the

hard-edge, back-end of the debt advice process. Wedo not say to people—

Q201 Teresa Pearce: You have money advice andyou have debt advice. They are separate roles.Tony Hobman: Yes. Because we already had themoney advice role—this was before we were everasked to take on these additional duties—when peoplecome to us for generic money advice but also needdebt advice, we already hand them over, whenappropriate, to those other agencies. We have alwaysdone that. Indeed, something like 20% to 25% ofthose who visit our face-to-face and phone servicewould eventually be handed on to debt advice. Wehave said very clearly—I believe it is the right thingto do—that we are not trying to create another debtadvice brand for the Money Advice Service. There isa lot of excellent provision out there already, whetherit is the telephone-based providers, some of whichwere witnesses last week, or Citizens Advice. Whatwe want to do is to work with them to create a morecoherent, sustainable, long-term model that isprobably more visible to the public. One of thechallenges at the moment is that some people tend tofall into paying for debt advice—the fee-charging partof the system—when they do not need to.

Q202 Teresa Pearce: People do not know which iswhich.Tony Hobman: Yes.Gerard Lemos: I am sorry to interrupt, Tony. I thinkthat is right. We are not going to provide debt adviceunder the Money Advice Service logo, as it were. Weare only going to co-ordinate the services that we fundin part, and others do, too. For example, we give,through different grants and contracts, £23 million tothe Citizens Advice service. Nearly a third of our totalfunds goes to the Citizens Advice service, principallyfor debt advice, although it also has some moneyadvice contracts. We are very conscious of the risk ofconfusing that picture in customers’ minds.One of our key objectives in co-ordinating debt adviceis for people in debt to get debt advice in a moretimely fashion than at present. The consistentfeedback we get from the providers of debt advice isthat people come to them too late, and that is thefeedback we get from creditors as well.

Q203 Teresa Pearce: To us too late as well.Gerard Lemos: Yes, exactly, and you know that fromyour own surgery. One of the things we are doing inthat arena is putting in place a set of standards forensuring that the creditors—like banks, utilities andso on; the bigger creditors—refer directly to debtadvice, so the responsibility is with the creditor, ratherthan the debtor, to find the advice. Now, there willalso be, as it were, self-help debt advice provided bythe National Debtline and so on, but we want to getpeople to the debt advice services that exist. Referringpeople to debt advice at the moment can mean thingslike just getting a letter with a list of phone numbers,and no doubt that is the sort of thing you see in yoursurgery, but we want to get people to a point wherethey are just literally put through to a debt adviceservice.



Q204 Teresa Pearce: What link will you have withlocal authorities, for instance?Gerard Lemos: The links that the debt adviceorganisations already have. Our job is not to—

Q205 Teresa Pearce: Directly with the localauthority rather than the debt advice. Local authoritiesquite often will see somebody who comes along andhas not paid their council tax or whatever, and that ispart of the bigger thing. Would they know to directpeople to you?Gerard Lemos: If it was debt, they wouldn’tnecessarily direct people to us, but if they did—

Q206 Teresa Pearce: Surely your website showspeople somewhere where to get debt advice?Gerard Lemos: Yes, sure. Absolutely, there is lots ofinformation about where to get debt advice.

Q207 Teresa Pearce: The website costs a fortune.There must be something on it somewhere that tellspeople—Gerard Lemos: Yes, there absolutely is. Sorry, I—Teresa Pearce: I am not saying that you would givethe debt advice.Gerard Lemos: Precisely, no.

Q208 Teresa Pearce: But you are a signposter; youneed to—Gerard Lemos: We would signpost people, and we doalready do that.

Q209 Teresa Pearce: In your business plan—yourinitial business plan. How many business plans haveyou had now? Is it the third year?Tony Hobman: We have had two in my time.

Q210 Teresa Pearce: Two, right. In your firstbusiness plan, you made a number of peopleredundant, and in your second business plan you arehaving to make a number of people redundant. Whendid it change from the first year to the second year—when you realised you needed another tranche?What happened?Tony Hobman: It is all the same process, so towardsthe end of last year when we had—

Q211 Teresa Pearce: Is this part of the originalplan, then?Tony Hobman: It is part of the original plan, and weclearly took the view, in terms of the stability of thebusiness, that this couldn’t all happen just once inshort order and that it ought to be a phased process.Really all that is happened is that process hasstraddled two business years—

Q212 Teresa Pearce: Okay, so there is not somethingthat has happened that has made you realise—Tony Hobman: No, no, absolutely not.

Q213 Teresa Pearce: When you did your firstbusiness plan, did you engage with the sector that isalready out there, and did you consult it on yourbusiness plan?

Gerard Lemos: The money advice business plan orthe debt advice business plan?Teresa Pearce: The money advice.Gerard Lemos: Not as much as I think in hindsight,as I think I said to Mr Love, perhaps would have beenthe right thing to do. As I have said, we were veryfocused on getting the thing up and running and outthere.

Q214 Teresa Pearce: For your next business plan,how much will you consult?Gerard Lemos: We will certainly consult more thanin the past. We have learned that lesson for sure.

Q215 Chair: But you have not seemed to haveconsulted at all, so if you double that, you still end upwith nothing. Let us put a serious marker down.Teresa has asked you a straightforward question: howmuch are you going to consult? Are you going toconsult fully before your budget starts and before youstart dishing out contracts and so on?Gerard Lemos: Yes.

Q216 Chair: Is there going to be a real partnership?Gerard Lemos: Absolutely.

Q217 Chair: Well, that is better than saying, “Wewill double what we did last time,” because you—Gerard Lemos: Sorry to interrupt you, but somethingmuch more like what we did with debt advice is whatwe foresee, and something much more like what theFinancial Ombudsman Service does at the moment.So, it is rather more than we are statutorily obliged todo, absolutely.Chair: There is a vote in the House. If you would justget yourself a cup of tea or something for quarter ofan hour, we will be back.Gerard Lemos: Okay.Sitting suspended for a Division in the House.On resuming—

Q218 Chair: This is overtime, but not for you, Tony,not for you. Do you understand?Tony Hobman: I do, yes.

Q219 Teresa Pearce: Can we just be clear aboutwhat it is that you actually do? You have two tranches,and you have debt advice that you fund the contractsfor.Gerard Lemos: Sorry to interrupt you, but let’s justget the debt advice thing clear, shall we? We fund thecontracts, which were the previous BIS contracts, andwe roll them forward on the same basis. We haveadded Scotland, Wales and Northern Ireland under theBarnett arrangements and so on. The other thing weare doing—and we have had a lot of support fromthis, from the debt advice world—as I started toexplain before the Division, is trying to improve thetriage arrangements, crudely speaking, and also to setstandards for consistency across the agencies andensure that people get to hear about these servicesbetter, so we are, for example, in discussion about thepossibility of having a single telephone number. Wehave a long way to go on that, so I don’t want to makethat commitment here, but that is one of the things we



are trying to work towards, as well as qualityassurance and so on.Then there is a policy agenda, because of the changesto consumer credit regulation, that we are going totransfer from the OFT to the FCA in due course. Debtadvisors need consumer credit licences, so we need tobe working closely. Anyway, there is a lot of policystuff as well; that is what I am saying.

Q220 Teresa Pearce: You have two main bolts towhat you do. One is that you provide debt advice viaproviders, so you fund the CAB to do that.Gerard Lemos: Yes.

Q221 Teresa Pearce: And you do money advice; thatis what you actually do.Gerard Lemos: Yes.

Q222 Teresa Pearce: What does A4e do? What is itcontracted to do?Gerard Lemos: It is contracted to provide face-to-facemoney advice in England—Tony Hobman: And Northern Ireland.Gerard Lemos: And Northern Ireland. We had aprocurement process and a competition—

Q223 Teresa Pearce: And it was the best?Gerard Lemos: At that time, it won the contract, yes.Obviously, this was some time before the muchpublicised issues that surrounded them.

Q224 Teresa Pearce: Have you revisited thatcontract since?Gerard Lemos: Well, we monitor all the contracts.The others are with Citizens Advice—

Q225 Teresa Pearce: How is it paid? Is it just givena fund and it does it? What happens?Gerard Lemos: No, no.

Q226 Teresa Pearce: Could you just talk methrough it?Gerard Lemos: Yes. There certainly are quantitativetargets, and we do quality-assure those targets, sothere are volume targets for the contract. We cancertainly send all those numbers to the Committee, ifyou are interested.

Q227 Teresa Pearce: That is for money advice—faceto face.Gerard Lemos: Face-to-face money advice that it isdoing under our brand in hundreds of differentlocations around the country.

Q228 Teresa Pearce: So if somebody comes to yourwebsite, they don’t get face to face. How do they getface-to-face advice from you? What do they have todo?Tony Hobman: Perhaps I can explain. It could happenin two ways. If they come to the website, it is clearthat there are phone numbers, and indeed you canaccess face to face. What we have tasked ourcontractors with doing—and that is A4e as it is,Citizens Advice Scotland and Citizens AdviceWales—is to go out and find those people. That is part

of the contract. Let me come back to the points wewere making earlier about the Thoresen work; indeed,you were asking about how you segment the market.What Thoresen came up with, in effect, was a sortof Experian-based segmentation model that you canoverlay on postcodes. In other words, you can mapwhere vulnerable people are most likely to be. Theyuse their local intelligence. Some of it theysubcontract themselves, for example to Age UK oranother agency like that, where there is coverage onthe ground where vulnerable people are.

Q229 Teresa Pearce: To use a Work programmeanalogy, A4e is your prime contractor, but there couldbe sub-primes.Tony Hobman: It has the bulk, and then contractsabout a third, I believe.Gerard Lemos: The contract arrangements are slightlydifferent, but the analogy is the same.

Q230 Teresa Pearce: If somebody goes to thewebsite and finds out there are face-to-face facilities,do they then ring and book an appointment, or—Tony Hobman: Yes, or A4e or the other contractorsfind them themselves.

Q231 Teresa Pearce: So A4e can go out and findpeople who need advice?Tony Hobman: Yes. We pay it to do that.Gerard Lemos: But most of the referrals are peoplewho self-refer, or come via our telephone.Tony Hobman: Their contractors are trained by us andquality-controlled by us. Clearly part of the contractis that they maintain the standards, but we have anindependent verification.

Q232 Teresa Pearce: Just to go back, A4e could goout and find some people who need face-to-faceadvice, and then give that face-to-face advice. Howdo you know it has done that?Tony Hobman: Part of the contract is that it has toprovide evidence that it has done what we have asked,and we conduct independent audits as well. Indeed,we have recently done one.

Q233 Teresa Pearce: For instance, if it said that ithad met 10 people that week, do you do follow thosepeople up and ring them back to find out?Tony Hobman: Not everyone, but on a—

Q234 Teresa Pearce: But you do random checks.Tony Hobman: Yes, we do.Gerard Lemos: We did revisit it, as you would expect.

Q235 Teresa Pearce: Someone like the CAB, forinstance, or my local law centre is not making a profit.They are covering their overheads, or even not doingthat. They are basically run by volunteers and peoplewho work many more hours than they are ever paidfor, whereas A4e is a commercial business. How is itthat A4e can be paid an amount of money to delivera service and make a profit out of it, yet you cannotdeliver that service yourself or get someone like theCAB to do it? It would not seem to me that it wouldbe somewhere where someone could make a profit,



because if there is a profit element that is going in forA4e, surely that would be an amount of money thatcould help somebody else.Gerard Lemos: We are bound by Governmentprocurement arrangements for those contracts. It isdifferent in debt advice. We make grants in debtadvice. They are not contracted, which obviously havestatutory powers—

Q236 Teresa Pearce: You had to have open tenderand it won.Gerard Lemos: It won.

Q237 Teresa Pearce: What was it about its tenderthat was better than everybody else’s? Was it cheaper?Tony Hobman: I couldn’t give you all the criteriahere.Gerard Lemos: But we are very happy to.Tony Hobman: Yes. We can send you details of thefactors that gave it to them. There would be somecommercial sensitivity—

Q238 Teresa Pearce: But you see my point.Gerard Lemos: Yes, I entirely see the point.

Q239 Teresa Pearce: One of the criticisms is the factthat people like CAB are run on a shoestring. Theyare for ever worrying about whether they are going tobe able to keep their staff on. The service is prettymuch run by volunteers. However, you have this hugebudget, but a big chunk of it is going to a commercialcompany and that looks wrong. I am not saying it iswrong; I am just saying that to anybody who worksin that advice world, where lots of it is voluntary andlots of it is done by charities and churches, this lookslike a company that will do anything for a price—there are lots of them out there and we all know theirnames. They will go, “Yes, we can do that.” They cando anything as long as the price is right, but why arethey experts when somebody like the CAB is not?Gerard Lemos: Yes, I entirely understand—

Q240 Teresa Pearce: What you are saying is you arebound by the procurement rules and you have to putit out there, and if they come up with the best tender—Gerard Lemos: That is the statutory framework underwhich we operate.

Q241 Teresa Pearce: It is the same as the Workprogramme.Gerard Lemos: It is exactly the same issue. There hasbeen one example of the reverse happening and that isour telephone contract, which was won by a charity—Elizabeth Finn Care—through commercialprocurement. So our telephone contract is staffed anddelivered by a charity, not a commercial provider.

Q242 Teresa Pearce: Can I just give you an examplefrom my experience? I am a Member of Parliament,and people ring up every day and say, “I need anappointment to see you.” Nine times out of 10 theydon’t need an appointment to see me because they canjust tell me what they need and we can deal with itbefore they have their appointment. How do you

decide—or how does A4e decide—who needs a face-to-face and who doesn’t? Is it just that the person says,“I want a face-to-face meeting”? How is that decided?Surely everybody wants a face-to-face meeting, and ifthey can increase demand, they are just going toincrease their contract.Tony Hobman: Like all contractors, it was given aclear picture of who it was seeking to meet. We comeback to this point originally about Thoresen’ssegmentation. It is very clear that it needs to meetpeople who are generally going to have below-medianincomes and other clear distinguishing features thatmark them out, as it were, as particularly financiallyvulnerable. It is because of its knowledge of localnetworks and local areas and of where people are,whether it is going into community centres or indeedinto local CABs, and then delivering that advice thatmeans that generally it will target that right. We doset a very clear criterion for meeting this threshold ofvulnerability, and last year it got to 74%. We wouldlike it to be higher; we would like it to 80% of thepeople in need.

Q243 Teresa Pearce: I know you have not beengoing for very long, but I have people coming to mewith debt issues all the time, and I don’t know whereA4e is in my area delivering this at all.Gerard Lemos: You say debt issues.Teresa Pearce: Debt issues, but it is not always.Recently we have had a lot of people with interest-only mortgages who want to know what they needto do next, or about any final annuities. They do notunderstand. I don’t know where A4e is in my area sothat I am able to say, “These are people who couldhelp you.” Why do I not know that? Why is it notcontacting MPs?Gerard Lemos: We can certainly let you and indeedevery—

Q244 Teresa Pearce: But it should be, shouldn’t it?It shouldn’t just be going out looking for peoplelooking puzzled in a bank window. It should begetting in touch with people like us and saying, “Wehave this service”.Tony Hobman: We did write to all MPs with a packexplaining the service, and indeed giving aconstituency helpline, so that people could understandwhere these services are, even to the extent of puttingposters up if you wanted or making statements in thelocal press. I am happy to send that to you again ifthat would help.Teresa Pearce: I would like to have that, yes.Tony Hobman: I know a number of MPs have donethat and have found it particularly useful.

Q245 Teresa Pearce: As I say, it just seems to methat this is exactly the same as the Work programme,where you have these large corporates that are able toapply for the tender because they have capital in thebank and all the things that they need to show theyare a credible organisation—charities often do not,because they are not allowed to keep capital—andthey have won these contracts and are managing tomake a profit. When I look at my local law centre andCAB, they do not and could not make a profit, but



they deliver a fantastic service. It seems to me thatthis is not the right road to go down.Gerard Lemos: We can certainly supply you withinformation about what—

Q246 Teresa Pearce: They should be knocking onmy door, though, shouldn’t they?Gerard Lemos: Absolutely, and we will make surethey do.Teresa Pearce: I will pretend I am not in.

Q247 Mark Garnier: In your written evidence, yousay what you are going to do with regard to financialeducation. Can you give us a bit of a flavour abouthow you see your role with the MAS with regards tofinancial education for young people in schools?Gerard Lemos: Absolutely. You said that we had twoplanks to our financial capability strategy—debtadvice and money advice. Well, a third plank isfinancial education, and we are drafting the nationalfinancial capability strategy, on which we will consultvery widely with the Treasury, the FSA and allstakeholders.

Q248 Mark Garnier: Can you explain what thenational financial capability strategy means?Gerard Lemos: We have been asked by HMT to puttogether a national financial capability strategy, andwe have suggested to it that the three components offinancial capability, within the background of thework that the FSA did on financial capability and soon, are: financial education in schools, which I willsay a lot more about that in a minute; preventativefinancial advice of the sort that we have just beendiscussing; and debt advice of the sort we havediscussed at length. One the things I am veryconscious of—it relates a bit to what Lord Turner wassaying—is that we do not want the organisation, justas it is getting up and running, and it is early days, tobe constantly given new responsibilities andobligations. It does not help us to keep focused andkeep getting the structures right and so on. So I wantto focus on those three things. We have talked aboutdebt and we have talked about money advice; now itis financial education.We published some research last week, which wetalked about at the breakfast that you kindly organisedand I was delighted to speak at, that shows that thefinancial services industry spends £25 million a yearon financial education in schools. It is saying to us, asindeed it said at that breakfast, that it wants us to dotwo things. The first is to understand what makes adifference and an impact, and to get much clearerabout evaluation and impacts. That is regardless ofwhether financial education is included in thecurriculum, which we support—we support the APPGon that. The second thing is to broker the overlapsand the under-laps in access to financial education inschools. We are very happy to do both of those things,and we are now embarking, with PFEG and others,on putting together—I think Tracey Bleakley told youabout this last week—a national financial educationplan in schools, and we will consult on that verywidely. We are already committed to doing that.

Q249 Mark Garnier: Could you give us a flavour ofwhat that looks like?Gerard Lemos: It is some of the things we talkedabout last week.

Q250 Mark Garnier: On the record; we can’t referback to the breakfast we had last week.Gerard Lemos: Absolutely. The research from thiscountry and others seems to indicate that the thing thatworks in financial education is tooling up youngpeople in the transition to adulthood—so from 14years onwards. We have reduced our age profile forour own service—you will see this rolling out overthe next few months—from 18-plus to 16-plus toreflect that, and we are pleased to be able to do that.

Q251 Mark Garnier: Why 16-plus? Why notearlier?Gerard Lemos: It could be. That is a good challenge.

Q252 Mark Garnier: Give me some clarity on whatyou are doing. What I would like to hear from you ishow much money you are prepared to put into thisfinancial education in schools. Do you see your roleas being to help to contribute to educating teachers todeliver these things? Do you see your role as merelya sort of co-ordinator of the efforts that are being putin by banks, or do you think you should supplementthem?Gerard Lemos: On teacher education, that is not arole that we see ourselves funding at the moment.

Q253 Mark Garnier: Why not?Gerard Lemos: The financial services industry hasquite strong views that teacher training is not anobligation it thinks we should pay for.

Q254 Mark Garnier: Why not?Gerard Lemos: Because it is a job for the Departmentfor Education, in its view. If that view was to changeand it was, in consultation, willing to provide us withthe resources to do that—

Q255 Mark Garnier: What conversations have youhad with the Department for Education about this?Gerard Lemos: Extensive ones over the years. Wehave worked very closely with the Department forEducation and the APPG, but as this process goesforward, we will talk further to them. We do feelcurrently, although we are very happy to debate it, thatthe question of teacher training and teacher educationis not a job either for charities or for us. What we willdo—we have been in discussions with PFEG aboutthis already—is to produce learning and teachingmaterials that we will help to syndicate into schools.We are absolutely committed to doing that.

Q256 Mark Garnier: How much money do you putinto that?Gerard Lemos: We are building this up now.

Q257 Mark Garnier: How much do you anticipateputting into it?Gerard Lemos: I don’t know the answer to that.



Q258 Mark Garnier: Give me a rough estimate—£1 million; £10 million. The reason I ask is becauseyou are also saying that you could reduce yourbudgets. There is a lot of criticism that you arespending a huge amount on advertising a website thatis arguably superfluous to requirements.Gerard Lemos: Not in our view.

Q259 Mark Garnier: It wouldn’t be in your view,because you are the one who is going to—Gerard Lemos: Well, it might not be in other people’sviews, might it not?

Q260 Mark Garnier: Yes, absolutely. I won’t repeatwhat Martin Lewis said about it, but he obviously hasvery strong views. It is a big issue, as you have said.You are talking about reducing your budget. You alsohave an extensive marketing budget for this website,and then you talk about possibly putting money intoliterature—perhaps lesson forums and that kind ofstuff.Gerard Lemos: We are already committed to doingthat and it is coming out of the funds we are alreadyspending.

Q261 Mark Garnier: Fantastic. How much is it?Gerard Lemos: I can’t tell you off the top of my head,but I am happy to come back to you.Mark Garnier: But there is a commitment.Gerard Lemos: Yes. We are in the middle of buildingmaterials as part of this transformation that will be—

Q262 Mark Garnier: But roughly what is it?Gerard Lemos: I am sorry, but I don’t know is theanswer to that. I am very happy to come back to you.Mark Garnier: Tens of thousands. Hundreds ofthousands?Gerard Lemos: It is more than tens of thousands.

Q263 Mark Garnier: So perhaps a six-figure sum,but not necessarily more than £200,000. Is it that typeof thing?Gerard Lemos: I don’t know, but we are very happyto provide you with that information. As I say, we areworking closely with PFEG, as you heard last week,to build this plan. I must say there is a lot of moneygoing into this already, and we have already heard alot of concern from this Committee about the cost ofall this and the cost of regulation.

Q264 Mark Garnier: But you are in a very strongposition on this. You are the Money Advice Service;you are contracted by Act of Parliament to create. Ifanybody could take the lead on this, it could be you,and I am trying to get a flavour of what you are doing.You have extensive resources of £80 million or so. Iappreciate that quite a lot of it is deployed out to crisismoney, but I am just trying to get a flavour of howmuch of your budget you are prepared to put intofinancial education for young people because, as isbeing repeatedly discussed, we have a—broadlyspeaking and, it is accepted, relatively speaking—financially illiterate nation.We are not really doing much about it apart from theenthusiasm of the banks that come into schools to do

it, which is something they should be praised for. Weall spend a lot of time beating the banks up, but theyare doing something about this—nobody else is. Wehave people who have unadvisedly bought productsand all sorts of things, and have got themselves intomortgage arrears and all sorts of problems, yet we arenot dealing with the root of the problem, which isfinancial illiteracy. I want to know how you are takingleadership to drive this forward.Gerard Lemos: What I would say is that is we doaccept that leadership role. We see it as absolutely—

Q265 Mark Garnier: What are you doing to do?Gerard Lemos: We are building a strategy forfinancial education with PFEG and so on.

Q266 Mark Garnier: I am sorry. I do not mean tobrowbeat you—it is unfair of me—but people say,“We’re coming up with a strategy,” or, “We’re goingto be doing this next week,” or, “We’re going to bedoing this in a year’s time.” This organisation hasbeen going in one form or another since 2006, andI don’t see any real evidence that there is anythingsubstantial and meaty coming forward in terms ofleadership on financial education in schools, anddriving it forward and getting it on to the curriculum.I have not seen a strong coherent case from you guysabout getting financial education on to the curriculum.What have you done about that? I am the vice-chairman of the all-party parliamentary group.Gerard Lemos: I know you are. I have only been heresince 2010, as you know.Mark Garnier: Two years.Gerard Lemos: Yes.

Q267 Mark Garnier: It is a long time. I mean, Ihave only been here since 2010 and we are achievingquite a lot.Gerard Lemos: All I can say, although perhaps it willnot satisfy you, is that this is an area we are committedto. Do keep pressing us on it, and we will keepworking on it.

Q268 Mark Garnier: That is not a good enoughanswer. I am pressing you now. I would like to seesomething coming forward. Show us evidence andengage with the all-party group. You are not doingthat. You are talking about what you are doing, andyet in two years I have not seen anything from youguys on this.Gerard Lemos: That is a fair challenge.

Q269 Mark Garnier: Please explain why.Gerard Lemos: As I have already explained inrelation to other areas, the task that we felt we hadbeen given by Parliament was to implement the needfor a preventative financial advice service, and that iswhat we have been focusing on. We have done a lotof work in schools over many years—long before mytime—and that is an area that we intend to continueto work in. Should we do more? Well, we are alwaysunder pressure to do more and this is, in a sense, ourproblem.

Q270 Mark Garnier: But it is your core job.



Gerard Lemos: It is certainly one of our core jobs.We wouldn’t dispute that.Tony Hobman: Can I have a go? I have nothing moreto offer than the stark reality of everyone who is outthere in the world now not being financial capable.That is a very big job, and we know it exists. I thinkthere are 1.4 million young people—16 to 18 yearolds—leaving education every year. What we havedone is to try to move the boundary of our service, asit were, further down than it was before. It was rathermore a service for adults, but what does that mean? Ifyou take some of the points we were making aboutlife stages being much more important, we nowrecognise one that in house we call “young firsts”. Inother words, it is people who are coming out into theworld, and we absolutely feel—because you are right;there is a lot that isn’t dealt with at root—that theyare vulnerable. Now, we absolutely feel that that hasto be one of our priorities.You have raised the issue, but is there anything wecan do to step back before that—back into the worldof schools and the root cause? We have gone quiet fora while, and part of the reason was because we wereasked to go and think strategically, rather than just dothings, and that was why we commissioned theresearch to which Gerard referred to establish whatthe landscape is. Who is out there spending circa £25million from the industry on 36 different programmes, many of which measure engagements and numbersalthough not many, it has to be said, that have yetmanaged to measure long-term behaviour change?So, having stepped back from it—and that was onlyvery recently; just a matter of weeks or months—wenow feel we are at a point where we have to gathereveryone round us. I know that that sounds liketalking and strategy again, but we have to do that andsay, “So what needs to be done? What sums would beinvolved?” There is a lot of money bandied aroundthat we could spend or might not spend, and I thinkwe need to go into that loop seriously and, withanother business case coming up for another round offunding, that is something we need to think about. Idon’t think we can commit a sum at this stage orindeed, in a sense, a certainty of role.

Q271 Mark Garnier: I have had an estimate that £5million would kick-start a training programme forteachers.Tony Hobman: That is something we need toconsider. That is not a figure I have seen.Gerard Lemos: We also have to take the financialservices industry with us on this, and there is feelingin the industry that teacher education was notsomething that it should be doing.

Q272 Mark Garnier: The financial services industryit going to a great deal of effort to go into schools todo this. I have certainly seen it in my constituency,and it is part of the all-party parliamentary group’sreport into this issue. The reality of it is you may getone lesson a year or two lessons a year. They do agood job—don’t get me wrong—but, having writtenthe report on financial education in schools andcirculated it to all the schools in Wyre Forest, I havehad schools come back to me saying, “This is

fantastic. We are desperate for it. Where do we get thehelp from?” They are not getting it. I keep comingback to you and I keep putting the pressure on you.You are the ones who have an Act of Parliament thatis there to make you get on with it, and I am notseeing any evidence of real action. I am seeingevidence of focus groups and evidence of gettingtogether and having conversations about it.Gerard Lemos: We do have to take stock—

Q273 Mark Garnier: Of course you do, but we havetaken stock—Gerard Lemos: That is what we have been doing.Mark Garnier: We have done it on the basis of asix-month—Gerard Lemos: So it will be part of this businessplanning process that we have already talked about,which we will consult on widely. If the answer comesback from that consultation about the kind ofnumbers—With respect, we are being criticised on theone hand for not consulting people and takingdecisions unilaterally but, on the other hand, you arepressing me to take a decision now without talkingto anybody. I think you have to give us a little bitmore time—

Q274 Mark Garnier: You have been in the job fortwo years, and the organisation has been going for six.Gerard Lemos: Okay, but we have been asked to takea step back from what was going on and, as Tonysays, to take a view of what was going on in financialeducation in the schools. We now need to think aboutwhat the next steps are. A consensus may build thatwe should do more of that and after the consultationsthere is the business plan that we have talked about.You know, if I was now to say to you, “Yes, it is £5million a year,” or whatever it is, what credibilitywould all the other answers I have given aboutconsultation have?

Q275 Mark Garnier: Sure, which was why Icouched it in terms of very loose amounts of moneyand order of magnitude. Certainly there would be noquestion that this Committee would hold you to stuffthat you have obviously said in verbal evidence. I donot want to browbeat you any more, but I would beextremely grateful if you would come back to theCommittee as soon as you can with a coherent,structured business plan as to how you are proposingto deliver financial education to schools. A nice extrawould be to have Nick Gibb complain to the Ministerin charge of this, and him come to complain to methat, as a result of me browbeating you, you have beenon to him every day about getting financial educationon to the curriculum. That is what you have to do.You have to drive it. We do our best, but you have todrive it.Gerard Lemos: It will be part of our businessplanning, I absolutely give you that assurance.

Q276 Mark Garnier: I would also like you to givesupport to all those other organisations out there thatare involved in trying to drive this process forward aswell, and that are doing it as charities.



Gerard Lemos: Absolutely. I have already talkedabout wanting to involve people and consult themmore. To repeat my earlier comments, perhaps weshould have done more of that in the past. I absolutelyassure you that, in our next business plan, there willbe a section on financial education in schools.

Q277 Mark Garnier: When is your next businessplan coming out?Gerard Lemos: For the next financial year. We arebeginning that process now.

Q278 Mark Garnier: I slightly weep at that. I wouldrather have you come up with something a bit moreconstructive than that.Gerard Lemos: We have a business plan about whichwe are being criticised for spending all this money,and there was a discussion earlier between Mr Fallonand Lord Turner about variations to our business plan.I really don’t feel that I am empowered to go to theFSA now and ask for a variation. I think that wouldbe quite the wrong thing to do.Tony Hobman: We are already, at this early stage,starting to put the business plan together. So, it is aprocess that gathers speed across the summer andthen, when we are into the autumn—

Q279 Mark Garnier: When is it being published?Tony Hobman: It will be published next March.Absolutely it has to be agreed, because it has to gobefore the FSA well before the end of this year.

Q280 Mark Garnier: So it is another year, basically,before we—Gerard Lemos: But the process is going to start verysoon.Mark Garnier: Very soon?Gerard Lemos: The process of consultation on ourbusiness plan, which we have spent a good deal of theafternoon being told we should do more on.

Q281 Chair: The good thing is you have a lot ofspare brass there, don’t you? You should have madean offer of £5 million straight away—you could havetaken it out of your marketing. A sum of £15 millionis quite sufficient to spend on marketing, and youcould have had a friend. But your attitude with Markis my fear about how you are acting as anorganisation. You see, I picture you like theplayground bully who is come with all these powersand all this money; you make sure you are okay, andthen you start causing havoc out there in the market.Nobody knows what on earth you are doing.You inherited a perfectly good—in fact, the NationalAudit Office said it was world leading—organisation.You hadn’t had it for a year, and then you sackednearly half the staff. You decided to go off in adirection nobody is quite clear about. You have gotthe debt advice, and you are going about causinghavoc there, and then a Member of Parliament says,“Here is a very important subject,” and you aresaying, “Oh, we will let you know.” That is exactlythe basis on which the existing organisations out thereare worried about your attitude. You don’t discuss it.You do not consider it. You do not do any work on it

or any research on it. You seem to just decide to takea notion.For example, on debt advice, there is a paper you havehere in which you say it is not that you are just goingto co-ordinate debt advice—if I can find the relevantpaper—but you are going to make it more sustainableand more efficient. How often have you been in aCitizens Advice debt clinic?Gerard Lemos: Well—Chair: No, I am not asking you; I am asking thechief executive.Tony Hobman: I visited one last month in Wales.

Q282 Chair: Was it busy?Tony Hobman: Yes, it was.

Q283 Chair: Yes. Mine is locked out halfwaythrough the afternoon—halfway through the session—because they just cannot take any more people. Doyou know what you have done as an organisation,with the powers that you think you have? You havegone in and said, “You must do 50% more with thesame money.” Now that is bright, isn’t it? Anybodywho goes in a debt clinic can see the individuals withall the problems they bring in, the time it takes to getthem to settle down, the time it takes to go throughthings, the time it takes to decide who you have tocontact to negotiate with, and so on, only to makeanother appointment and bring them back, but thatdoes not matter as long as they see more people.I will tell you what you are doing to my Leeds one.You are asking for a 62% increase in throughput,without any more money, without any more people.That is what you are doing on debt advice, and thento top it all—just what we are speaking about—youthen come back with, next year, they are going to haveto bid for money for face-to-face debt advice.Gerard Lemos: No.

Q284 Chair: So, will you put on the record that youare not having—Gerard Lemos: Yes, we will.

Q285 Chair: You had Citizens Advice bidding forface to face on money advice, and you gave it to acompany that is up for fraud. If I could send one ofmy constituents to A4e or the CAB now and I asked,“Which one do you want to go to?”, I know whichone they would choose: the CAB—it would be thesame anywhere in the country. The CAB is a firm withthe best brand and best reputation going, and you havesaid, “You are not doing enough and we are comingin here to make you more efficient, and in turn youwill bid for your service.”Gerard Lemos: No, sorry, can I just—Chair: Well, what are you doing? Why is therebidding for service and money advice, and then thereis a rumour going around that there will be biddingfor debt advice next year?Gerard Lemos: No, we have already taken thatdecision. Just on that last point, we are not going tore-procure the debt advice services next year.

Q286 Chair: All right, and on what basis have youtaken that decision?



Gerard Lemos: Because we have taken the view thatwe need to complete the process, which everybody isinvolved in—this is all the things I went throughearlier about standard setting, quality assurance and soon. Also, it is about completing the value-for-moneyexercise that Lord Turner referred to at the beginningof next year. Then, at some stage, I think we willbe expected—

Q287 Chair: So you will go to bidding at somestage?Gerard Lemos: I don’t think, no. Sorry, I don’t wantto—

Q288 Chair: Finish that sentence, though. It wasquite wrong of me to interrupt you. “At some stagewe will”—what?Gerard Lemos: Once the value-for-money exercise iscomplete, we will decide what to do next. It may bethat we will go on to that.

Q289 Chair: You are either saying you are not goingto take the contract from them, you are going tocontinue funding them, or you are going to put it outon the market. Which one is it?Gerard Lemos: That is the decision—Chair: Is that the choice?Gerard Lemos: Well—

Q290 Chair: So there is a sword hanging over theCAB debt advice in the future, because you will makeup your mind at some stage in the future, and the CABin Leeds thinks it is next year.Gerard Lemos: It is not next year.

Q291 Chair: You will decide when you will do it. Itis just a question of when you will do it, not if youwill do it.Gerard Lemos: No, it is a question of if we will doit. That is the decision. The stats—

Q292 Chair: Why did you do it on money advice?Gerard Lemos: Because that was the requirement wehad when we set up the service.

Q293 Chair: From whom?Gerard Lemos: From the statutory framework withinwhich we operate—

Q294 Chair: No, the statutory framework did not sayyou outsource or you put it out to bid. Who gave youthe express order to outsource it and put it out to bidwhen there was an existing service there? You decidedto take the money, and you decided—[Interruption.]Yes, go on; you can consult if you wish.Tony Hobman: Well, the procurement process startedbefore I started the organisation, but I believe theanswer was because there was no comparable servicebeforehand. It was post-Thoresen, and I think youwould have to go back to the conversations that tookplace at the time of the Bill and within the FSA afterthat. It was decided that because there was no nationalface-to-face service at that stage, as part of—

Q295 Chair: There was no national—

Tony Hobman: Not as part of the financial capabilityoffering that was seen as being taken out into theMoney Advice Service. It should be procurement forthat service. I can’t tell you who took that decision,but the decision was taken at the beginning of theorganisation.

Q296 Chair: You are paid £350,000 a year. You mustknow who told you to do it.Tony Hobman: It was done before, for the process—

Q297 Chair: What do you mean, “It was donebefore”? You took it over. You keep telling us aboutyour independence, so you just did this: Mondaymorning; “Oh, we’ll go out to tender”.Tony Hobman: No, it is my understanding that theprocess was already in train because it was agreed aspart of setting up CFEB before it even left the FSA,so the decision must have been made in the FSA—Iwill check that for you—that there should be aprocurement of the face-to-face service, in order toform this newly created CFEB system.

Q298 Chair: So you will tell the Committee whogave you the specific instruction?Tony Hobman: Yes, I will.

Q299 Chair: Lovely. Now let us go back to the debtadvice. Do you not think it is worth re-thinkingmaking these instructions to people to go on thenumber of people who walk in the front door, ratherthan the quality of work that you are doing? Do younot understand what you are doing to the debt adviceservice? That is a service. But that is not important; itis what they are doing to their customers. They havecome in. They are in desperate trouble. They are nearbreaking point. Some of them have health problems,mental problems. Some of them lost their job or losttheir house. It doesn’t matter to you because as longas they are out and in, and then somebody else is in,your figures will look good. Do you understand whatyou are doing to the debt service?Tony Hobman: First, I would say it does matter to me.Chair: Good.Tony Hobman: Absolutely, and we would not havelet this process start—thinking about increasing thenumbers—unless we had had extensive conversationsand dialogue with the sector, and we did.

Q300 Chair: No, we spoke to the citizens advicebureau about the extensive discussions you had, andthey are coming before us next month to put it onrecord. So can we recast that conversation? They wereforced to increase their numbers so that you couldmeet some target that you designed, and you are doingharm to a lot of innocent people out there in thecommunities, and I really think you should agree atleast to go and reconsider the targets you have given,unless of course you give them some more money.Tony Hobman: We are doing a review at the half yearof the process.Chair: Good.Tony Hobman: I have to say at the moment that, yes,indeed we will.



Q301 Chair: I am saying “good” so you will includethis in a review.Tony Hobman: Yes, we will.

Q302 Chair: You will give some comfort to the debtadvice agencies that, if they have had difficulty in thefirst half year, they should relax, because you are nowfully aware of the problems they have with the peoplethey deal with?Tony Hobman: Yes, Mr Mudie, absolutely that is theintention. The intention of this review is to establishwhether the process is working as intended, whetherthe standards are being maintained, whether thereare—

Q303 Chair: Mr Hobman, I will tell you what it is.This just sums up our total frustration at how yourorganisation is working. If you can go into a citizensadvice bureau on debt advice and, just like that, saythat there is a 50% increase in numbers with no moremoney and no more debt advisors, you can’t be trustedto do anything else, because that is the most sensitivepart of the whole field—even more sensitive than theeducation field.Tony Hobman: With respect, that is not the way theprocess worked. Indeed, many of those providing debtadvice across the country are now able to operate ata level that is even higher than the one I think wehad suggested.

Q304 Chair: Yes, and I would like to see theircustomers. If I have someone, I send them to thecitizens advice bureau because I know they will gettreated properly and seriously and they will doeverything they can to make sure that the person getsthrough that period, but you say they are not doingenough. Just with one visit you suddenly say they cando 50% more, which is impossible.Tony Hobman: We didn’t have one visit; we spoke tomore than 30 of the providers before the process, as Iunderstand it.

Q305 Chair: You mean the citizens advice bureauand another 29?Tony Hobman: Well, I can’t tell you the number ofCitizens Advice—

Q306 Chair: You only fund another six.Tony Hobman: Well, they represent—

Q307 Chair: No, you only fund another six.Tony Hobman: They represent 228 contributingorganisations within those—Chair: Sorry?Tony Hobman: The six lead projects that we fundhave 228 participant organisations—

Q308 Chair: Yes, and they are not the citizensadvice bureau.Tony Hobman: Many of them are citizens advicebureaux; yes, you are right.

Q309 Chair: I welcome you putting in the reviewand I welcome you coming back with that review afterwe have seen the citizens advice bureau, and we see

whether they feel they can do the job. The ones thatfeel they can do the job—good luck to them. That isnot what happened at national level with CitizensAdvice. It was given an offer: a horse’s head in thebed—an offer it could not refuse—and I think that isworth revisiting.Tony Hobman: We will do a serious review.Chair: Wonderful, anything else? Andrew, you arelooking pensively at me.

Q310 Mr Love: Arising from something Mr Hobmansaid, I wanted to have a final fling on the issue ofsalaries, because it says in your submission that youwaived your entitlement to a bonus in 2011–12, butyou said earlier on, in an answer to Teresa Pearce, thatif you fulfilled certain metrics, you would get a bonus.If you fulfil all the metrics, how much would thatbonus be?Tony Hobman: I believe the bonus entitlement wouldbe up to 20% or 25% of my salary for this year.

Q311 Mr Love: So that would be an additional 20%to 25% of your salary?Tony Hobman: But I have also made no commitmentto take the bonus this year either.

Q312 Mr Love: I understand that you waived it lastyear, and I will come on to that. It also suggests thatfor your pension, an employer contribution will becapped at 10% of salary?Tony Hobman: Yes.

Q313 Mr Love: So I can assume that the employerwill make a £25,000 contribution towards yourpension.Tony Hobman: Yes. We have moved from a non-contributory to a contributory scheme, and that iselective. If I take the maximum pension to which I amentitled to get a matching sum, and that would be 5%contributed by me and a matching10% from myemployer, that is how that would be derived. But inorder to get that 10%, I would now, on the new termsand conditions, need to take it from my salary.Previously I did not.

Q314 Mr Love: I have to say that you will not getan awful lot of sympathy. There are doctors who arediscussing that particular issue about greatercontributions at the present time. But I want to beclear: my understanding is that if you were to takeyour bonus, and you were to contribute up to themaximum, your salary would be well in excess of£300,000. And 20% of £250,000 is £50,000.Tony Hobman: It would be close to it.

Q315 Mr Love: Plus a £25,000 contribution to yourpension from the employer. We could calculate itexactly. It would be £325,000 on that basis. Wouldthat not be correct?Gerard Lemos: I was just going to say that thedecision about whether to award a bonus is a matterfor the Remuneration Committee of the MoneyAdvice Service. It is not a question of whether Tonywould take it.



Q316 Mr Love: But Mr Hobman said earlier that ifhe fulfilled the metrics, he would get it. That is anarrangement in place for the coming year, although Idon’t underestimate the achievement of thosemetrics—I am not suggesting that for a moment. WhatI am trying to get a handle on is that we have beentold—indeed, the BIS Committee I think was alsotold—or led to believe, that the salary we were talkingabout had gone from £364,000 pro rata and £314,000down to £250,000, when actually potentially it couldbe £325,000, which would be an increase on 2011–12when it was £314,000. On that basis, I think theCommittee was of the view—Lord Turner was of theview—that the salary was too high. Indeed, MrLemos, you were of the view—hesitantly, it has to besaid—that you could interpret this as being too high.Based on the new figure of potentially £325,000,would you not accept that it is too high?Gerard Lemos: You are—Mr Love: I am asking you, yes. You are the chairman.Gerard Lemos: I think the decision about whetherTony will get a bonus—He has waived it for 2011–12,and the 2012–13 decision will not be taken until July2013. That will be a matter for the RemunerationCommittee of the Money Advice Service and arecommendation to the board. We can take anydecision we like at that point, but what we can’t vary,as I have already explained, is Tony’s contractualentitlement to his core salary. So we could say, evenif Tony had fulfilled the metrics this year, that hewould not be awarded a bonus. Indeed he could dowhat he did do this year, which was come to us andsay he does not even want to be considered for abonus. So the process would be either he would sayhe didn’t want—

Q317 Mr Love: It would be invidious for us try toenter into some sort of discussion about arenegotiation, but are you saying that there is no scopefor MAS directors to consider his base salary, andwhether it is appropriate or not?Gerard Lemos: I don’t think we have any legal orcontractual—

Q318 Chair: You say you “don’t think”, but we arenot here to hear your thoughts. Do you know? Haveyou checked it out legally?Gerard Lemos: Yes—

Q319 Chair: So you don’t think; you are saying youhave legal advice that you cannot change anemployee’s salary, because it would mean a breakingof contract. Is that what you are saying to us?Gerard Lemos: I am saying what I have been advisedby our human resources.

Q320 Chair: All right, and have you that advice inwriting?Gerard Lemos: I can get it in writing by all means.

Q321 Chair: No. Do you have it in writing?Gerard Lemos: From our own Human Resourcesstaff, yes.

Q322 Chair: Can you send us a copy?

Gerard Lemos: Sure.Chair: Lovely.

Q323 Mr Love: All of this is leading up to thequestion that has been asked all through this, and I amnot sure we have had a clear answer as of yet: is MASgoing to reconsider—the decision will be yours, ofcourse; that is what you have been tasked to do—theoverall remuneration of the chief executive and theremuneration of other directors of MAS? While wewent into the detail, we did not get a clear view fromyou as to whether you considered it appropriate toreconsider at this time, following on from thepublicity that these two issues have received.Gerard Lemos: Within the bounds of our contractualrights to do so. I am not going to give an assurancethat I am willing to break people’s contracts. I am not.

Q324 Mr Love: We would not wish you to do that,clearly, but I do think that—Chair: Do not put it to the vote, Andy.Mr Love: What I would ask, Chair, is that perhapsMAS could consider what has been said this afternoonand respond to us on what they think they are entitledto do as an organisation and how they perceive theseissues, because I think it is an important issue for usto pontificate on and put in our report.Gerard Lemos: I am happy to do that. Sorry tointerrupt you. I should also add that our memorandumand articles make it clear that the FSA has to approveany remuneration for directors, and that remains true.It does not just relate to when Tony was appointed. Itis still the case.

Q325 Chair: You have seen him in action, and youcan say you are happy that he will get his salary, butwhat I would say to you is let us not make it aboutMr Hobman. If you were re-advertising the post—ifMr Hobman at some stage has gone to pastures new—at what level would you be suggesting, because thisis not about Mr Hobman; this is about you aschairman? You are chairman of an organisation thathas a chief executive who gets paid more than thePrime Minister and every permanent secretary in theGovernment. He is probably, on basic pay, one of thehighest paid people in the civil service or associatedquangos. There is anger out there about it—genuineand understandable anger—but the anger is beingdirected at us in this respect, with, “Well, they arepublic servants. You appoint them and you agree whatthey are paid at.” Now we are always told, “Oh, hehas a contract,” or, “She has a contract.” Okay, thatmay be so, and we will see your letter and we willtake legal advice about it. But in the future, as you arethe chairman, would you be advising a level is set foran organisation that looks after 80 people at a levelthat is almost double the Prime Minister’s? Well, it ismore than double the Prime Minister’s, if you add onyour £100,000 benefits. Now, what would you berecommending?Gerard Lemos: Well, we have changed the basis ofthe benefits, so it is a lot less than £100,000 now. ButI think if—



Q326 Chair: Sorry, say that again. You have notchanged the basic.Gerard Lemos: We have not changed the basic, butwe have changed the 10 years—

Q327 Chair: Yes, well, leave your benefits out. Theyshouldn’t be on the table in the first place. Butsecond—and you have admitted that you can takethem off, so you should be taking them off.Gerard Lemos: No, sorry—Chair: The basic salary is £250,000. Now, people arewatching this on the television, and I am putting astraightforward question to you. You are chairman ofthis little quango that employs 80 people, and the postcarries a salary of £250,000 a year. The PrimeMinister gets half that. There is not a permanentsecretary looking after Defence, the Cabinet, the

Treasury or the Home Office who gets more than£200,000. Do you think you will recommend a salarylevel that is so obscenely higher than the PrimeMinister’s salary?Gerard Lemos: We would consider the benchmarks atthe time, but I think as things stand, it is very unlikelythat we would do that.

Q328 Chair: Well, that has hedged every bet. Youshould be in the City. You would be a hedge fund.Gerard Lemos: I am not a banker, I should say. Well,perhaps I should have said that at the beginning.Chair: Gentlemen, I am very grateful for your time.A lot of the stuff has been sensitive and I accept thatyou have sat through it with dignity, Mr Hobman. Butthank you for all the evidence. I think there is a lot ofcontroversy and a lot of questions needed to be asked,and it has been very useful. Thank you.


Wednesday 5 September 2012

Members present:


Mark GarnierStewart HosieAndrea LeadsomMr Andrew LoveMr Pat McFadden

________________

Examination of Witness

Witness: Gillian Guy, Chief Executive, Citizens Advice, gave evidence.

Q329 Chair: Good afternoon. I am very sorry we arerunning late but, on the basis that the Minister felt thathe could not possibly follow you—No, to be fair, withthe change of Minister, we have put him off foranother day. In view of the first name fuss with MrDiamond, do you mind if I call you Gillian?Gillian Guy: Not at all.Chair: Right, Gillian. Thank you very much forcoming. We had a very interesting session with MAS.Jesse, you are going to start.

Q330 Jesse Norman: Thank you for coming in, MsGuy. I want to ask you a very simple question. Whatis the point of the Money Advice Service? It costs £40million a year and, as far as I can see, it is a quangoin search of a role.Gillian Guy: I am sure that the Sub-Committee willform a view for itself, but what I can say is that theMoney Advice Service is clearly part of this landscapeon money advice and debt advice. Our concern is tomake sure that that kind of money gets as much tofront-line service as is possible and demonstrates thatit is adding value to that landscape. The difficulty thatwe have in the value that it currently adds is on itsfocus. From our point of view, it is perhapsundertaking the wrong job with the wrong focus. Witha bit of redirection towards its strategic and statutoryobjectives, but also probably with firmer and bettergovernance, we might see better value coming fromthat investment.

Q331 Jesse Norman: How large is your total topteam—your administrative team—in the CAB?Gillian Guy: We have five people in the top team.Jesse Norman: Five?Gillian Guy: Yes; including me.

Q332 Jesse Norman: What do you make of anorganisation that has staff and associated costs ofnearly £14 million a year and a CEO’s office with 7.1people in it?Gillian Guy: That would be nice. Seriously, it is partof our argument about the resources that come in,which are not insignificant—we are talking about over£80 million. In Citizens Advice, for less than £20million, you buy a debt advice service, at the moment,which covers a large proportion of our bureaux andbuys the full-time equivalent of 320 staff and 500people giving money advice to hundreds of thousandsof people every year. In our terms, we look at what

Jesse NormanTeresa PearceMr David RuffleyMr Andrew Tyrie

we could do with that resource and very clearly saythat the main problem in this arena at the moment isthat demand outstrips the capacity to give the advice.We don’t have a problem with getting demand. Wewould not focus resources on overheads, which welike to keep at a minimum, and certainly we look atthe executive and non-executive team of the MoneyAdvice Service and see that it costs about £1 milliona year. That is quite luxurious, in our terms. Also, wewould not stray into marketing and creating a separateand new brand when what we need is capacity to dealwith all the people—who will be growing year onyear—needing financial capability, money advice anddebt advice.

Q333 Jesse Norman: MAS has a communicationand service delivery team of 73 people and a strategyinnovation team of 33 people. Do you see any of thesepeople? Are they ever helpful to you? Do they doanything that helps the CAB in the delivery of adviceto people who need it?Gillian Guy: I think the fundamental issue here is thefocus of the Money Advice Service that leads it tohave those teams. That is about building a separateand new brand, and marketing financial capability,particularly. Our argument, which is quite clear to theMoney Advice Service, is that that is not the rightfocus. There are plenty of things that can be done inthis area that an organisation that does not delivercould do. It could make the delivery arms moreeffective and it could make them work together better.It could have common case management systems. Itcould have standards and validation of thosestandards. It could have verification of the people whogive the advice. We could have a common portal sothat members of the public would not have to go fromone place to another in giving their information, butcould deal with creditors and advisors all in one placeand at one time. There is plenty that could be done.

Q334 Jesse Norman: In Hereford we have anexcellent CAB. We used to have a CAB in Ross-on-Wye, which was built on a local organisation set upby local people offering good-quality local advice.That has now been centralised. If you had moremoney because the MAS was disbanded or its incomedifferently allocated, how quickly would you be ableto feed that through to people on the ground who needit, and what is the overhead cost that would you applyto the money you receive?


5 September 2012 Gillian Guy

Gillian Guy: We look to keep our overhead costs aslow as possible. The more we expand our business,the less the percentage is of those overhead costsbecause you do not have to replicate.

Q335 Jesse Norman: What are they and what wouldthey be if you had—Gillian Guy: They would be under 10%.

Q336 Jesse Norman: Under 10%. The staff cost ofthe MAS at the moment is 30% and, as far as I cansee, it does not deliver any debt advice.Gillian Guy: The other aspect from the CitizensAdvice point of view is that we do not just give face-to-face advice. We give advice over the telephone,which is where we believe there is some duplicationgoing on. I would point out that this year it looks likeabout 80% of the phone referrals to the Money AdviceService are going to come from Citizens Advice,because we are lacking capacity to deal with them.

Q337 Jesse Norman: Was that 80%?Gillian Guy: About 80%.

Q338 Jesse Norman: Would you be able to movequickly on any new money allocated?Gillian Guy: We always move quickly on that.

Q339 Mr Tyrie: If the Money Advice Service ceasedto exist, how much more money do you think youwould need to maintain the service that you feel isneeded for the public?Gillian Guy: The first thing we would do is analysewhat is needed for the public. One of the issues thatis hurtling towards us is welfare reform and thedemand on the back of that. About 8 million peopleare going to be affected over the next four years. I justwant to say that welfare reform does not appear in thebusiness plan of the Money Advice Service at all.

Q340 Mr Tyrie: I am going to come on to that in amoment. You are looking forward and I am asking aquestion about the snapshot now. I just want to get afeel of how much of this MAS activity you think thatwe could do without, without there being any loss ofwelfare to the people who are benefiting.Gillian Guy: There are various strands to that. Thefirst is not to stop what we are currently doing. Inmuch the same situation as last year, we still have nothad certainty about continuing our face-to-face debtadvice that is funded through the Money AdviceService. The first thing I would ask for is to confirmthat that is going to roll forward and then we can carryon with our over 300 full-time-equivalent advisors.For every £18 million that is put in, we could provideat least another 320 full-time advisors and we couldextend that throughout our bureau network. More thanthat, we could also cost a telephone service, which iswhat we are endeavouring to set up at the moment,which is advice over the telephone on any issue.Also, remember that this is not just about moneyadvice and debt advice because every person comeswith a package of problems. That is when they areamenable to financial capability and education,because they have a problem in the first place. We

would not be segmenting this. We would be dealingwith people on a general basis. Our touchstone has tobe what we provide at the moment. For £18 million,we provide over 320 full-time-equivalent specialistadvisors on debt advice, and we do that across morethan half our bureaux. We could double or treble thatand we would still not meet all the demand.

Q341 Mr Tyrie: I think we all heard those numbers,and I think they are very important for us. We havean excellent CAB in Chichester as well and demandalways exceeds supply, exactly as you describe.Let us move on to the question not of what ishappening right now, but looking forward. Were youconsulted on the Money Advice business plan beforeit was drawn up?Gillian Guy: Is that the 2013–14 business plan?Mr Tyrie: Yes.Gillian Guy: I believe that consultation startedyesterday.

Q342 Mr Tyrie: I see. So you have not had anycontact with it. What about the last one?Gillian Guy: We had very limited contact with thelast one. That was something that the Money AdviceService took on board—that it was not fully engagingwith the advice sector. The disappointment this year,which I have expressed to the Money Advice Service,is that this is a bit late in the day to start talking aboutthe business plan for next year. The consultation islikely to happen, which I would not term as fullengagement, in a series of interest group meetings thatI believe started yesterday. The trouble is that thatbusiness plan has to be signed off by the MoneyAdvice Service board later this month or in October,and then it has to go to the FSA by the end of theyear. That is a very tight timescale for the businessplan. It is a very short timescale if we have to waituntil then for a decision on the debt advice contracts.

Q343 Mr Tyrie: What would you say to thoselistening to your evidence who might feel that youwere just advancing the cause of your ownorganisation, as anybody at the head of anorganisation might do?Gillian Guy: I would say that I am answering thequestions that are posed to me and some of those aregeared towards what Citizens Advice could do as anorganisation. I am answering those questions asfrankly and honestly as I can. I have not said that thatis the position I am advocating. I am just saying thatthat is what we could do. That said, all our commentsabout the Money Advice Service are based on what isin the interests of the people who need the advice rightnow and have a shortage in the capacity to give thatadvice. We would like to see investment in thatcapacity, rather than developing a contrary anddifferent brand. At the moment, it seems to us to beabout raising awareness of an organisation rather thangiving help to the people themselves.

Q344 Mr Tyrie: Looking specifically at debt adviceand noting that demand will always exceed supply, doyou think the main gaps that currently exist can befilled by you?



Gillian Guy: I believe they can, because of the brandrecognition that we have. There was 97% brandrecognition in recent studies. I believe we are trustedas an organisation. The most important thing is thatwe do not just give debt advice. When we give debtadvice, we give budgeting advice and “how to controland handle your money” advice. We go into financialcapability and education at the same time. That isanother argument we have with the Money AdviceService: those things need to be integrated for peopleand not separated.

Q345 Mr Tyrie: Your argument, in a nutshell, is thatyou just offer much better value for money thananybody else who could do this.Gillian Guy: Were I asked to make an argument forCitizens Advice to move into Money Advice Serviceterritory, I would say that we have the brand, we havethe people, we have the training, we have thecapability and trust, and we have the wherewithal andthe channel spread, to give all that advice combinedso that it suits people better. I am not asked to do that.What I am asked to do, obviously, is look at what weare currently facing: the best use of the huge resourcesthat the Money Advice Service currently has.

Q346 Mr Tyrie: I thought for a moment you weregoing to say, “We have the men, we have the moneyand, by jingo”, or whatever that particular—Gillian Guy: I would not want to be corny about it.

Q347 Mr Tyrie: It sounds as if it is a value-for-money argument, combined with the branding, thatleads you to feel that—Gillian Guy: There is a value-for-money argument.There is a governance argument and there is a focusargument, which is about delivering to people and nottalking about developing a brand.

Q348 Teresa Pearce: We have spoken about thelarge amount of the Money Advice Service’soutgoings going on marketing. You have just said thatthe CAB is a trusted, well-known brand, with lots ofbrand recognition. How much money do you expendon marketing?Gillian Guy: It is a difficult question to answer fullybecause everyone has a different interpretation ofwhat marketing is. When we can promote ourselves,we do. Strictly speaking, it is hardly any onmarketing.

Q349 Teresa Pearce: Apart from the CAB dealingwith people who come through the door and all theirproblems, they are in a unique position where theycan look at policy across the country. They can seehow it affects all types of people in all types of waysand they can feed that up. Would the Money AdviceService have any way of doing that?Gillian Guy: It would probably lack access to our datain that we are unique, and this is another point that Idrew out from the Money Advice Service directors’report that recently went to the FSA. The MoneyAdvice Service is claiming to be the uniqueorganisation that gives all this advice; discounting ourrole completely, which is a bit of a shame. We have

unique access to data through over 2 million peoplecoming through our doors every year with 7 milliondifferent issues, most of which are around debt,money management and benefits. We also have about12 million hitting our website every year and a largeproportion of those, of course, will be looking formoney guidance and advice. We use all that to tryand change things for the better so that people do notundergo those difficulties again.

Q350 Teresa Pearce: So that I can join in, I can saythat I also have an excellent CAB in my area.Sometimes when we see a problem with a policy orthe way a policy has been implemented, it first comesvia the CAB. We have seen that in a number ofinstances and it is a useful way of picking up earlywhere there is a problem. Turning to the business planof the Money Advice Service, what would you say itsbusiness is?Gillian Guy: I could say what its business should be.Teresa Pearce: No; what is its business?Gillian Guy: I will say again; I think its business atthe moment is to become a household name, and Ihave heard it terms in this way by the Money AdviceService. That means promulgating a brand or aname—a trademark if you like—that will encouragepeople to recognise it. I say “recognise” only because,when I asked the Money Advice Service howsuccessful this marketing work is, the reply that I gotwas that when it is current, there is more flow to thewebsite—although it has not tried it on thetelephone—but that when that stops, that also stops.My question would be: what difference is it making?What is the business case for that? Anyone can readthe business plan, as you clearly have, but there seemsto be an emphasis on creating that brand. There is alsomanaging other people, such as Citizens Advice, togive debt advice and money advice. That istransporting funds from the levy through to directservice delivery. In our view, the transporting of thosefunds costs quite a lot of money, so there is a middlefunction there that is quite expensive.

Q351 Teresa Pearce: You have mentioned increasingdemand. I also sit on the Work and PensionsCommittee, and this morning we took some evidenceabout universal credit, the movement to monthlypayments and the increase in debt that that mightbring. There are also the cuts to council tax benefitcoming up next year where the working poor willhave to pay council tax. Anybody can see that thereis going to be a huge increase in demand, yet youmentioned that it is not reflected in the business plan.It is not mentioned.Gillian Guy: That is correct. I cannot find mention ofit. However, we have identified that we will probablysee another 350,000 clients come to us as a result ofthe introduction of universal credit and we are stillworking on the numbers. As you rightly point out, alot of that focuses on who will now be caught inpotential debt situations because of the constraints thatwill come through welfare reform and universalcredit. We are worried about the council tax benefitcut as well because that will hit working-age families,



particularly as the protection is ring-fenced for olderpeople.

Q352 Teresa Pearce: In your role with the MoneyAdvice Service, how can you feed that information upto make sure it understands what is coming down theroad? Is there a conduit for that?Gillian Guy: I suppose there are two aspects to that.One is that we mentioned it because we weresurprised that it was not appearing. Apparently, thereare conversations between the Money Advice Serviceand the DWP, which we are pleased to hear. The otherissue is that I am not sure it is Citizens Advice’s placeto draw up the business plan for the Money AdviceService.

Q353 Teresa Pearce: No, but you would hope thatthey would draw on your knowledge.Gillian Guy: There will be some working groupsbetween now and October that will look at thebusiness plan. We do not think that is sufficientengagement, but that is what is planned.

Q354 Andrea Leadsom: Is it realistic for the MASto provide only financial advice? As you have saidbefore, CAB provides a wide range of advice. Dopeople present just with financial problems on thewhole, or is that not the case?Gillian Guy: Generally it is not the case; sometimes,financial problems are identified later in aconversation. Face to face we see about 2 millionpeople with 7 million issues, as I always say. That isan immediate multiplier that says there are many morethings that go on. If people are in financial difficulty,they may well have issues around utility bills that theywant us to sort out, for example. They may well haverent or mortgage repayment problems and possiblerepossession actions hanging over their heads. Thatmay be affecting their health and it may be affectingthem with regard to the education of their children.All of those things or some of those things present atonce, and then we then try to unpack all of it so thatwe can solve the whole problem.

Q355 Andrea Leadsom: From visiting CABs, Ithink you now have a system so that each advisorcan go into the system and look up frequently-askedquestions, solutions and so on. Are you aware ofwhether MAS has any link to that? Does it haveaccess to being able to signpost people on ifsomething is outside its area of expertise?Gillian Guy: I am not aware of its signposting. Theonly signposting I am aware of is where we signpostto it. As I have said, this year there are going to beabout 68,000 calls; about 80% of its throughput to thetelephone advice.

Q356 Andrea Leadsom: How many calls get passedbetween you both ways; so you refer to it and it refersback to you and so on? Is that something that youmonitor?Gillian Guy: We certainly monitor referral to it. I donot have figures for referral to us, but they do notfeature as a significant statistic for us. Because we area recognised brand, people tend to pick up the phone

to Citizens Advice. If we cannot deal with thatthrough our automated system, we are on track forabout 68,000 calls going from us to MAS.

Q357 Andrea Leadsom: At what point in theconversation do you tell your advisors to refer on toMAS?Gillian Guy: Only when they cannot pick up.

Q358 Andrea Leadsom: When they cannot pick up?What do you mean?Gillian Guy: It is an automated system. It is when ourcapacity is lacking.

Q359 Andrea Leadsom: So it is a call centre issue.Gillian Guy: If we had the capacity, we would notrefer any at all.

Q360 Andrea Leadsom: I see. In other words, whatyou are saying is that there are no questions thatwould be put to the MAS that you could not answer,if you had the capacity?Gillian Guy: No.

Q361 Andrea Leadsom: So there is no uniqueexpertise that it has over the advisors in CAB.Gillian Guy: That is probably a broader question.None that I am aware of. There is nothing that I amaware of that we could not deal with.

Q362 Andrea Leadsom: I would not want to putwords in your mouth, but would you say that whatMAS is doing is providing a subset of what the CABare doing and, if you are looking at a Venn diagram,that its offering sits entirely within your broaderpicture and there is no particular expertise it has thatsits outside CAB’s—Gillian Guy: The difficulty we have, which I haveexplored with the Money Advice Service, fits into twocategories. One is this duplication, as we have calledit, which is that we do not really need anothertelephone service and we do not really need anotherweb service. We need capacity within the existingservices. The other category is that, therefore, we donot need a focus on marketing and creating a brandand moving resources away from that capacity, whichis crying out for more investment. Those are the twomain areas.No one is currently operating effectively, includingCitizens Advice, on bringing the whole sector togetherand potentially having common systems—commoncase management, common training and potentiallythis portal that allows people to share informationwithout having to repeat it. If I were asked, “Is a rolethat such an organisation could carry out,” those arethe kinds of things. We have shared with the MoneyAdvice Service and it is looking at that quitepositively.

Q363 Andrea Leadsom: In terms of the legal adviceside of CAB, is there any overlap there whatever?Does MAS get involved with providing people withlegal advice on financial matters that would cross overwith what citizens advice bureaux do, or is there nooverlap there at all?



Gillian Guy: That should not be its business. In termsof its direct service delivery, as opposed to buyingservices from organisations such as ours, which doescome into that kind of advice, it is there to give peoplefinancial capability and education. That ought not tobe about legal advice.

Q364 Andrea Leadsom: So it does not provide anylegal advice?Gillian Guy: It shouldn’t.

Q365 Andrea Leadsom: Potentially, if it came to anissue of providing legal advice, it would need to referback to Citizens Advice. I am just trying to understandhow much to-ing and fro-ing there is likely to be.Gillian Guy: If it strayed from financial moneyadvice, which is about education and capability, intodebt advice, debt management plans or legal advice—any of those things—it would need to refer elsewhere.

Q366 Andrea Leadsom: That addresses my nextquestion: when you try and establish a debtmanagement plan for someone, where you arrangewith all their utilities for them to pay a set amountover a period of time, it would need to refer back toyou to provide that set-up, would it? MAS would notbe involved in that sort of activity either.Gillian Guy: I do not believe it is. It does not have torefer just to us. It could refer to anyone else whoprovides debt management plans, including somecompanies that charge for doing so.

Q367 Andrea Leadsom: The impression I get is thatthere is an unnecessary, enormous overlap andduplication of fixed costs.Gillian Guy: I think there is a duplication, but thereis an attempt to separate out financial advice, whichis about enabling people to manage financially, anddebt advice, which is about trying to get them out ofdifficulty. We do not believe that you can separatethose two out, because people need both at the sametime. For example, when we do a debt managementplan for an individual or a family, we try to give themsome financial capability advice at the same time. Wetalk to them about budgeting and how not to get intothe situation again.

Q368 Andrea Leadsom: Does the CAB also includesomebody who perhaps got their house repossessed inthe past? Would you give them advice—in otherwords educate them—on how to avoid those pitfallsin the future, or would that be something that wouldget referred to MAS?Gillian Guy: We would do that in the natural courseof a conversation giving advice. Whatever yourexperience of Citizens Advice and its advisors, I amsure it will be that they see the person and theproblems that they have as something that needs to betaken completely to resolution. It is not the kind ofservice that says, “We don’t do that bit. Go away.”

Q369 Mr Love: Can I take you back to a questionthat I think Teresa Pearce raised, which is the essenceof what we are trying to get at? From the CitizensAdvice viewpoint, what would be the role of the

Money Advice Service in assisting you in providingthe best service you can, but also reaching out to theother parts of debt advice and financial advice thatyou are perhaps not reaching at the present time?Gillian Guy: The front end of that would be aboutproviding the glue for the advice sector in this area.There are lots of organisations that do bits of this. Oneof the primary aims of an organisation such as theMoney Advice Service could be—and indeed somesay is—to facilitate all of those organisations workingtogether to make it work for people, as opposed tothe organisations. When I talk about a common casemanagement system, training or standards, and thingslike that, that is something that one organisationholding the ring could probably do. That is animportant function and there are many parts to it. I donot anticipate that that would cost over £80 million ayear. The other part of it is to make sure that the bulkof the money that is available gets invested in thecapacity to deal with the demand that is already there,let alone what demand might grow in the future.

Q370 Mr Love: Effectively, you are saying that thebranding, which takes up such a lot of their financeat the present time, should be redirected into a co-ordinating service and then to filling out where thereis demand, but not the capacity to meet that demand?Gillian Guy: Indeed.

Q371 Chair: That is an important question, but Andyhas left the amount. It is actually a quarter of themoney available to MAS that is going on marketingthis financial year. That is £20 million out of £80million. That is quite a sum, is it not?Gillian Guy: It is a huge sum.

Q372 Chair: Let me take you back to the first lot. Ido not think the Committee wants this to be seen asan argument of CAB versus MAS. There are a numberof organisations and we have had evidence from them.What has not become clear, even after seeing MAS,is what on earth they do. The starting point was thatthey were going to co-ordinate. There is an acceptancethat some co-ordination might be useful, particularlyon the financial advice side—I would even say someweeding out, if you wish—but what are they? Theydo not seem to have set their stall out to co-ordinate.They are talking about a direct service fromthemselves, taking work from others. Are theycommissioning, because they are talking about puttingyou out to tender? Are they regulating? What are they,in your view? Have you made any sense of what theysee as their role?Gillian Guy: That is the role as is articulated; it is allthose things. Our argument is that, given thatresources are so stretched and demand is so great—and is increasing and will increase—we want to seevalue for that money. As we see it, the main role thatwould bring value is the piece that is aboutfacilitating, co-ordinating and bringing together theadvice and making sure that the gaps are identifiedand filled. That would serve people well. The otherissues are ones that we do not see a need for, but thatis another argument.



The point about the marketing budget—which, to thelikes of Citizens Advice, looks colossal because whatwe do for £20 million is all the debt advice, forexample, or a large proportion of it—is we have notseen a business case for it. If I were to go to my boardof trustees and ask to spend probably a third of thaton marketing, I would expect to have to bring abusiness case about what I expected to achieve andhow I was going to evaluate that. I do not know towhat extent the FSA has or will become involved inthis, but I find it very difficult really to understandwhere the checks and balances are on that sort of sumof money—as you say, £80 million over four years—seemingly going to no great effect.

Q373 Chair: One of the criticisms they write in theirreport is the inefficiencies in the debt advice sector. Ithink it is in your organisation. They claim some ofyour advisors see five people a week. In actual fact,when they came in, they forced new performancetargets upon you without any more resources. Are youaware of any debt advisor in a CAB who only seesfive people a week?Gillian Guy: I am not aware of any. That is notentirely impossible, because all our debt advisorswork for different times. If a debt advisor works halfa day a week, for example, they may only see fivepeople. I cannot fully say that. The change in thespecification in their commissioning role—debtadvice—has been that they are very much wedded tonumbers, probably because they are judged by them.We are anxious to get to quality of service as well asthe numbers; so what difference does it make to seeall these people?As I believe some Committee members are aware, wehad some difficulty in a contract that was presented tous that had a 50% increase in output with noadditional resources. Looking underneath that, it wasquite clear it was less contact with individuals thatwas to give that rise in throughput. We haveaccommodated that. We are going to meet the targetsthat we have to meet through the ways in which wemanage the contract, but we are concerned about notbeing able to spend enough time on case handlingwhere people need more of our time and more input.Sometimes it is right to spend a long time with oneparticular client to get them through a whole range ofproblems and get them into resolution control.

Q374 Chair: Are you aware that they are working ona common debt advice model, which they feel is muchneeded within the debt advice field?Gillian Guy: I have heard of that, yes.

Q375 Chair: Have they spoken to you about it?Gillian Guy: Not me personally. I cannot say whetherthat has surfaced elsewhere in the organisation. Ourconcern is always that we are not dealing with aperfect science when we deal with people in debt.

Q376 Chair: Are you aware that nearly £3 million ofthe money that flowed from the DWP to yourselvesfor debt advice is being taken over to staff costs atMAS?

Gillian Guy: I am certainly aware that there is anoverhead cost, as I would call it, to the functions thatMAS performs, which is why I am anxious to see theadded value that could come from bringing the advicesector together.Chair: Jesse, you are back on executive pay, I think.

Q377 Jesse Norman: We have touched on thisalready and it goes to the question of cost for MAS.As you know, a lot of that cost goes on staff turnover.Recently, the head of MAS resigned after it wasrevealed that he was on a salary of £350,000 a year.Could you talk a little bit about that? There have beenother reports that senior figures at MAS are on largesix-figure salaries. Can you comment on how thosewould compare to the kinds of costs that you have atCAB? How much does your senior team get paid,broadly or roughly? Is it significantly different fromthose kinds of sums?Gillian Guy: Yes, it is significantly lower than thosesums. Also, our trustee board—

Q378 Jesse Norman: Is your pay a matter of publicrecord, Ms Guy?Gillian Guy: I am not sure whether it is. It oughtto be.

Q379 Jesse Norman: Would you like to make it so?Gillian Guy: It is certainly less than half the figurethat was put around for the retiring chief executive ofthe Money Advice Service.

Q380 Jesse Norman: So it is under £175,000?Gillian Guy: Oh, yes.

Q381 Jesse Norman: You could be more precise ifyou wanted to be.Gillian Guy: The other issue is that my trustee boardget some expenses, but that is all they get; whereasobviously there are payments to the board here.

Q382 Jesse Norman: If you look at the board’s costsfor the MAS, even the non-executives are getting paid£25,000 a year, I think. You have five of those andexpenses as well, I imagine. Again, none of yourtrustees is paid for that trustee role?Gillian Guy: That is right. My recollection is that thenon-executives costs add about £500,000 to theoverheads.

Q383 Jesse Norman: This is an organisation that isbeing run on a kind of large state-type budget ratherthan what you might call a voluntary organisation-type budget. There seems to be a completely differentethos between what MAS is paying people, how itsees people and how it sees its own directors, and howyou pay people, how you see them and how you donot pay your own trustees. Is that correct?Gillian Guy: Yes, it is. It feels a bit like the splitbetween public and private sector.

Q384 Jesse Norman: You regard yourself as a kindof private sector organisation?Gillian Guy: Public sector.



Q385 Jesse Norman: Right. They are payingthemselves like a large corporation?Gillian Guy: Yes.

Q386 Mark Garnier: Can I turn to financial literacyand financial education? As I think you know, I ama vice-chair of the all-party parliamentary group onfinancial education for young people. It is worthmentioning that now.Have you done any assessment, either formally orinformally, as to the financial literacy of schoolleavers? Even on an informal basis, what would beyour appraisal of the financial literacy of peoplecoming out of school?Gillian Guy: We do not have data on people comingout of school and what their level of literacy is. I donot want to stray into anecdote and gut feeling, butthe people we see who come to us for advice clearlydid not have the level of financial literacy at the timethey left school that would have enabled them not toget into the difficulty that they have got into.The other thing to say is we have a few programmeswithin Citizens Advice where we are able to do it,where we try and work with schools to bring financialcapability and education into that younger age group.We believe that that kind of investment is well worthwhile. It is something that is not easy for anorganisation such as Citizens Advice to do becausemost of our money has to go to giving advice, but welike to get more into prevention wherever we can.

Q387 Mark Garnier: So you are spending yourresources more on resolving problems as opposed totrying to prevent the problems?Gillian Guy: That is where the balance is, yes.

Q388 Mark Garnier: If I was to ask whetherfinancial education should be part of the schoolcurriculum, what would be your reply? Why don’t Iput that another way: should financial education bepart of the curriculum?Gillian Guy: Given our experience in seeing howpeople get into difficulty later in their lives, after theireducation, we would probably welcome that as part ofwhat goes on in schools to give them thatwherewithal.

Q389 Mark Garnier: How do you think that shouldbe delivered? Do you have any thoughts aboutwhether that should be in maths or PSHE, or spreadthroughout the curriculum?Gillian Guy: I suspect I am straying outside my areaof expertise here. I would want to analyse whatworks best.Chair: There is no need to be modest.

Q390 Mark Garnier: Your experience is incrediblyvaluable to this whole debate. The reason I am askingthese questions is because you see the genuine effectsof financial illiteracy day in, day out—people comingalong who simply do not understand how to resolvetheir own problems.Gillian Guy: Indeed, yes.

Q391 Mark Garnier: The reason I keep going onabout this, and the reason I am very interested in yourthoughts about this, is that we have a hugely indebtednation, with £1.46 trillion of household debt, difficulteconomic conditions and a super-low interest rateenvironment. If that interest rate just goes to beingjust a low interest rate environment, in which case thebase rates could double or quadruple and we wouldstill have a low interest rate environment historically,there could be knock-on effects for lots of people. Aspart of the help that is going to be available when thatstarts happening, your input on the financial educationthat people have to start off with is incrediblyimportant. To a certain extent I completely appreciatethat a lot of your answers will be gut feeling orinstinct, rather than from any qualitative analysis.Nonetheless, as the CAB, your input on this isincredibly important.Gillian Guy: We have limited experience in schoolsand education. It is difficult, at that stage, to give thefull cost-benefit analysis of what that input has given.We also have a lot of financial capability activity,which has been going on for 10 years at CitizensAdvice—we have some experience of that—which ismore about getting organisations and getting themeducated to educate others, but also with peopledirectly. We have undergone a lot of evaluation of thatto feed into improving what we do and some of ourevaluation has indicated the real difference that itmakes. About 78% of the people who have beenthrough our financial capability say to us that theyhave changed the way in which they manage theirmoney. About 71% of them say they feel much moreconfident in handling money and dealing withfinancial institutions and a percentage of those havechanged their savings behaviour as well. We do followthat up and do see a very positive impact.

Q392 Mark Garnier: The OECD has recentlylooked at financial capability in the internationalcontext and published a working paper, defining thata national strategy is a nationally co-ordinatedapproach to financial education which, first of all,recognises the importance of financial education, butthen also identifies a national leader or co-ordinatedbody for delivering it. Do you think MAS is capableof being our national leader in terms of deliveringfinancial education?Gillian Guy: I do not think that it was set up to dothat, so I would be very surprised if it was equippedto do that.

Q393 Mark Garnier: If I may, I will paraphrase thatas, “No.” Who do you think should be the nationalleader for financial education in schools?Gillian Guy: I would like to see some leadershipcoming from the Department for Education.

Q394 Mark Garnier: That is very interestingbecause, during the scrutiny of the Financial ServicesBill, there was certainly a stimulating and usefuldebate about the role of the regulators in terms ofproviding financial education. MAS is now sort ofcharged with doing this, but as a quango below anindependent regulator below the Treasury. You



definitely think the Department for Education shouldstand up and take on this role.Gillian Guy: There does need to be some leadershipin the area. I suppose, in a fairly simple way, I amsaying there is a Department for Education and surelythat has a role to play, because things are not going tochange in schools unless that leadership is present.

Q395 Mark Garnier: Do you think financial literacyshould be tested in schools?Gillian Guy: I think that most things need a bit oftesting before they are rolled out, yes.

Q396 Mark Garnier: One of the interesting pointsthat has come from a number of teachers who havecome before the APPG is that if you do not testsomething, it tends not to be taught. On that basis, doyou think it should be tested?Gillian Guy: Oh, that sort of testing.

Q397 Mark Garnier: Yes, examinations. Do youthink that financial literacy should be part of thecurriculum in terms of the exams that students take?Gillian Guy: I am not an educationalist. I do not reallyhave data to support an argument that what isexamined is what gets taught. I know what getsmeasured gets managed and this argument is akin tothat, but I do not know enough to say for definite.

Q398 Mr McFadden: Debt advice and moneyadvice are not the same thing, are they?Gillian Guy: No.

Q399 Mr McFadden: So, in terms of the talk aboutoverlap in the field, is it fair to say that the peoplewho are coming to CABs—I add to the chorus bysaying that the one in Wolverhampton, where myconstituency is, does a great job—are coming becausethey are financially stressed, often to a significantdegree? They cannot pay their bills, they are in debtand they need help. The job of MAS is much broader,isn’t it? That is about people who may not be reallystruggling to make ends meet on a month-to-monthbasis, but they might be able to make significanteconomies in their budget by using their savingsproperly, by changing their utility deal, by claimingwhat is available to help them with childcare and inother ways. These are two different jobs, aren’t they?Gillian Guy: They are not different people; they arevery similar people. Through Citizens Advice, weassist people with accessing the income they areentitled to, whether that is through benefits oranything else they are entitled to. As I said, we try toget involved in education, prevention and capabilityactivity where we can, alongside difficulty. It wouldnot be very difficult to expand promotion of that kindof preventative and education activity, which is whatwe intend to do as an organisation. That does notnecessarily need a whole separate brand. That is ourargument.

Q400 Mr McFadden: Do you get significantnumbers of people coming in your door who are notfinancially stressed, but who might say, “Look, I’mconfused by the range of utility tariffs on offer,” or,

“My family has a sum of savings of a few thousandpounds and we’re not sure what is the best thing todo with it.”? Do you get those kinds of questions, aswell as people saying, “I can’t pay my electricity billthis month.”?Gillian Guy: We do get those questions and we willget more and more of them, given that we are aboutto expand further into the consumer space as we pickup consumer advocacy. We have started with theConsumer Direct helpline, which has been run by ussince April. So we get many thousands of such callsalong those lines. We also deal with financial servicesand products, and what choices one can make. Onlyon Friday I was on the radio talking about what peoplecan do about their energy bills and the increases thatare coming, and how they can save energy and reducetheir expenditure and get help. That has beenexpanding for us. It has always been there, becauseonce people know us they ask anything—weencourage them to do so—but as we pick up theconsumer territory, that will get bigger and bigger.

Q401 Mr McFadden: So you do not think that it isa defence of MAS’s role if it was to say, “It is not justour job to help people with debt. We have a broaderfinancial literacy—a ‘get the best deal for yourself’role—which is different from what CAB or the otherorganisations who deal with financially stressedpeople do.”?Gillian Guy: I am not here either to defend or attackthe Money Advice Service, but I can see the argumentthat there is a different remit. I am not sure that isplaying out in the way in which the business planningis proceeding for that organisation. I have talked abouta remit for bringing the advice sector together. Theremay be a remit for getting people to accessorganisations such as Citizens Advice and perhapspromoting it so that more financial education goes on.There may be a remit for encouraging education topick that up, but I do not see that in the business plan.There is certainly a remit for picking up lots of thedifficulties that are going to come about as a resultof welfare reform. I do not see that in the businessplan either.

Q402 Mr McFadden: Let me ask you about this. Mylocal CAB gives all the MPs for the city very goodmaps of the casework that is coming in through theoffice, down to a ward-by-ward basis, which is veryhelpful. You have a national view of this. What doyou think is happening in terms of the need for debtadvice and how much has that changed in the pastcouple of years?Gillian Guy: We are certainly seeing an increase inthe complexity of debt advice, and a change, albeitnot wholesale, in the trend of the people who requiredebt advice. Our typical demographic of those whomight seek advice has changed to working familiesand people who have not necessarily previouslythought that they needed any support, because theyare finding life tough, getting into debt and needingsome help with that. Our concern is to be there forthem and have the capacity because, otherwise, theyresort to other companies and other people holdingout support, which can get them into even greater



difficulty. We certainly see it increasing. We see adifferent demographic, so a much broader span ofpeople. That gives us a massive opportunity to getinto financial capability and education with peoplewho will not necessarily stay in difficulty and in debt,and to keep them out of that situation. That is how wesee it developing.

Q403 Mr McFadden: Is there an easy-to-read-and-digest report that you do of this on an annual basis?Gillian Guy: In terms of our projections?Mr McFadden: About the caseloads you are dealingwith.Gillian Guy: There is plenty of data that we cancrunch in, as you have already said, in all sorts ofways about what we see on a regular basis, and wecould take that a bit further into projection.

Q404 Mr McFadden: I do not know if this is inorder, Chair, but a short note on that would be quiteuseful so that we could see CAB’s debt caseload andwhat it is dealing with, and how that has changed overthe past couple of years.In terms of this caseload, do you think that lack oftrust in the banks has become a bigger factor in termsof people coming to see you for advice?Gillian Guy: I think people are driven to seek advicefor all sorts of reasons and it is usually somethingthat hits them personally. The general atmosphere andenvironment of a lack of trust in financial institutions,and indeed in energy institutions and others, leadspeople to feel powerless, and that is what takes theminto needing advice.

Q405 Mr Ruffley: You have made it clear that quitea bit of the financial capability service that the CABprovides is given at the same time as debt advice—Iunderstand that. Could you give me an indication ofthe proportion of your budget that is devoted todelivering CAB financial capability services inschools, in rough terms?Gillian Guy: It is a very small proportion and,generally, it would be where there is external fundingto support that.

Q406 Mr Ruffley: Where do you sense that most ofthe financial education service delivered to individualsin this country is coming from?Gillian Guy: I do not think that there is enough of it,so we are not dealing with a large span of that.

Q407 Mr Ruffley: Would it be schools?Gillian Guy: Currently, I would not think that there ismuch of that. No, I wouldn’t.

Q408 Mr Ruffley: If not much is being done byschools and not much is being done by you, forentirely understandable reasons, who would you sayis the lead provider of financial capability services inthe UK?Gillian Guy: Financial capability in schools is oneissue and financial capability more broadly is another,so I am separating those out. We have had a slightdiscussion about what is going on in education andwhere the leadership for that might be required to

make it happen in schools. As far as the broader issueis concerned, there is a money guidance contract as itused to be called—now a money advice contract—that gives probably the bulk of a service contract inEngland, Scotland and Wales. That is currently carriedout by those people who hold the contracts. We holdtwo of them and A4e holds the third.

Q409 Mr Ruffley: On financial literacy—I supposeit is numeracy—one key concept is that of compoundinterest, which is quite important. I have come acrossschools where 16-year-olds are not aware of everhaving been taught about the concept of compoundinterest. Is that the sort of gap that your people findwhen you do CAB lessons on financial capability inschools?Gillian Guy: It is that sort of thing. It is how financialinstitutions and others operate—what do you need tobe familiar with to have control, as far as is possible,so that you do not experience unintendedconsequences of your actions and do not get yourselfinto difficulty as a result of not understanding.

Q410 Mr Ruffley: You mentioned the Departmentfor Education. Has the CAB, in relation to financialcapability, had any discussion with or made anyrepresentation to the Secretary of State for Educationor the Schools Minister?Gillian Guy: Not recently I would say.

Q411 Mr Ruffley: Do you think you should?Gillian Guy: I think we could.

Q412 Mr Ruffley: But is that something that you areminded to do?Gillian Guy: Yes. There are two aspects to that. First,I do not think that it is just Citizens Advice, but manyothers would need to point out the importance of thatand we can do that by reference to some of our datalater in life. Secondly, we cannot undertake to executeall that in schools because we do not have theresources to do it. We have to be careful that we donot hold ourselves out in cases that we cannot execute.

Q413 Mr Ruffley: Sure, but on this very importantissue, which colleagues have referred to, it is an oldchestnut or a hardy annual. For the last 10 years Iknow that this issue has been raised: should it beexplicitly on the national curriculum or should it not?Do you not think that the time has come for a bit ofaction and that an organisation as august and respectedas yourselves should probably be making this point?Gillian Guy: It is a very good point that we will takeback. Of course, at the moment it is vying withwelfare reform, legal aid and many other issues aswell, but I take the point because prevention isimportant.

Q414 Mr Ruffley: I want to move from financialcapability to go back to MAS. In your writtenevidence you refer to existing funder initiatives:“There is significant overlap of the clients using theMoney Advice service and clients using the debtadvice services previously funded through theFinancial Inclusion Fund and now funded by MAS”.



You then go on in that part of your written submissionto say: “MAS case management system is poor andincreases the administrative burden on providers.”Could you explain what that overlap is, because I amnot entirely clear?Gillian Guy: I think that is a reference to the way inwhich the contracts are managed.

Q415 Mr Ruffley: Could you just give an example?These are contracts for what, exactly?Gillian Guy: That would be for debt advice.

Q416 Mr Ruffley: Pure debt advice. What are the“existing funder initiatives”?Gillian Guy: Without reading the whole context of it,I am afraid I cannot answer. I can certainly give youmore information on that.

Q417 Mr Ruffley: What caught my eye was yourreference: “MAS case management system is poor andincreases the administrative burden on providers.” Itis really a question about the performance of MASand how it sets itself up.Gillian Guy: I will need to check it out and give youfurther information, but my assumption is that this isabout the management of the contract that weundertake on debt advice under the auspices of theMoney Advice Service. What we are trying to say, inplain terms, is that we are not massively impressedwith the way in which that contract is managed, and itadds a burden to us in terms of providing the service.

Q418 Mr Ruffley: Is that something you have maderepresentations to MAS about?Gillian Guy: Yes, and we will do so again this year,should we be lucky enough to secure a contract intime.

Q419 Mr Ruffley: You have mentioned welfarereform a couple of times, quite importantly, and it notbeing in the remit. Could you say a bit more aboutthat? There seems to be rather a gap. Why is it not in?Gillian Guy: In the business plan?Mr Ruffley: Yes.Gillian Guy: I cannot fully answer that. From ourpoint of view, it is a very large oversight because ithas to be one of the biggest financial capabilitychallenges that is coming out—

Q420 Mr Ruffley: It is very complicated from theexisting system.

Gillian Guy: Yes. It is already confusing and worryingpeople through either the disability provisions, counciltax or the way in which the benefits are going to bepaid on a monthly basis, which is absolutely a casein point of how people need to budget differently inthe future.

Q421 Mr Ruffley: What have you been told aboutthe absence of that in the business plan when yourcolleagues have queried it?Gillian Guy: I think we have been told thatdiscussions are now going on between MAS andDWP.

Q422 Mr Ruffley: In relation to the way MAS goesabout its business—and obviously it has an impact onyour organisation as well—do you get the sense thatit is being overseen effectively by HM Treasury?Gillian Guy: I am not fully aware of how it isoverseen by the Treasury. I think the device is throughthe FSA. I have to say, as an onlooker, it feels as ifthe governance of MAS falls between two stools.

Q423 Mr Ruffley: That was precisely what wasbehind my question. Could you say a bit more aboutthat—the falling between two stools?Gillian Guy: I will give an example from a contractpoint of view. As you might imagine, I am agitatingto know whether, from next April, we have thecontinuation of the debt advice contract, because Ihave 500 people waiting for their redundancy noticesor not; let alone having to manage people who willnot get that service from us any more. The difficultythat MAS has in telling me whether that is going togo ahead or not is that it has to go to the FSA boardmeeting before its business plan is signed off andbefore it can say definitely that it can go ahead withthe contract. I looked with interest at the evidence thatthe FSA gave to this Sub-Committee, and it did notfeel to me that the FSA felt that that level of detailwas really being controlled. I do not know who takesthe decisions round here and, therefore, where theaccountability sits.Mr Ruffley: I think that is something that we willpursue with the new Minister when he comes beforeus.Chair: Gillian, thank you very much. That was somevery useful evidence.



Members present:


Mark GarnierAndrea LeadsomMr Pat McFadden

________________


Witnesses: Sajid Javid MP, Economic Secretary to the Treasury, and Alison Cottrell, Director of FinancialServices, HM Treasury, gave evidence.

Q424 Chair: Welcome, Minister. Is this your firstSelect Committee appearance since you took office?Sajid Javid: Yes, it is.Chair: Welcome to the Transport—that’s a good start,isn’t it?Sajid Javid: Transport? I think I’m in the wrongCommittee. Let’s go!Chair: To really put you at home, Andrew Tyrie isgoing to start the questioning.Sajid Javid: Do I have any say in that?

Q425 Mr Tyrie: Welcome to the TreasuryCommittee, in this case a Sub-Committee, for yourvery first appearance. Can I begin by asking you ifyou have had a chance to look at whether you thinkthe Money Advice Service is the right platform to co-ordinate debt advice or whether a more efficientmodel can be found that, for example, could comefrom the voluntary sector?Sajid Javid: Yes, I have. First, I thank you for thewarm welcome and also for the scrutiny theCommittee is providing of the Money Advice Serviceand this area in general. I think it is very important. Ihave had a chance to look at that. In the couple ofmonths, or just a bit more now, I have been in thisrole I have spent some time looking at what theMoney Advice Service does, its original objectivesand how it was set up. As Committee members willknow, the debt advice portion was a change that thisGovernment made1. I have looked at the numbersand how it splits its total income between its two mainfunctions, that being one of them.I do think it is the appropriate place, whereGovernment is involved, to have funding that is raisedthrough this levy. I think it complements what thethird sector or the not-for-profit sector is doing—institutions such as Citizens Advice2, which getsapproximately £18 million in this financial year offunding from MAS. The reason I think the MAS roleis important in this area is because what it brings to itis, first, its focus on the availability of debt advice1 Note by witness: The Government invited MAS to take on

the responsibility for co-ordination of face-to-face debtadvice projects as part of its existing consumer financialeducation function as set out in the Financial Services andMarkets Act 2000, which includes ‘the provision ofinformation and advice to members of the public’

2 Note by witness: In 2012/13, the Money Advice Servicehas allocated £27 million of its debt advice budget to fundsix delivery organisations in England and Wales to provideface to face debt advice services. This includes £17.9 millionallocated to Citizen’s Advice centrally with the remainderfunding non-CAB led projects

Mr Brooks NewmarkMr David RuffleyMr Andrew Tyrie

generally in the marketplace and making sure thatthere is enough availability and who is providing that.It also has a function of looking at the quality ofservice that is being provided to people who need thattype of advice. In doing that, it looks at consistency.For example, one of its major roles that I see in thisarea is to come up with maybe some standardoperating rules or procedure for debt advice to makesure there is some kind of consistency in standards. Ithas commissioned, for example, the Money AdviceTrust to develop some standards and to talk tostakeholders in the industry because there are peopleout there who are very well-intentioned and want toprovide debt advice themselves, because many peopleengaged in this area are often volunteers, but it doesnot mean that that advice is necessarily the rightadvice or good advice, however well-intentioned it is.I think MAS has an important role in this area and,from what I have seen so far, it is carrying that outeffectively, although it is early days with this newmandate.

Q426 Mr Tyrie: When you talk about effectively oreffectiveness, you have to take into account cost-effectiveness and they have quite a high overhead,higher than the voluntary sector. It is alleged theyhave a relatively poor case management system inplace. They pay, I think, £3 million in staff overheads.Are we sure they are the best platform?Sajid Javid: Yes, from what I have seen and thescrutiny I have done. I have met the Chairman ofMAS and discussed this with the FSA—only initialdiscussions at this point. I have looked at theirbusiness plan. I do think it is effective. It is importantto bear in mind, of the total budget they have, whichis approximately about £80 million this financial year,they are spending about £35 million or thereabouts ondebt advice and, of that £35 million, myunderstanding is that 27 million is being given toorganisations to provide face-to-face debt advice. Ithink that is probably one of the most effective ways,but not only face-to-face. I think that it is effective.There are other organisations involved in this spacethat do not get money from MAS at the moment. Imet one such organisation just a couple of weeks agocalled StepChange. They have just changed theirname to StepChange. What MAS is doing in thisspace and what they are doing, I think they see it iscomplementary and they are helping each other. Alsoit is important to point out that I have heard or readabout some people saying, “Could MAS potentially


28 November 2012 Sajid Javid MP and Alison Cottrell

crowd out other sources of finance for the charities inparticular that provide debt management advice?” Ithink that is a legitimate concern, but there is noevidence of that at the moment. In fact, at this eventI went to with StepChange, one of the speakers otherthan myself was Barclaycard, which, I think, is one ofthe main sources of funds. I understand that it has nodesire to change its role in helping to provide finance,despite the role that MAS is playing in this area.

Q427 Mr Tyrie: What about the balance betweenmoney advice marketing and straightforward debtadvice, given the current climate?Sajid Javid: If you are picking up on the issue of themarketing budget in general, which I think is about£20 million this financial year for MAS, it is asignificant amount. Clearly £20 million is a big chunkof money and so there is a big responsibility on MASand the FSA in overseeing its budget to make sure itis spent properly and there is good value for money.But we cannot get away from the fact that, given thatMAS was only recently recreated, it needs to marketitself appropriately because if people do not know thatit exists, they are not going to know where to go forfree, impartial, independent advice. Given that is oneof its key objectives, it is clearly going to cost somereasonable amount of money to advertise itself.

Q428 Mr Tyrie: One last point. I take the point thatone can argue that they have a higher level ofindependence than anybody in the third sector—in thevoluntary sector—could ever have. On the other hand,everyone knows what the Citizens Advice Bureau is.Everyone has heard of the CAB and we do not needto spend any money on marketing them. I am justputting to you that that is money that perhaps couldbe put to use in other ways. What is your responseto that?Sajid Javid: First, I agree with you. I think mostpeople would know what the Citizens Advice Bureauis. Not necessarily everyone would know all the greatservices that it provides and, just from my ownconstituency—I am sure it is true for all colleagues—having visited them and seen what they can do andwhat services they provide, I know that what they dois vital. But it is also fair to say that Citizens Advicehas been around for—if I say decades I might even beunderestimating it if I include its predecessororganisations, and they are on the ground locally in somany parts of the UK. That means that they are wellknown. When you set up an organisation from scratchlike this, clearly you are going to have challenges inmaking sure people are aware of what you do. I donot think it is necessarily a fair comparison betweenthe visibility of Citizens Advice versus MAS.Chair: Thank you, Minister. Do not take this asrudeness or anything but, if I just go through a pottedhistory of these hearings, all the outside organisationswere bemused, bewildered and devastated by howthey had been treated by MAS in the first year. Webrought MAS in. We were bothered, bewildered andwhatever by their performance. We had Lord Turnerin, and we will ask you whether you have caught upwith that. Lord Turner had a hard time and I think,

unfortunately—I hope it did not affect his chances ofthe Bank of England job because I would be very—Mr Ruffley: It had been decided by then, I think.Chair: Oh, thank God. But we subsequentlydiscovered correspondence between him and theTreasury, and Pat is going over it. Lord Turner wasrather worried about their business plan and theiractivities but could not find any power to intervene.You are a new Minister, who has had a Committeeand has a lot to catch up with. I would not dig myselfin too much about what a wonderful organisation it is.I will leave it to your judgment over time, but I justput that scene to you. That is what we are askingquestions about.

Q429 Mr Ruffley: Good afternoon, EconomicSecretary. Could I just refresh your memory of theletter from Lord Turner to Mark Hoban on 14February 2012? He says, “Existing legislation requiresthe FSA to take necessary steps to ensure MAS iscapable of exercising the financial education functionbut powers to support this duty are limited. We arerequired to approve the MAS business plan but arenot empowered to question operational issues such asoutsourcing proposals, provided those proposalsappear reasonable, and the Financial Services Bill didnot increase those powers.” Lord Turner is saying thathe is unhappy with the position the FSA has beenput in. Do you think the current alternatives are underconsideration—that is to say, should MAS be afreestanding body, or are you considering meetingLord Turner’s request that they be given greaterpowers? Are you looking again at this at all?Sajid Javid: I have looked at it. Since I have been inthis role, I have looked at it and I am satisfied that thepowers that already exist for the FSA to oversee MASand its functions are adequate. Just to summarise, FSAhas always had the powers since MAS was created. Ithas to sign off on its budget. It has to sign off on itsbusiness plan. It has the power to appoint and dismissdirectors. I think that in itself is sufficient power.

Q430 Mr Ruffley: Yes, okay. Your position isessentially Mark Hoban’s position, but have youdiscussed with Lord Turner why he seems to be soagitated about not being empowered, for instance, toquestion operational issues? He comes back to thistime and again. We have had evidence that there wasan FSA board paper over the summer. It has beendiscussed at FSA board meetings, and it is clearly abig sticking point for them. What is yourunderstanding of why Lord Turner is so persistent onthis point that he feels he needs more powers to beable to question operational matters?Sajid Javid: I have discussed it, not with Lord Turner,but with John Griffith-Jones, who, as you know, is onthe FSA and the Chair Designate of the FCA, whichwill eventually take over responsibilities for the FSAin this area. Even after that discussion, I am satisfiedthat the powers are adequate. Also, I think it isimportant to point out what the FSA has done sincesome of those initial problems with MAS, especiallyover the former chief executive and his salary—thatwas clearly, it is fair to say, an important issue that



needed to be dealt with and looked at and perhaps ledto some of the scrutiny.The FSA since then has set up, as I understand it, asub-committee, which they did not have before, thatwill look at MAS; so a particularly MAS-focused sub-committee. They have put more staff in the FSAworking on the MAS mandate. They have increasedscrutiny of the information they get from MAS andthey have conducted their own internal risk review. Iam pleased that they have done this, but they couldhave done it before. I did not need to give them morepowers to do this. I think, with the powers that theyhave, there is a lot that they can do.

Q431 Mr Ruffley: But under the legislation a powerto question MAS on operational issues was excluded.Why was that?Sajid Javid: I believe the powers that the FSA hasover MAS are not too different from the powers it hasthrough other independent organisations that fallunder the FSA.Mr Ruffley: Perhaps Ms Cottrell could enlighten us.Alison Cottrell: As the Minister has said, it is aquestion of the FSA using the powers that it had.Obviously, we would be reluctant to give powerswhen we do not think they are absolutely needed. Inthis case, we will be looking at how this works overthe coming period where the FSA is focusing more onthis and is using this new sub-committee. I wouldstress there is a dialogue ongoing clearly between theFSA, MAS and also us, with the different partiescontinually talking to each other around this. It is notas if it is a black and white situation all the time. Itis a case of the FSA using what it has, which it isnow doing.

Q432 Mr Ruffley: But the problem has not goneaway because the FSA seems to be quite aggrieved,and one assumes the FCA will be concerned that theycannot probe and scrutinise operational matters.Alison Cottrell: I think they will be taking a keeninterest. We also have to bear in mind what ishappening as the FSA moves into the FCA, let thatget into a steady state and then see what we have atthe end of that.

Q433 Mr Ruffley: Just as a matter of interest, are allthe officials who are currently in the FSA being sentas a job lot to do this work at the FCA, overseeingMAS, to your knowledge?Alison Cottrell: There is certainly continuity. I am notsure I would use the phrasing, but there is certainlycontinuity across the process.

Q434 Mr Ruffley: Minister, back to you. When doyou propose to review the current arrangements? Wehave established that you are satisfied with thearrangements as at today’s date, but clearly we willhave to see how it operates and how the MOU isutilised in due course. When would you normally lookto review the arrangements and their adequacy?Sajid Javid: I will answer directly the question youjust asked in a moment. First, just on your lastquestion, the FSA does not have control, but it has thesign off on the budget. It has the sign off on the

business plan and it has to appoint directors. I thinkthat is considerable power. If, therefore, there wassomething in a future business plan that the FSA didnot like, wanted to change, or it did not like howmoney was being spent, it did not think it was valuefor money, there is a huge scope there for it tointervene. I do not see at this point the need to changethat. There is adequate power there for the FSA tocarry out its functions in relation to MAS.The issue of review is important because it is still anorganisation that has only been around for a couple ofyears. It is entering a new space, especially by takingon debt management responsibilities as well. Any neworganisation—new space—will have some teethingproblems or issues and I think it is important for theGovernment to make sure it is meeting its objectives.What I intend to do is have a review before the endof this Parliament. I would intend to have a thoroughreview of MAS, making sure that it is meeting itsobjectives as set out by Government and byParliament.

Q435 Mr Ruffley: In evidence to this Sub-Committee on 20 June this year, Lord Turner wasclearly dissatisfied with MAS’s last business plan.Could you tell us what has transpired since LordTurner made his dissatisfaction known about MAS’slast business plan?Sajid Javid: Do you mean in relation to that particularbusiness plan? I think one thing that has come back isthat FSA have already said publicly that they intendto carry out a full value-for-money analysis of MASearly next year, making sure that all its budget is beingspent properly. Also, you may know—and it is linkedto this and I think the FSA has taken comfort fromthis as well—currently MAS is not under the NationalAudit Office, but it will be under the plans of thisGovernment. That is important because the NAO hasthe power, therefore, to carry out a value-for-moneyanalysis. What I hope is maybe the FSA and the NAOcan work together on this and, rather than doing thesame thing, work together, reach a joint terms ofreference and look at value for money.

Q436 Mr Ruffley: MAS, under legislation, has aduty to consult HM Treasury, BIS and also the Officeof Fair Trading when preparing its budget and itsbusiness plans. Could I just ask you, Ms Cottrell, whatdiscussions you have had with these bodies aboutMAS? Is there anything we need to know? Perhapsyou could tell us what locus BIS has and what locusthe Office of Fair Trading has in interacting withMAS.Alison Cottrell: Certainly MAS shares its businessplans and discusses with us. It also shares thembilaterally with other parties, as you have listed, andalso, I think, in its statute, with anyone else it feelsshould be brought into the loop on those. We thenhave conversations with MAS, we then haveconversations in particular sharing back with the FSA,and I would assume that BIS and OFT do likewise.

Q437 Mr Ruffley: What input do BIS and the Officeof Fair Trading have?



Alison Cottrell: I think you would have to ask BISand OFT, sorry.Mr Ruffley: But you are the lead Whitehalldepartment on this.Alison Cottrell: We are the sponsoring department forMAS and, yes, we clearly have conversations withMAS, and as I say, at all times with the FSA. Yes.

Q438 Mr Ruffley: Minister, do you know where BISand the OFT fit in, because they clearly are statutoryconsultees on the preparation of the budget of MAS?Sajid Javid: First, I have not discussed it with mycolleagues at BIS, nor have I discussed this yet withthe OFT; so my information is quite limited on that.As you know, BIS, for example, does haveresponsibility, as far as Government responsibilitiesgo, on consumer credit. With that in mind, I wouldexpect the responsible Minister, who is Jo Swinson,to look at the business plan—not necessarily herselfbut at least her officials—and if they have anycomments on it or any suggestions, I would expectthem to pass those directly to MAS or to the FSA.As far as my officials are concerned, I would expectthem to look at the business plan and future businessplans and to keep an eye on that. If there is anythingthat they think is not necessarily meeting objectivesor anything that I as a Minister should know about, Iwould expect them to bring it to my attention. Also,you may know that—and this is all related—MAS’saccounts are now consolidated into Governmentaccounts. It was not the case before and that will meanthat, for the first time, the Treasury able to see exactlywhat MAS’s income and expenditure is and look atits accuracy and have a line of sight to something thatit did not have before, which I think is an extraelement of oversight.

Q439 Chair: From MAS’s own accounts, under theFinancial Services Act 2010, the FSA approves abudget but does not have influence over the operationsof the Money Advice Service. We had worries aboutthe role. They changed the role whenever they tookover. They made staff redundant. They went to web-base and are spending a lot of money on it. We askedabout bonuses and salaries. We asked them aboutpolicy. They would not give us assurances that theywere not going to put the Citizens Advice Bureauwork out to tender. We raised this with Lord Turnerand he has followed up with specific letters to MarkHoban saying, “We cannot do this. We cannot beresponsible for this organisation unless there arethings we can hold them to account over”, if those arethe proper words but, “We do not have the power toraise any of these questions with them”. The lettershave gone back and forth. MAS feel they areindependent of the FSA. Who has the responsibilityfor MAS? Who can say to them, “You should not bespending £20 million on marketing when there aregrowing debt numbers out there and we can’t evendeal with a tenth of them”?Sajid Javid: First, Mr Mudie, you said that MAS feelsit is independent of the FSA.Chair: They have written it in their—Sajid Javid: No, clearly MAS is deliberately set up asan independent, impartial organisation with its own

budget that, overall, on a day-to-day basis, it willdecide how to spend. For example, as you know, anew CEO has just been appointed. I did meet herbefore her appointment and had to sign off on theappointment. I think it is absolutely clear to MAS andcertainly to the new CEO—the current chair—that theFSA has a real responsibility in overseeing what theydo and the FSA has to be made comfortable withMAS’s business plan, with its budget and withappointment of any directors. First, I do think that isunderstood by MAS and, secondly, those powerstaken together are sufficient powers for FSA tointervene if it felt that things were not going the waythey should do to meet MAS’s objectives.

Q440 Chair: So Lord Turner had this needlesscorrespondence with Mark Hoban, and we did right topush Lord Turner over the issues we felt he should beintervening to ask hard questions of MAS?Sajid Javid: Maybe this happened after you had askedthose questions or around the same time. Given thatFSA has itself made changes to the way it scrutinisesMAS—and we talked to you earlier about having asub-committee set up that it did not have before andso forth—it is fair to say FSA has recognised thatthere are other ways for us to scrutinise MAS and sothis is the kind of thing I would certainly keep an eyeon. Certainly, when we have a review sometimeduring the life of this Parliament, I would want tosatisfy myself that it is working the way that I thinkit is supposed to work.

Q441 Chair: One question to you on that, though.When you read the correspondence, it is moving tothe FCA, and the FCA have made it clear that theywill not touch it for two years because they are toobusy with other stuff. Do you think, as a Minister, youmight speak to it? The basis for asking you this is that£20 million a year is £20 million for four years, not£20 million over four years. There is £20 million inthe budget for four years, which is £80 million. Theweb-based strategy that deserves discussion will bewell advanced and so, in two or three years’ time,there will not be any opportunity to say, “You aredoing the wrong thing”. If the FSA has given up theghost and FCA say, “We will not touch this in the firsttwo years of us being in power”, do you think you, asa Minister, could get them to take it a bit moreseriously and act more expeditiously?Sajid Javid: It is fair to say that FCA clearly doeshave a lot on its hands. It will be a new organisation,so it will clearly face challenges and I accept that FCAis going to be extremely busy, but I think, with mycommitment, that we will have a thorough review ofMAS’s objectives by 2015. That will add to thescrutiny and help—

Q442 Chair: That is exactly what I am saying to you,Minister. This is a new organisation that has arbitrarilychanged their total way of operation within a year.Sajid Javid: Yes.Chair: When questioned by the authorities, whenquestioned by us, we have been given the impression,“No, you cannot tell us to do anything”. I hear thatthe FCA will come in, and you have given us



assurances that they may have more power, may feelthey have more power, are being encouraged to thinkthey have more power, but I would be unhappy toleave for three years the sort of things that arehappening in this organisation now. Besides, it is notonly a question of internal. It is the effect they arehaving on the existing organisations that are carryingout this very valuable work out there. That is thegreatest problem.Sajid Javid: Yes. I think that it would be wrong forme and the Committee members to think that therewill not be strong scrutiny of MAS until the FCA isproperly set up and running.Chair: By whom?Sajid Javid: For example, the FSA. As I understandit, Lord Turner has already said, as we mentionedearlier, that a value-for-money analysis will be donelater next year. I have already mentioned the role ofthe National Audit Office, which is new to this. I thinkthat is an extra layer of scrutiny in a way. Also, theFSA sub-committee has said, “I would expect andhope that when the FCA is constituted, there will stillbe a sub-committee that is looking at the day to dayfunctions of MAS”. If you are implying that MASwill not be number one or two on the FCA’s prioritylist, I think you are right, but there will still be, I amsure, people in the FCA who will be dedicated tolooking at MAS on a day-to-day basis to make sure itis meeting its objectives and giving it proper scrutiny.Chair: That is not what they put in their letter, butanyway.

Q443 Mr Newmark: Can we get to the thorny issueof executive pay? The former chief executive of theMoney Advice Service, Tony Hobman, was initiallypaid, I believe, £300,000 per year, which was, as I amsure you are well aware, more than the PrimeMinister, Chief of Defence staff and Lord ChiefJustice, and, I am sure, many others. According toLord Turner in his evidence on 20 June of this year,this pay was set on appointment in February 2010.Minister, can you confirm that this is correct, that thiswas set under the last Government and this was indeedthe main cause of the trouble that the chief executivehad before he even started?Sajid Javid: Yes. First, it is correct that the formerchief executive was recruited and offered his salarypackage. What you have referred to there is probablyhis total package. I think his base was still high at£250,000, but the total took it over £300,000 a year.He was appointed under the previous Government, butalso MAS was still set up in the way that it is set uptoday in that the FSA was responsible overall for itsbudget and for signing off on senior appointments. Ibelieve I am correct in saying that the Treasury at thetime would have had to sign off on the appointmentof the CEO, just as I have had to sign off on theappointment of the new CEO, Caroline Rookes. Yourpoint is correct about the timing of when that decisionwas made.

Q444 Mr Newmark: Clearly, looking at the newchief executive’s salary—which I believe is set atabout £140,000 per annum, which is less than halfwhat the former one was—do you feel that is an

appropriate figure? Can you tell me how that figurewas arrived at?Sajid Javid: Yes, I do believe it is appropriate. It wasarrived at, first, by looking at what other individualsin comparable non-Governmental public bodies wouldget for a CEO-type function; looking at the number ofemployees, the size of the budget and so forth. I metCaroline Rookes myself and, in my previous career,which was in the financial sector for 20 years, Irecruited a lot of people and so I have quite a bit ofexperience myself in recruitment, let us say. It is clearto me from what I saw that this was someone withextensive experience of leading large organisationsand important projects, particularly in the publicsector. She has relevant experience and an impressivetrack record of delivery, and MAS has shown this timethat it is possible to recruit someone at a lot less thanwhat the previous chief executive was earning but notto have to compromise on skills, experience andsuitability.

Q445 Mr Newmark: In 2011–2012, four executivesreceived total packages, I believe, of between£117,000 and £314,000. MAS has a staff ofapproximately 80 people. Are you satisfied that theseamounts are appropriate for such a relatively smallnumber of staff?Sajid Javid: My understanding is that the totalremuneration for all directors and non-executivedirectors, so that is all of them put together, thisfinancial year—more than the number you said; youreferred to four—is £963,000. Because of the wayMAS is deliberately set up, as an independentorganisation, there to give impartial advice, it is fairto say it is not for the Treasury to scrutinise in detailwhat it is paying each of its key staff or any of itsstaff.

Q446 Mr Newmark: Is having executive paytotalling almost £1 million to manage effectively 80people, which is a relatively small number, anappropriate use of taxpayers’ money at the end of theday? That is what I asked you.Sajid Javid: The FSA, for the reasons we havediscussed earlier, needs to be satisfied that, whenMAS is setting its budget and its objectives, it ispaying the right salaries to attract the right type oftalent. MAS, for example, when it comes to marketingor other capabilities, has very ambitious plans—and itneeds to because it needs to reach out to millions ofpeople with the advice that it is offering, and if thatmeans that you need to pay a given salary to get thattype of talent, I think it would be wrong for theTreasury to set some kind of arbitrary cap on what itcan pay individuals, but it needs to be convinced, andso does the FSA, that value for money is beingobtained.Also, as we know, in the public sector in a moregeneral sense, in the Government there is public sectorpay restraint. MAS is exempt from the public sectorpay caps because it is a non-Governmental body, butI would still expect the organisation, even though it isfunded by a levy and not directly through taxation—how it is funded is an important point—to showproper sensitivity to pay and to take into account that



many people who are paid either directly or indirectlythrough taxes are subject to public sector pay restraint.

Q447 Mr Newmark: MAS is currently advertisingfor two senior management positions, one is the Headof Marketing and one is the Head of Digital—two keyroles, I am sure you would agree. Does it concernyou that two such key positions for a business whosestrategy is focused on reaching consumers primarilythrough the internet and a business that is yet toachieve its desired level of consumer awareness stillneed to be filled?Sajid Javid: It would do if I thought that no one wasdoing those roles in the organisation at the moment,but I have no reason to think that based on what youhave just said, Mr Newmark, because, although it isrecruiting for those roles, it does not mean to say thereis no one doing those roles. I would expect, forexample, that they would have, even if it is on aninterim basis, a suitably-qualified person to do thatrole. The Committee will know, that recently theGovernment recruited for the Governor of the Bankof England, but it did not mean to say we did not havesomeone doing that role.Mr Newmark: Right, but it is still a big hole in amanagement structure whose key objective is to reachconsumers and a business that has still failed toachieve an appropriate level of consumer awareness.Sajid Javid: Where I agree with you, I think it wouldbe a hole if no one was doing that role at the moment.Mr Newmark: Right. Do we need to fill both holes?Can we save some money here?Sajid Javid: I think you said Head of Marketing andHead of Digital.Mr Newmark: Marketing and digital, yes, which bothhave to do with reaching consumers on a variety ofplatforms.Sajid Javid: Yes. I hope you appreciate I do not knowthe exact details of each role, but I would think theyare probably sufficiently different that you would needdifferent skill sets to carry them out effectively.

Q448 Mr McFadden: What is MAS for?Sajid Javid: It stands for Money Advice Service. Itsgenesis—Mr McFadden: I know what it stands for. What isit for?Sajid Javid: Good. Its genesis was work that wasdone by the previous Government and it started bylooking at financial capability. I understand that theFSA, from 2006 onwards, had done a considerableamount of work looking at financial capability in amore general sense. Mr Otto Thoresen was chargedwith carrying out what was known as the ThoresenInquiry eventually and that identified a gap, let us say,in financial capability and the idea was to set up anindependent, impartial organisation—I think thosetwo aspects of it are important—that would providefinancial advice and information on financial productsfor people in a more general sense and a source theycould rely on. They know it is independent, it isimpartial, it is not owned by any commercialorganisation, and I think that is important. The majorchange the new incoming Government made to it was

to accept all that, but to add to it the debt managementfunction that we talked about earlier.

Q449 Mr McFadden: What is the differencebetween what MAS does on debt and what the CABis doing on debt?Sajid Javid: On debt management?Mr McFadden: Yes.Sajid Javid: I think the main difference would be thatCAB is an organisation that provides debt advicedirectly itself, often face-to-face, to individuals whoneed it, particularly financially vulnerable individuals.Whereas I see MAS’s role as more of what you couldcall a co-ordinating role. It receives, as you know, itsoverall funding from the levy. It will use a big chunkof that for its debt advice function. I think over 70%of what is dedicated to debt advice, goes out toorganisations such as CAB. I understand that probablyabout £27 million of the total goes to about sixorganisations. CAB gets close to £18 million, butthese six and other organisations provide direct debtmanagement advice, whereas MAS plays an overallco-ordinating role doing things like, as I mentionedearlier, looking at having a good set of practices,having a code of conduct and trying to see if thereare other ways to help these organisations that raisefunding, for example, the industry in general.

Q450 Mr McFadden: Have you had a chance tolook at what some of the people who providedevidence to us have said about the organisation?Sajid Javid: Yes, I have.

Q451 Mr McFadden: I will just read, for example,what Advice UK said: “We are extremely concernedat the amount of money that MAS is spending onbranding, marketing and consumer communications,money which we think could be better spent onexpanding frontline debt advice delivery. We do notthink there are adequate accountability mechanismsfor MAS or that it has properly consulted with theadvice sector on its plans for debt advice delivery.” Iasked Martin Lewis what he thought of it and I willjust read some of the stuff he said: “The product isabominable and I would be embarrassed to put mostof their tools on my website.” I took that down. I didnot read the first part because I wanted to be polite.He said he had put a message up on Facebook to tellpeople that he was coming before us and asking whatthey thought of the products. This is specifically aboutthe financial health check. The comments that hereceived were, “It is useless if you have already got abit saved up”, “Looked at it several times, not findingit very helpful as it seems very basic”, “Looks verybasic”. He then goes on to advertise his own website.Have you had a chance to look at this financialhealth check?Sajid Javid: Yes, I have done it. Have you done it?

Q452 Mr McFadden: What did you think of it?Sajid Javid: I do not know if members of theCommittee have tried it but I thought it was verygood.Mr McFadden: You disagree with Mr Lewis?



Sajid Javid: I would disagree with probably most ofthat; pretty much all of it actually.

Q453 Mr McFadden: Do you think they are doingbetter than the people who gave us these opinions?Sajid Javid: I cannot speak for all the people givingthe opinions.Mr McFadden: Just the ones I read out.Sajid Javid: Yes. I think that, at least certainly the lastone you read out, especially on the point on the web-based service, the financial health check, I do think itis very good. I did not even know about the healthcheck until I became Minister and I thought, giventhat this is a big part of the offering of MAS, I shouldcertainly check it out. I did the health check and Ithink the advice it kicks out at the end, although Iwould say, to be fair, I did not feel that I neededfinancial advice myself, for those who do, is a veryuseful tool. May I ask if you have you done it?Mr McFadden: I have not.Sajid Javid: You may want to try it and then let meknow what you think.

Q454 Mr McFadden: I will definitely let you knowwhat I think. Do you think, in the balance of face-to-face and online, that they have that right in terms ofwhere they put their resources?Sajid Javid: Yes. When I used the website somethingpopped up saying, “Do you want an onlineconversation”. I did have a quick one withoutrevealing who I was, just to do a mystery shopper testand I thought when I asked the difference betweenAPR and AER it was quite a good answer. The onlinetool seems to work well, at least from what I haveexperienced, and however limited that experience is.In terms of the overall balance, I think that clearlythat is something that MAS is going to have to decideover time. It will learn better over time depending onhow many responses it gets.

Q455 Mr McFadden: You are financially literate. Alot of people who need debt advice may be lessfinancially literate. This is quite an important thing forthem to get right because, by definition, a lot of thepeople who need debt advice might not be asfinancially literate as Treasury Ministers.Sajid Javid: Yes, I think that is why there have tobe different ways or different platforms for people tointeract with MAS. Online is part of it. Obviously theonline chat function is part of it, the web-basedfunction is important, but the face-to-face contact isvery important as well, especially for the debt adviceservices where, for the reasons you say, people areeither already in trouble and they just need that extrabit of help through debt advice, or you might havesomeone who clearly just is not up to speed on somany different products. If they want face-to-faceadvice, it is important that that can be offered. I thinkyou would appreciate that face-to-face advice isprobably generally more expensive to offer or moreresource-intensive. So it is correct for MAS to try tothink of other forms it can to provide help. Forexample, a number of people have telephoneconversations, something in between online chat and

face-to-face I guess, and in many cases that can behelpful too.

Q456 Mr McFadden: We have had some issues inthe evidence sessions on this about transparency andwhere the budget is being spent and all of that andyou have heard some of that in the questions today.Am I right in saying at the moment it is not subjectto the Freedom of Information Act? It is not withinscope, is it?Sajid Javid: It is not, no.

Q457 Mr McFadden: Are there any plans to changethat? Is that something you would think about,bringing it within scope?Sajid Javid: I will let Alison come in if there isanything different, but my understanding is, in generaland not just relating to MAS, the Government islooking at reviewing whether independent bodies likeMAS should become subject to the Freedom ofInformation Act or not, in the interests oftransparency. I think the Government is right to lookat that and, as part of that review, MAS is beinglooked at.Mr McFadden: Do you want to add anything to that?Alison Cottrell: Yes, absolutely—if it is appropriatewe would then consider it in any future extensions ofthe Act. So it is certainly on the radar.

Q458 Chair: I hear your answers to Pat, but I thinkit is interesting that our different views—there will bedifferent opinions, but we are in the middle of arecession. MAS calculate that 4.2 million peoplerequire debt advice, and about 2.1 million are latentor something, not seeking help. There are 2.1 millionpeople seeking help and I think Citizens Advice getabout 150,000, simply because of the time it takes todeal with these cases. We are dealing with 150,000and there is that backlog of 1.8 million. The core costbefore they do anything is £10 million. They spend£20 million on marketing. That is £30 million. That isalmost all the budget on money advice, and the debtadvice is run separately. But £2 million of the debtadvice is in that figure. Does it not raise anyquestions?That is exactly the point I was making with timescaleand about surveillance, that here is this organisationcoming in and spending that amount of money at thissensitive time. Well, we could take your view, “Yes,it is good. Yes. The professionals did not think so butwe think it is good”. But is it the priority at this timeof the economic recession? That is the point we areputting and nobody seems to be able to discuss that,so they are ploughing ahead. They are on the seconddesign of their financial health check, which they saidwas so great when they launched it eight months ago.They have now discovered there is all sorts of—andthey have now agreed to make it better and they gliblysay it is Mark II. All that money has been spent andpeople are desperately being locked out of CABsbecause they can deal just with so many people in aday. It seems to me this organisation needs to havesome hard questions asked about it. Do you want toanswer that or shall I go straight to Mark?



Sajid Javid: No, I would like to answer that if I can.In a general sense, you are raising very importantvalue-for-money questions. It has a budget. Is itproducing value for money? I think that is the general,very important point that you raise. If you look at itstwo major functions, money advice and debtmanagement, we would all agree that, clearly, forpeople who need debt management services becausethey have found themselves in trouble, that helpshould be there. But where it is possible, it would befar better to make sure people did not get into thatposition in the first place and that is where I think themoney advice function is vital, because if you canincrease that financial capability, their understandingof the products, then they might not have made themistake either of taking on too many loans, or loanswhere they did not really understand how they workedor other related financial products.If you accept that it is better to stop people gettinginto trouble in the first place, then if you are thengoing to provide this money advice service with oneof its most powerful points being it is impartial andindependent—there are lots of people out there whoclaim to provide money advice and in some ways theydo, and sometimes I guess it can be valuable, but it isimportant that this is impartial and independent—youhave to make sure people know that it exists. I did nothear about the Money Advice Service until probablyabout six months ago. That is the first time I have everheard about it.Chair: Despite £20 million in marketing?Sajid Javid: Despite all the years I have spent in thefinancial industry, despite becoming an MP in 2010,and I do not know if there is a way to do it, but if wepolled most MPs, asking whether they have heard ofthe Money Advice Service, I would not be shocked ifthe majority of them had not, and we as MPs aredealing with people who have financial problems allthe time in our surgeries. I think there is a good reasonas to why it needs to market itself but also, equally,and I think that is implied in your question, we haveto make sure it is value for money. I think to have nomarketing budget at all, for example, at one extremeand then perhaps to take that money and put it all intodebt advice, yes, you would certainly be able to helpmore people with debt advice because there are moreresources. However, will you eventually see a biggerproblem down the road a few years hence, when youfind there are lots of people who did not get advicewho could have?Chair: Minister, I accept that, except you wouldaccept that these are particularly special times. Wehave not had a recession like this for someconsiderable time. The Governor was here yesterdayand he is projecting it to 2018 or 2020. Now, there areover, what, 2 million people desperate for advice. Iunderstand the point about the coming generation—Mark is going to deal with that. There might be peopleout there who might get in trouble in the future. Therewill always be people like that, I guess, but at themoment people are drowning in their financialproblems. They are losing their homes and thisorganisation has come in and thrown money about insuch a haphazard way, and nobody has told us how

we actually get into a meaningful dialogue with themto determine their priorities.

Q459 Mark Garnier: In a number of speeches in thepast, and, indeed, a bit earlier, you have been talkingabout financial capability. The Thoresen report wasabout financial capability. Your predecessor, in aspeech last year, talked about taking consumercapability first and, in another speech, consumercapability. Sue Lewis of PFEG mentioned the benefitsof greater financial capability. People are talking aboutfinancial capability. We are hearing a lot about this.What do you understand by the term “financialcapability”?Sajid Javid: Okay, I will answer that in a moment.Mr Mudie, one thing just so you are aware, when itcomes to—Chair: You will only provoke me.Sajid Javid: I do not mind. When you are provoked,you provide even better scrutiny, so that is verywelcome. But on debt advice, just to point out in thefigures that MAS published for the first six months ofthis year—so when I looked at performance figures—it was encouraging to know, in a way, to point to yourissue about increasing demand in many quarters fordebt advice, that the entities that were funded throughMAS provided advice for 34,000 more people thanthey did the previous six months.

Q460 Chair: You should not go there because, if youread our papers and you had listened to the CitizensAdvice Bureau—it was one of the matters that Pat didnot raise with you—one of the comments was, and wewill probably come to it, about the lack ofconsultation over their role. That is what Mark wasgetting at, their role. They went into Citizens Adviceand they instructed them, not backed up withresources, to see more people in return for the samegrant, presumably under the threat, “If you do not wewill take the grant”. But as Citizens Advice say, whenyou are dealing with an individual deep in debtproblems it is not a two-minute job. Citizens advicebureaux lock their doors when they are full becausethey know they cannot see any more people. Tosimply say, “Save 50% more”, as was the claim, youare simply forcing people to get less good advicebecause they are trying to see more people in the sametime. That is why those figures are better. They arebetter in quantity but not in quality and that is theworry.Sajid Javid: Yes, I completely agree with you—it isas much about quality as anything. It is the mostimportant thing. I have, and maybe you have as well,Mr Mudie, been in a citizens advice bureau when theyprovide advice and have seen the high quality of workthat they provide. Quality is absolutely important. Interms of getting the right balance between the budgetit has, between debt advice and your more generalmoney advice, what I hope and what I would expectto see is, in its business plans over coming years, asit sees changes in demand and the need to react tothat, that that is reflected in the balance of funds. Thatis something I will certainly be keeping an eye outfor, and I would expect the FSA to do that as well.



Going back to the question from Mr Garnier aboutfinancial capability, I think you asked me what I thinkfinancial capability is, or for some kind of definitionof it. I would say probably knowledge andunderstanding of financial products. In a generalsense, what is financial capability? Having aknowledge and understanding of financial products;having the skills to then choose between differentfinancial products; to be able to have some basic levelof analysis between the different products, forexample, being able to compare different types ofinterest rates on a loan if they are quoted in differentways; and I would also add a third element, whichmight be more about making people feel moreconfident about financial products and changing theirattitude towards them.I think there are people who probably have knowledgeand the right skills. They might be very good atmathematics, for example, but maybe they do nothave the confidence in themselves that they can makedecisions because it is such a big financial decision.For example, when you take out a mortgage, probablyone of the biggest financial decisions most of uswould make, people sometimes feel they do not havethe confidence to deal with that. In terms of overallfinancial capability I think those are probably the threemain areas that help define it.

Q461 Mark Garnier: That is a very interesting andvery informative answer. While I would not disagreewith any of that, what slightly surprised me was thatleft off that list was a simple definition of how tobalance a budget, some of the most basic sort offundamental stuff. It is quite interesting; you asked MrMcFadden if he had done the financial health check.I did do it—I did not finish it funnily enough, as ittook rather a long time—but what struck me about itwas that, in order to do the financial health check, youneeded to have a certain element of financialknowledge already to understand what was going on.You mentioned a very important point, which is whenyou ask the online question about the differencebetween APR and AER—a very important question.But that is not the sort of question that somebody whois not financially capable could ask, and they certainlywould not understand the answer. We talked aboutdebt. We have a colossal elephant in the room, whichnobody has really seemed to confront too much,which is that level of household debt, £1.46 trillionacross the country, at a time when we have super-low interest rates—and it is not a low interest rateenvironment, it is a super-low interest rateenvironment. Yet we have, what we accept, broadlyspeaking, is a financially illiterate population. Wouldyou agree with that?Sajid Javid: I think we need to find better ways toeducate people about financial matters, yes. I wouldnot necessarily use the same phrase you have used,Mr Garnier—“financially illiterate”—because thereare different levels of knowledge clearly in thepopulation, but I think we, certainly as a country,would do well to focus on raising financial capability.

Q462 Mark Garnier: Several people have comebefore this committee who have talked about financial

education, and a great many of them agree thatfinancial education on the curriculum is something weshould be looking seriously at. Do you agree withthat?Sajid Javid: First, I do not think it would surprise youif I said that whether we put it in the curriculum is adecision for the Department for Education. I thinkthere is a legitimate debate to be had because thereare so many other things we want to put in thecurriculum and the Government is making changes tothat, focusing on core subjects. Some of them clearlyadd to and would enhance one’s financial capabilities,some of the basic core subjects: mathematics andEnglish, and there is already a number of things thatgo on in schools, some supported by charities, somesupported by financial institutions. They are trying tobring financial capability and financial ideas toyoung people.There is a role for MAS in all this. I think it is lookingat financial capability in schools and beyond,especially among young people, and looking at waysit can bring people together to play a role. Can it co-ordinate, for example, between the numerous financialinstitutions? I think there are over 20 that would gointo schools, banks and other companies. Can itprovide a voluntary code of best practice so theorganisations that want to help are doing it in ways inwhich they can get through to young people moreeasily and make a positive impression?Also, I would expect it to have its own discussionswith Ministers in the Department for Education andsee other ways that they can work with officials to tryand see if elements of financial capability can put intoother core subjects like mathematics so that examplescan be used with children. For example, whendiscussing interest rates, maybe a sort of real examplecould be used of taking out a mortgage or something,which will help teach both mathematics but also a bitabout financial capability.

Q463 Mark Garnier: Do you not agree that the factthat we have a relatively challenged level of financialcapability in our population has direct effects on theeconomy? Certainly, we have the level of householddebt that I have described, but we are also looking forentrepreneurs to come forward and set up businessesand give them a modicum of financial capability atschool. We have a ready-made bunch of capableentrepreneurs coming forward. In terms of buildingthe economy, it would be extraordinarily useful.Sajid Javid: If your question is, “Is more financialcapability a good thing for the economy?” I think yes,all other things being equal, it clearly is. I am notsaying it does, but if it came at the expense—there areonly so many hours in a school day—of someone notbeing able to do other core subjects like sciences andlanguages, which the economy also needs, there couldbe a negative impact somewhere as well. That is whyI deliberately use the phrase, “All other things beingequal, it is a good thing”, but often there are choicesand trade-offs to be made. It is not for me as theTreasury Minister to decide what should be thepriorities in a school curriculum, but I think it is alegitimate debate to have.



Q464 Mark Garnier: No, I agree it is not yourdecision, but have you had a conversation or do youplan to have a conversation?Sajid Javid: I have not yet had a conversation withmy colleagues in the Department for Education, but itis something that I would like to discuss with them.

Q465 Mark Garnier: You do plan to. That isfantastic. Have you had a chance to meet with thePersonal Finance Education Group, PFEG, who arepromoting this?Sajid Javid: Not yet.Mark Garnier: Would you be prepared to meet themand have a conversation?Sajid Javid: Yes, I would.Mark Garnier: That is fantastic. Thank you verymuch.

Q466 Andrea Leadsom: Good afternoon, sorry forbeing late. I had to meet Baroness Kramer about bankaccount portability. I have to say, I have a great dealof sympathy with what Mr Mudie was saying earlier,which is that through this inquiry, which has rambledon a bit, when we had Citizens Advice in and theymade very clear how much more they could achievewith a budget similar to that of MAS, it was quiteshocking. Of course, one of the reasons why they canachieve so much is because of the extent of volunteersthat they use; that they manage to get in to sort ofsoup up the number of people they can see, the qualityof advice and so on. I just wonder, Mr Javid, whetheryou have considered calling on MAS to do somethingsimilar, to get better value for money, perhaps byengaging with the banks, which, as I am sure youfound, as I and as colleagues here have, are alwaystelling us that they are keen to deliver financialeducation and any school that wants to receive it needonly ask and they have all these programmes that theyput together. MAS does not appear to engage with thatat all. Could that not be a means of improving theiroffering and getting better value for money out of it?Sajid Javid: Yes. In terms of financial education, first,it is important for me again to emphasise that Treasuryis not involved in day-to-day decisions that MASmight make and that the FSA is more involved, buteven then, the FSA has an oversight role. MAS hasbeen deliberately set up as an independentorganisation that has to make its own decision aboutthe best way to carry out its objectives.But the very issue that you mention touches on whatMr Garnier was asking about, financial capability andwhat kind of role MAS can play. I have discussedthis with the current chairman of MAS because it issomething I am certainly interested in and that theGovernment in a more general sense is interested in.It is something that they have been involved in. Whatthey told me is that, first, there was a lot of work doneby the previous Government on financial capability,starting I think in 2006 to about 2010. The FSApublished maybe even more than one report and MAShas told me it is their intention to work withstakeholders to, what they describe as, “refresh thisreport.” I think it does need refreshing because wehave had the financial crisis and we need to take thatinto account because that has made a change. Mr

Garnier has referred to record levels, or almost recordlevels, of household debt. They are going through thisprocess at the moment.I have discussed this with the Chair and I would liketo see what they come back with in terms of how theycan work with organisations. They pointed out to me,if I remember correctly, that there were about 25financial organisations that are involved with schoolson a voluntary basis and providing help with financialcapability to school children. MAS sees their role asbeing one where they can co-ordinate that and makesure it is being done more effectively and also to havesome basic standards, code of conduct, so there aresome basic principles that everyone can meet. I thinkall that is a good thing.

Q467 Andrea Leadsom: You say it is not theTreasury’s role to tell MAS what to do or how toexpand or how to arrange their affairs, and nor is itthe FSA’s role to do that. I think you said that the FSAjust overviews as a whole, but it is for MAS itself todetermine what it does. If this committee wanted toput forward the proposal that the MAS’s activitiesshould expand, for example, to include financialeducation or indeed to try to use voluntary supportfrom the banking sector to try to improve the numberof people they were giving debt advice to, how wouldthat instruction go to MAS? Who would put thatdirection to them?Sajid Javid: I think it is important to remember thatMAS has been deliberately set up as an independent,impartial organisation, so to a large extent they needto decide the best way to carry out the objectives. Thefinancial capability and trying to promote that isclearly one of them. I appreciate, as you said, that youmissed the beginning of this session and one of thethings we talked about was the FSA’s responsibilitiesvis-à-vis MAS. On the FSA’s role, the FSA has to signoff on its budget and its business plan each year andalso sign off on the appointment of all its directors.That gives it quite a big degree of involvement andoversight. Also the FSA has already set up a sub-committee of individuals in the FSA that focus onlyon MAS and look more closely at its day-to-dayfunctions. Clearly the FSA have a role to play in this,but it would be looking to MAS and influencing MASabout how it carries out this financial capability role.If members of the Committee or Members ofParliament generally want to influence this, I wouldsay two things. First, clearly the Committee can callthe FSA anytime and discuss it either formally orinformally. You can speak to MAS, its managementteam, particularly its new CEO, who maybe at somepoint the Committee might be speaking to directly.That is one avenue, but something else that I said atthe start of this session that you may have missed, MsLeadsom, is that I as the Minister will be carrying outa thorough review of MAS and looking at how it ismeeting objectives, how it has been running after ithas had some time, especially with all the recentchanges, and I will expect to do that most certainlybefore the end of this Parliament. I think that, when Icarry out that review, there will be an opportunity forother stakeholders and people with scrutiny to provideinput into that review as well.



Q468 Andrea Leadsom: Thank you very much. Justthen changing subjects slightly to the way in whichMAS is funded. We have had some written evidencefrom the IFA Centre who said they are concerned thatIFAs are effectively being forced to pay for a servicethat people use as an alternative to seeking properadvice. They are saying when businesses are facedwith financial challenges of their own, someeconomic, some commercial, some regulatory, firmstend to feel aggrieved that they also pay levies to fundthe work of the Money Advice Service. Then theFinancial Services Practitioners Panel has said thatthere are concerns around the sustainability ofconstant cost increases for firms in a very challengingeconomic environment, and that same FinancialServices Practitioners Panel has said that utilityproviders should contribute to the Money AdviceService’s budget particularly because a lot of thestress for customers and the short-term risks forcustomers is in rising energy, fuel and utility pricesand not necessarily other forms of debt. I think thegeneral evidence that we received from financialservices practitioners is they should not be the onlyones funding the MAS and certainly there is a casefor utility companies and Government to contribute tothe costs of running this. What is your thought onthat?Sajid Javid: First, I think you referred to IFAs. Youused the phrase, “not proper advice”.Andrea Leadsom: Yes. In effect, what they arearguing is that IFAs would give sound advice andinstead they are paying for a service for people to goto, which is not as good advice as they would get froman IFA. I think that is how I read their evidence.Sajid Javid: First, I would not suggest for a secondthat this is not proper advice. I mean MAS is athoroughly professional organisation. It is verydifferent to IFAs in that it is independent, it isimpartial, and it is free as well. That does mean itmight give different advice, but I think it is mostcertainly proper advice.Also, in regard to IFAs, with the RDR and the changesthat we have made there that the Committee hasdiscussed in the past, I think the good thing there isthat, once the qualification levels are increased for allIFAs and with the extra transparency the RDR willbring, that will possibly make that advice even betterif you just look at the fact that all IFAs in future willhave to meet a higher bar for qualification.You mentioned utilities and maybe, say it is anelectricity, phone bill and so forth, people fall intoarrears. That is an important point and I did look intothis. What I found was that, first of all, MAS hadalready done research to look at, when it is providingthrough others but you are co-ordinating debtmanagement advice, what it is that people are mostlygetting advice on. The number was even lower than Ithought it would be. I thought it would be a lownumber, but they said that research they did showedthat people that are getting advice for debt in arrears,other than borrowing from financial companies—sofor utilities, phone companies, household associations,local authorities, and other similar things—was lessthan 1% of the total number of people. Given that99% is not utilities and similar things, I think it is

reasonable to fund through a levy on the financialservices in general.

Q469 Andrea Leadsom: My final question is,bearing in mind the situation that we find ourselves inthis year, do you think that it is reasonable that MASis increasing the levy by 5.7% this year to fund theirincreased enhanced activities? Does that seemreasonable to you?Sajid Javid: You refer to the economic times we arein. Whenever costs are increased on any industry Ithink it needs that extra level of scrutiny, but also thislinks into what we discussed earlier. There is a casethat maybe more people, given the size of thehousehold debt, given the recent recession and otherchallenging issues, need debt management advice. Inthat context, it is not unreasonable that there shouldhave been an increase in the levy.

Q470 Chair: You have not put any caveat on that,because that is a fair answer, but if they are going toget this 5.7%, which is an amazing increase in thistime of recession, they should pass it on to thefrontline services. They are spending something like£10 million on core centre administration and that isquite wrong if frontline services are not able to do thejob with troubled people. Is there any prospect ofgiving that instruction to them, “You cannot spend itin head office; you should be spending it on thestreet”?Sajid Javid: It would not be for the Treasury to givethat instruction specifically for the way the MAS isset up as an independent organisation funded by thelevy. It could be something that, when the FSA isgoing through its business plan and its budget indetail, they could choose to do, but I think it wouldbe inappropriate for the Treasury to put caps andcaveats on how MAS should spend its money. What Iwill add, and I think hopefully you would agree thatthis is a good thing, is that, as referred to earlier, FSAhas already said that it will carry out a value-for-money analysis of MAS in the New Year.Chair: Which year?Sajid Javid: This coming year, the start of 2013. Also,as I have mentioned, MAS will now for the first timefall under the NAO, and they can also carry out theirvalue-for-money analysis. I would not be surprised ifthey do and, if they do, I would fully support it.

Q471 Chair: The last question to you is one that wasraised initially and it has raised its head again thisyear. One of the constant complaints from the serviceson the street, the deliverers, was that there were noconsultations, firstly, on whether they were going tobe used and, secondly, on their budgets, until very latein the financial year. This letter just came in on 23November to me. Advice Leeds has nine peoplegiving advice. It is a Government scheme. Last yearthey were told on 31 March, the last day of thefinancial year, that they were going to have continuedfunding. By that time, they had had to give the staffnotice of redundancies. The staff had to break offseeing their clients to prepare for closing down. Doyou know what is happening this year? I have hearda whisper that there was better consultation than last



year, but that would not be hard. Will we be told bythe providers that there have been adequate, timelyconsultations? If so, Alison, while you are passing theMinister that note, why does Advice Leeds send methis letter worrying that they do not know whetherthey are going to continue next year and they do notknow whether they are going to have to wait until 31March? That is a bad way to treat people who aredoing this key job.Sajid Javid: We will answer that question in twoparts, if we may. First, on the general point, I clearlywould agree with what is the main point in yourquestion. Institutions like Citizens Advice and othersthat MAS is working with need to be provided withadequate notice, because we discuss Citizens Adviceas the example. They are not the only one. They doexcellent work in this area and many of the peoplethey have are volunteers, not all, but they haveexpenses to pay and so forth; so they need to knowwith adequate notice. I have not particularly looked atthis myself yet, but I know officials have. I would letAlison be a bit more specific about that.Alison Cottrell: You are right; it is not the way youwould want to run a business. It does cause

tremendous problems for charities and for businesses.It is in part a function of the fact that obviously MAShas to take its business plan on an annual basis to theFSA, so it is on this yearly cycle itself. I think one ofthe issues that the FSA and in future the FCA will bediscussing with MAS is, firstly, can this happen a littlebit earlier so that it does not come so late to CABand to others when it happens. At the moment, as Iunderstand it, with the discussions with the FSA, thisnew sub-committee and with MAS, they are trying togive some comfort so that the situation that CAB issetting out there should be hopefully resolved veryquickly, if it has not been already, just to tide over thefact that it is relatively late in the year at the moment.But it is something that we are very aware of as aproblem.Chair: All right. Minister, I am much impressed byyour performance when you have a bad case. I wouldhate to meet you when you had a good case. We arevery grateful for your giving evidence. Thank youvery much.


Monday 24 June 2013

Members present:


Mark GarnierMr Andrew LoveJohn MannMr Brooks Newmark

________________

Examination of Witness

Witness: Caroline Rookes CBE, Chief Executive, Money Advice Service, gave evidence.

Chair: Thank you very much for coming. Mr Tyrie isgoing to start.

Q472 Mr Tyrie: Could I begin, Caroline Rookes?You have had quite a lot of critical comments fired atyour organisation, including about the quality of thewebsite and the lack of clarity over its purpose, andsome trenchant criticisms from the citizens advicebureau as well. Are these criticisms fair?Caroline Rookes: I do not think that I can commenton whether they are fair or not because I think theywere comments that were made some considerabletime ago—some of them over a year ago. I can tellyou how I see the organisation four and a half monthsin, and I think that it is doing very well. I think it hasturned a corner and that it has some real achievementsunder its belt.

Q473 Mr Tyrie: Could you perhaps just articulate anachievement and the purpose of MAS in a sentenceor so?Caroline Rookes: I would say that the purpose ofMAS, in a sentence—in a nutshell—is to help peopleto manage their money, either directly through its ownservices, or in partnership with other organisations.We do that through money advice; we do it throughdebt advice; and we do it through, if you like, aleadership role. We try to bring together the financialcapability sector to make sure that we are all workingeffectively together.In terms of achievements, I would point to the 3.5million people who have been helped by the MoneyAdvice Service so far and the fact that while numbersare certainly not everything, we have exit polls thattell us that satisfaction ratings are very high—over80%. Three quarters of people who have used theMoney Advice Service have found the informationthey needed and taken action. On the debt advice side,last year we increased productivity by over 50%, so Ithink there are some real achievements there.

Q474 Mr Tyrie: When you took over, did you takea look at whether, were MAS not to exist, the spacewould be filled by voluntary action?Caroline Rookes: I did not particularly because I wasrecruited to run MAS, so I was not looking at whatwould happen if MAS was not there. I have beenlooking at, and indeed talking to, the whole range ofstakeholders that are out there to consider what theirrole is and what they are doing so that we can workcollaboratively with them.

Jesse NormanJohn ThursoMr Andrew Tyrie

Q475 Mr Tyrie: Have you looked at whether MASshould be smaller?Caroline Rookes: I am conscious of the need forMAS to demonstrate value for money at all times. Atthe moment, we are in the process of developing athree-year plan and our next year’s business plan, andit is in the context of that that we will need to look atthe funding that we require.

Q476 Mr Tyrie: So you might need more money.Caroline Rookes: I do not anticipate that we wouldneed more money, but we have not yet done ourplanning—or, rather, not yet completed it. We are inthe process of doing it now.

Q477 Mr Tyrie: Your current business plan statesthat you will use a range of qualitative andquantitative research methods to develop: “A richerunderstanding of our audience, their behaviours andthe levers that can be used to make a real differenceto people’s financial capability”. What that means, Ithink, is that you are intending to try to get to knowyour clients. There does not seem to be much detailon the methods that you intend to use. Have youspecified them anywhere else in such a way that wecould assess your performance?Caroline Rookes: We are in the process of puttingtogether a document, which we intend to publish nextmonth, on the basis of setting out the findings from amajor piece of research that we have done, bothqualitative and quantitative. That is research that weare going to repeat quarterly. What that has done is ithas surveyed 5,000 people to ask them about theirmoney and how they manage it. Of those 5,000people, 800 of them are Money Advice Servicecustomers, and our intention is to continue to carrythat survey out on a quarterly basis so that we canbuild up a picture of the financial capability of theUK.In addition to that, we have carried out somequalitative research. We have carried out a number oftypes of research, but the biggest piece is somethingcalled an ethnographic survey, where 72 families havebeen followed—not continuously—with theiragreement for a year, and filmed in their moneydealings, so that we can get a better understanding ofwhat people do with their money and why they do it,rather than what they say they do. The idea for us isto pull all that together into a research report into abaseline survey of the financial capability of the


24 June 2013 Caroline Rookes CBE

country, which we will then use going forward toassess how effective we are being.In addition to that, we of course monitor the numberof people who we see, who use our telephone serviceand who use our website. We use exit polls toestablish whether they have got the advice they wantand whether, having got that advice, it has helpedthem to take the action that they want. We have quitea range of ways of measuring our performance, and ifyou would like more detail, we can send it to you.

Q478 Mr Tyrie: We would like some if we could,because there is nothing coming along with thisstatement that you are going to get to know better thepeople whom you are trying to serve.Caroline Rookes: That will be primarily the researchthat we publish next month. We will be publishing itprobably in about two weeks, and that will give amuch fuller, richer picture of people in the UK.Mr Tyrie: It would be helpful, too, if you could takea look at the language to see if you can simplify asmuch as possible some of the statements that are beingmade in your documents. This is only one of a goodnumber of examples of rather curious phraseology thatcan be reduced to very simple thoughts if, in this case,you want to get to know the people you are serving.

Q479 John Thurso: May I ask a simple question?Who are the core customers?Caroline Rookes: Our service is a universal offering.It is there for everybody, but we are focusing on threemain groups: young people; families with youngchildren; and, indeed, those with older children. Wedid a piece of work based on some Experian data onfinancial segmentation. We have looked at segments—I think they had about 50—against a series ofoutcomes or elements that we think represent goodmoney management: keeping debt under control;saving regularly; saving for retirement; insurance; andprovision for dependants. We have looked at thesesegments against those five outcomes, and there arethree segments, which are the ones I listed, where wehave the most concern. We will be particularlytargeting those groups, but I do say again that that isin the context of a service that is universal and willprovide coverage for all.

Q480 John Thurso: I suppose what I am driving atis that there are a lot of people who are moderatelysavvy about money and so on and who know theyneed advice. They will go and look and get advice.They are perfectly bona fide customers. There are alsoa lot of people who do not know they need advice andwho find out they are in trouble when they get intotrouble. I am really trying to understand, given youare a relatively new organisation in quite a complexarea, to what extent you are focused on the problemend, if you like, as opposed to the general advice end.Caroline Rookes: I think I would answer that in twoways. The problem end is partially the debt adviceend. As you say, though, these are people who are introuble. Sometimes they have left it too—well, not toolate, but they have left it late. With the debt advice,we were given the role last year to co-ordinate fundingfor face-to-face debt advice, but also to raise standards

across free debt advice. One of the things we want todo, apart from raising standards, is to ensure that debtadvice is accessible to all, and we are working withthe main organisations like Citizens Advice,StepChange and the Money Advice Trust to make surethat people can access debt advice easily and quickly.On the money advice side, I think what you have hiton is the real issue: how do you engage people whoare not interested in money and probably will not beuntil it is too late? I think that is an issue that all ofus in the sector are grappling with. I have hadmeetings with most of the big banks and that is thesame conversation we have with them. They havepeople who they can see are tipping over intodifficulties, but they are people with whom, evenwhen they offer help, it is rejected.Having said that, we do not have a magic wand. Ourfirst step is raising awareness of the service. What wespent our marketing budget on last year was toincrease awareness of the service so that people knowthat the Money Advice Service is here. We are alsoworking through a lot of partnerships to draw peopleto the advice service. For example, we havepartnerships with things like Mumsnet and Emma’sDiary so that at life stages when people have children,they are referred to our website. Those are the sortsof routes that we are taking to make the contentengaging and draw people.

Q481 John Thurso: Your own business plan makesthe very obvious statement: “We are a very neworganisation with a wide and complex remit”. Do youthink, now you have been in post for a while and hada chance to grapple with it, that it may be too wideand too complex, and that Parliament would havebeen better giving you something somewhat narrowerand simpler?Caroline Rookes: No, I do not think it is. I think it isessential that someone has that wide remit, becausefor me it is those two very wide statutory objectives—to raise people’s understanding and to raise people’sability to manage their money—that give us, if youlike, the locus to work with the financial capabilitysector, to draw the organisations that are working inthis space together and to try to ensure that we aremoving forward as efficiently as we can, without toomany overlaps and gaps, so that we are actuallyworking together. That is very much how I see theMoney Advice Service’s role developing over the nextfew years.

Q482 John Thurso: By sheer coincidence, I attendedquite recently a meeting in my part of the world wherethere was a young lady from Money Advice who wasgiving some advice to some fairly disadvantagedpeople. I asked the question, “How many of you canaccess the internet?” and the answer was there wasnot one in there, unless they came into this particulargroup. Looking at, if you like, with those people whoyou are just trying to give advice to, obviouslyworking online is fine, but for those who are indifficulty, very often they are also digitally excluded.How can you assess the scale of that problem andwhat can you do about it?



Caroline Rookes: Well, in terms of assessing the scaleof the problem, I come back to the research I wastalking about at the outset to get a feel for the realsize of the problem. I think what we can do about itis to ensure that our services are well publicised, thatpeople know about them and that they are available.For instance, the jobcentre is clearly a place where alot of people who have difficulties will be going. Weadvertise our services there, and, in fact, we are justin the process of putting up a whole new set of postersin jobcentres. It is making sure that our services arepublicised in areas to which those sorts of people willhave access.John Thurso: Okay. Thank you very much.

Q483 Chair: I was just going to ask about the ideathat you intend to reach 10.2 million people. Now, inMoney Marketing, there was an article that said youwere dropping these huge targets that we raisedquestions about and that you were going to focus onbehaviour—that is the headline. Have you droppedthis business of getting to 19 million people as yourtarget audience?Caroline Rookes: We do not have that as a target. Wehave assessed the size of the target population. Wehave assessed the size of the three particular groupswe are focusing on to try to get real behaviour change,because we need to assess the size of the challenge infront of us. That is the group that we have estimatedto be around 10.2 million. You will have seen that wehave estimated our starting point this year as half amillion outcomes towards effecting behaviouralchange. Yes, those figures are still there, but our targetis not to hit a particular number as such. It is muchmore focused now on trying to effect behaviouralchange.

Q484 Chair: I do not think we twigged in the firstsession, when we gave Lord Turner a very hard timebecause we took him as being responsible for agreeingyour budget. It emerged that he had been in frenziedcorrespondence and discussion with a Ministerbecause he felt he did not have sufficient powersactually to alter your budget or refuse your budget.Now the FCA has come along. You have put througha budget. Was it accepted without comment? Was itaccepted without change? Did it make any suggestionsto you? You might as well deal with the biggerquestion. There is a memorandum of understandingknocking about. Have your organisation and the FCAcome to some conclusion about who has ultimateresponsibility?Caroline Rookes: Yes, I believe there is a clearunderstanding between the FCA, the Treasury andourselves. The FCA is responsible for agreeing ourbudget and our business plan. That is clear. We areaccountable to the FCA and Parliament for what wespend. I am accountable for delivering the businessplan that I have agreed with the FCA. We have setthat out formally, as you say, in a memorandum ofunderstanding, but we also have very close workingrelationships now with the FCA. I have meetings. Ihave met the chair, John Griffith-Jones, several timesand with Lesley Titcomb, the Chief Operating Officer.I also meet their Director of Policy and Risk, Chris

Woolard, who is a fairly new appointment. One of mydirectors meets regularly with the team that isresponsible for oversight of the Money AdviceService and we exchange information on a monthlybasis. We have very, very close working relationships.I am satisfied that the relationships and theaccountabilities are clear, and to my knowledge,although I cannot speak for the FCA, it is, for themtoo, as indeed it is for the Treasury.

Q485 Chair: That is very helpful, but I just did notexactly catch the first phrase you used in terms of,“Yes, the FCA is.” Let us put it this way: Lord Turnerclearly was not happy with salaries and was not happywith elements of the budget, but he felt it impossibleactually to force change on the Money AdviceService. The FCA has taken over. If the FCA said toyou, “We do not accept the content of this budget andwe will not approve it,” is that decision accepted bythe Money Advice Service? We could not get LordTurner to say he could do this and we now see thereason why. Has this been resolved? Is it that theMinister and, particularly, the regulator can indentifydetails of your budget and ask your board to rethinkthem?Caroline Rookes: Absolutely, yes.

Q486 Chair: Yes, good. Well, that is a step forwardat least, because if we are unhappy about yourbudgets, we can have words with you, but it is theFCA that carries the can, is it not?Caroline Rookes: Yes.

Q487 Chair: Very good; you are in the clear.Mr Tyrie raised the question of your language. Youare too young, but Private Eye used to have “PseudsCorner”, if you remember. I think MAS would win itevery week for your business plan.Caroline Rookes: Oh dear.Chair: I am glad somebody out there is nodding. Yourbusiness plan states as one of your deliverables thatyou will: “Optimise interventions to drive actionagainst our outcomes and longer-term behaviourchange. This includes developing our existing toolsand content and developing specific outcome-specificcontent”. Can you tell us what that means?Caroline Rookes: Can you tell me where it is, andthen I will—

Q488 Chair: While you are thinking that one out,page 7 of your business plan says: “We will focus ourmeasurement of impact on value and outcomes wherewe can. Where this is not possible, we will measureour activities and outputs”. Then there is another onethat I just started off but did not have the heart towrite out, which says: “A new baseline for financialcapability”.Caroline Rookes: Tell me where the first one was.Chair: Who wrote this? Please, Caroline, tell me youdid not write it.Caroline Rookes: I did not write it.

Q489 Chair: Very good. Are you still employing theperson who did?



Caroline Rookes: Tell me where it is and I willexplain it to you. Or would you rather I just made acommitment that in future we will ensure that thelanguage is simpler?

Q490 Chair: I would settle for that. We will stay inthe dark for a year as long as there is hope in thefuture.Caroline Rookes: We will make sure that next timeround it is simpler.Chair: Okay.

Q491 Jesse Norman: Ms Rookes, when you said thatthe Money Advice Service had turned the corner, whatdid you mean?Caroline Rookes: What I meant was having read thetranscripts of the hearings last year and having seen alot of the publicity, I knew that there was a lot ofconcern about the Money Advice Service and what itwas not doing. I hear the points about the language inthe business plan, but I think it is a good businessplan. We published results at the end of March or thebeginning of April for the Money Advice Service’sperformance last year, and they were good. So, whatI meant was that I think it is an organisation that isperforming well. It is a new organisation. It is stillevolving and developing, and there is still a long, longway to go, but my view is that it is going in theright direction.

Q492 Jesse Norman: Because our concerns were notmerely that it was not doing its job properly and itwas very expensive, but that we were not clear why itshould exist at all.Caroline Rookes: Well, I am clear what its role is.The Government took the decision to set it up. It doesexist. I am quite clear that it has a role to play in termsof providing a source of impartial generic advice, butthat is only one tool in trying to raise financialunderstanding and ability across the UK. Its other bigrole is collaborating with the many other organisationsin this sector and working together with them, andproviding leadership, so that we all get the most fromthe resources that we have.

Q493 Jesse Norman: Have you had a chance to getyour head around the financials in the annual review?Caroline Rookes: Some, yes.Jesse Norman: Some.Caroline Rookes: Yes, sorry, I have; yes.

Q494 Jesse Norman: Okay, thanks very much. In theannual review, it says that your redundancy costs were£4 million in the year ending 2012 and are £250,000in the year ending March 2013. Why have they fallenso much?Caroline Rookes: Because the redundancyprogramme is complete. Most of the redundancieseither took place in the previous year, or were agreedin the previous year and were accounted for in thatyear, rather than this year.

Q495 Jesse Norman: Do you accept that there issomething slightly odd about a two-year-old service

having £4 million worth of redundancy costs lastyear?Caroline Rookes: It was the nature of the service.Obviously, I was not there, but the service was set upby taking an arm of what was then the FSA, and theorganisation has been through an enormoustransformation programme to create the organisationwe need to deliver the Money Advice Service andleadership to the sector.

Q496 Jesse Norman: When you were recruited tothis job, how long were you given to understand itwould be for?Caroline Rookes: I am sorry, could you repeat thequestion?Jesse Norman: Was there some period in officediscussed when you were recruited for your currentjob?Caroline Rookes: My contract is for three years.

Q497 Jesse Norman: What kinds of assurances werethose who recruited you able to give you about thelongevity of the service itself?Caroline Rookes: I did not ask them about thelongevity of the service. My assumption was that aservice that had been set up by statute would have afuture, providing it was able to demonstrate clearlythat it was offering good value for money and aneffective service. As you probably know, we have theNational Audit Office reviewing our value for moneyat the moment, and we hope that that will have apositive outcome. But my sense is that as long as wecan provide, and demonstrate that we are providing, agood-quality service, we will continue to exist.

Q498 Jesse Norman: You cut the budget this yearby something like £2.5 million. How was that done?Caroline Rookes: A lot of that came through spendingless on marketing than we had in the previous year.The previous year the marketing spend was aroundraising awareness across the population. This year weare focusing down more, so we are spending lessthere.

Q499 Jesse Norman: There had been a lot ofcriticism of the size of the marketing budget, hadn’tthere?Caroline Rookes: Yes, there had.

Q500 Jesse Norman: Do you think that will go downfurther next year?Caroline Rookes: We have not set our plans for nextyear. I would anticipate that the spend would probablybe around the same level, but we have not set ourplans yet. Sorry, I have lost the question you wereasking me about.Jesse Norman: Just on the nature of the savings youmade in the budget.Caroline Rookes: The savings, yes. The other elementthat contributed to the savings was that we brought anumber of posts in house. We decided to bring ourIT development team in house, rather than relying oncontractors. That, too, is cheaper. The business modelgenerally has changed. That has, as I say, released anumber of savings, some of which have been put back



into areas like policy development, stakeholdermanagement and partnerships, and the overall neteffect is the £2.5 million saving.

Q501 Jesse Norman: This business plan of 2013 thathas been put out: did you have a hand in drafting that?Caroline Rookes: Yes.

Q502 Jesse Norman: As it were, you signed off onit before it was issued?Caroline Rookes: I have signed off on it, yes.

Q503 Jesse Norman: I must say that I share theChair’s worry about some of the language in it. Iworry not just about the language, but about what thelanguage is supposed to refer to, because inevitablyone of the things it refers to is a large expenditure ofpublic cash. On page 41, you have a resourcesummary analysis, which contains a phrase that I thinkactually needs to go down in legend: “Propositiondevelopment: £2,755,000. Description: to develop ourproposition to deliver against our outcomes.” Couldyou explain what that means?Caroline Rookes: Again, I accept the criticism of thelanguage. Proposition developments are the tools thatwe use on the site. A proposition would be thebudgeting tool, the mortgage calculator tool, or one ofthe savings comparison tables. Those are ourpropositions.

Q504 Jesse Norman: This is some kind of softwaredevelopment.Caroline Rookes: It would include that, yes.

Q505 Jesse Norman: I think the worry that I wouldhave is that these choices of language do not merelyreflect a certain fuzziness, but a mindset that really isso bureaucratised that it is not really able to engagewith the real issues involved. “Service delivery costs”,“Action and behaviour-change communications”: youcan see the worry, can you?Caroline Rookes: I can see your point that you do notunderstand the language and that therefore it is notclear what the money is there for.Jesse Norman: There is someone in there who isactually trying to write English. This is rather a niceline: “Money needs awareness: £3,900,000.Description: prompt people to overcome theirinertia”—I think that is pleasingly clear—“and engagewith managing their money using channels such asradio, press, outdoor and DRTV”. Perhaps that clarityof expression could be extended elsewhere.

Q506 John Mann: I would just like to follow up, ifI may, because I am reading this and scratching myhead, as nobody has ever raised the Money AdviceService with me in any discussion ever, other than inthis Sub-Committee, and I see constituents withmoney problems all the time. I am just looking at thisclaim that 46% of the population have heard of theMoney Advice Service. I am just wondering whether,in fact, that is “have heard of a money advice serviceof some kind”, because I find that quite remarkable. Iwondered what the question asked was.

Caroline Rookes: I cannot tell you off the top of myhead what the precise question was, but I can assureyou that the research that we have done has been veryrobust. That is the response, and over 80% of peopleremember the advertisements.John Mann: I remember lots of advertisements, but Ido not know what they are for.Caroline Rookes: Well, if you would like us to giveyou more detail on the research that we have done,we can happily do that.

Q507 John Mann: I am going to do better than thatbecause I have some events of my own coming up, soI am going to carry out my own research and that willbe available. That is only one little snapshot.I am looking at your annual report, and there is afinancial report—you could never have guessed—thatcame out of the Financial Services Authority. Youpaid bonuses. What did you pay bonuses for?Caroline Rookes: We have not paid any bonuses todirectors this year. We have paid bonuses to morejunior staff for exceptional performance.

Q508 John Mann: Are they not getting paid a gooddeal already, these junior staff?Caroline Rookes: They are getting paid market rates,yes.

Q509 John Mann: I am looking at one who gets abonus. They were paid £160,000 as basic salary andgot a bonus on top.Caroline Rookes: We have not paid bonuses toanyone paying—sorry, which page are you looking at?John Mann: I am looking at your annual report.Caroline Rookes: But which page?John Mann: Page 47. Karen Broughton has been paid£6,000; Mark Fiander £5,000; Lesley Robinson£6,000. That is £17,000 in bonuses.Caroline Rookes: Yes, the note above that is, “Nodiscretionary bonuses”. They are not bonuses.

Q510 John Mann: What are they, then?Caroline Rookes: There are elements to the salarythat—John Mann: Are these bonuses from the year before?Caroline Rookes: Well, I cannot comment on that, Iam afraid. I was not there.

Q511 John Mann: So you have stopped payingbonuses.Caroline Rookes: We have paid no bonuses for thisyear.

Q512 John Mann: Are you going to pay in thefuture?Caroline Rookes: It would depend on performance,but for the 2012–13 year, we have not paid anybonuses to any senior staff.

Q513 John Mann: How are you going to measureperformance to justify a bonus in the future?Caroline Rookes: The bonuses available to seniorstaff now are exactly the same as those for junior staff.That is, I believe, up to 10% for very exceptional



performance, and that would require the directors tohave delivered against all of their objectives and more.

Q514 John Mann: That is a subjective analysis tocreate a bonus.Caroline Rookes: To a large extent; not entirely.

Q515 John Mann: It is very banking, still.Caroline Rookes: As far as we can tie it down wewill, but there will always be an element ofsubjectivity. It is inevitable.

Q516 John Mann: It is not based on performance; itis based on your judgment of performance?Caroline Rookes: It is based on performance. It is notbased on my judgment. It is based on an assessmentof how they have performed, and the decision is madeby the board, advised by our remuneration committee.

Q517 John Mann: You are paid significantly lessthan your predecessor. Is that because you are notvery good?Caroline Rookes: I am paid less because, as you willremember, there was a view that my predecessor waspaid rather highly for the job. I have been paid whatI consider to be an adequate salary. I took the job onthis salary, and I am happy with it.

Q518 John Mann: Is there any suggestion that youare not as good—and significantly not as good—asyour predecessor?Caroline Rookes: I have not heard that fromanybody, no.

Q519 John Mann: So why are some of your staffbeing paid more than you?Caroline Rookes: Because they were recruited sometime in the past on those terms. I cannot alter those.

Q520 John Mann: I am not doubting that, by theway; I have not heard that. If you are comparable withyour predecessor, if you were to find ways of cuttingdown the pay of those who are paid more than you,there would be no reason why those people, who areas good, should not be paid less.Caroline Rookes: They are in their positions at themoment. As and when directors leave and come to bereplaced, we will look at the prevailing conditions andthe job, and then consider what the rate of payshould be.

Q521 John Mann: They are paid more than schoolhead teachers. They are paid more than the PrimeMinister and the Cabinet. I am looking at the outputthat comes from that, because last year—Mr Normandid raise this—it does look like you spent pretty muchhalf your money on marketing and brand awareness.Caroline Rookes: We spent a substantial amount. Wedid not spend half—we spent £18 million—but it isnot just about awareness. It is about engaging peoplewith the service. If they do not know we are here, theyare not going to engage with it, and this is the verypeople who we are all concerned about: those who donot seek help until it is too late.

Q522 John Mann: It is nearly half your budget onmarketing and brand awareness but, looking at yourstaff, you are not experts in marketing and brandawareness, so why are your staff getting paid so muchif you are spending all your money on outsideconsultants doing marketing and brand awareness?Caroline Rookes: Because the one thing that we doneed is people who understand what they are doingand can operate as an intelligent customer. If we aregoing to get value for money, my staff need to knowexactly what they are buying, to be able to specifyclearly what they are buying, and to understand thecontracts to which we are signing up.

Q523 John Mann: How many school pupils are yougiving financial education to each year?Caroline Rookes: We do not give direct advice tochildren in schools.

Q524 John Mann: How many of my constituents areyou giving financial advice to face to face each year?Caroline Rookes: I cannot tell you that.

Q525 John Mann: What is the breakdown across thecountry? How does that break down regionally, forexample?Caroline Rookes: I do not know if we have regionalbreakdown, although we certainly have a breakdownby the four countries. I can have a look at whether itbreaks down below that. Certainly, the debt advicewill, and some of the face-to-face money advice will.Advice that is being given through the telephone andvia the web will probably be more difficult, but wecan have a look at that.

Q526 John Mann: If you are dealing withconstituents—well, perhaps you are doing face to facein my area.Caroline Rookes: I expect we are doing some.

Q527 John Mann: I have missed it. On thevulnerability of the client group, you are not doingthis at school, so what is the literacy level of theaverage target group that you have?Caroline Rookes: That is the research that we aredoing at the moment and we will be publishing in thenext couple of weeks.

Q528 John Mann: What is the spec on the research?Caroline Rookes: Sorry, I am not sure I understandyour question.John Mann: Well, if your target group of those whoare not asking for information already is people withlow levels of literacy, but you are heavily reliant onthe internet, there is a bit of a problem.Caroline Rookes: We do recognise that not everybodywill use the internet, absolutely, and that is why weprovide face-to-face and telephone services as well.

Q529 John Mann: If your budget was halvedovernight, what would be the measurable impact onthe advice given to those who are not able to seekadvice by going on moneysaving.com and other suchwebsites? What would be the measurable impact?



Caroline Rookes: Well, we would have to make adecision as to how we wanted to use our funds.Obviously, face to face is hugely more expensive thantelephone. An average face-to-face interview isaround £60. Telephone is £8, and a web visit is 50-something pence. What we would have to do wouldbe to have a look at how we wanted to spend ourresources if they were halved.

Q530 John Mann: It would be helpful if we couldget a constituency breakdown of the face to face, justto see where they are taking place.Caroline Rookes: We can do that. Do you want it foryour constituencies?Chair: You tell us your suggestion.John Mann: Yes, that would be a good cross-section.Caroline Rookes: Okay.

Q531 Mr Tyrie: I am just going back to the resourcesummary. Can I just say also, Caroline Rookes, thatyou are new to your job and this is your first time infront of the Committee, so you probably have notbeen made as fully aware as you are now about thescale of concern in this Committee about what hasbeen going on over at MAS. I am not going to carryon in the same vein as Jesse Norman by reading outmore of this resource summary, but it is completelymeaningless. Even with the explanations you aregiving, it gives us only a very rudimentary notionabout what is going on. Do you know, or have youasked, what the ratio of overhead to service is for eachof these areas?Caroline Rookes: Well, yes, I can tell you the ratio.Overheads on the Money Advice Service are around10% of the total budget, and the same on the debtadvice side.

Q532 Chair: Could you say that again for me,please?Caroline Rookes: The overheads—HR, IT, finance,staffing—represent 10% of the costs of the MoneyAdvice Service.

Q533 Chair: The total service with debt thrown in?Caroline Rookes: Yes.

Q534 Chair: You would be saying it would be £8million, then, if it was 10%?Caroline Rookes: Yes, it is just slightly over that—the two together.

Q535 Mr Tyrie: If we were to ask you for thatbroken down by main heading—main function—would you have that readily available, or would youhave to work that out? I am not asking you to be ableto remember it off the top of your head but, to befrank, if I was running the organisation, that would beone of the first questions I would ask.Caroline Rookes: I can let you have that, yes.Mr Tyrie: But the question I am asking you, though,is is it—Caroline Rookes: I do not have it with me. I wouldhave to let you know.

Q536 Mr Tyrie: No, the question is: are youconfident it has already been done, or are you goingto have to ask for it to be done?Caroline Rookes: I am going to have to ask for it tobe done.

Q537 Mr Tyrie: Do you know what the staffcomponent of each of those overheads is?Caroline Rookes: I know what the total staffing is but,to go back to your previous question, have I looked atit, or do I have it heading by heading? The answer isno, although I know it is available.

Q538 Mr Tyrie: At a time of financial stringency,this Committee is deeply concerned to get value formoney from what is being spent. There is considerableunease about how this money is being spent, as youcan hear. I think it would be helpful to have a gooddeal more thoughtful detail on the resource summarythan has been made available in this report.Caroline Rookes: Okay.

Q539 Chair: Can I just gently, because you have justarrived here, say this: last year we were livid as aCommittee about the fact that you were spending aquarter of your income on marketing. It has notimproved. You have spent £18 million on marketing.Caroline Rookes: Yes.

Q540 Chair: Let me just break it down so that wesee what we are playing with. On your debt advice,do you get that from BIS, or do you get MoneyAdvice Service money from BIS? You get one fromthe financial industry—Caroline Rookes: Not any more. The money on debtadvice—the funding of debt advice—used to comefrom BIS. It is now funded by levy.

Q541 Chair: Right. Now, your income from that in2012–13 was £34.5 million. You actually handed out£30.2 million to Citizens Advice and other people. Itis a great step forward that you are not pursuingputting these people out to tender and taking theirwork, etc. That is a great improvement, but what isnot an improvement is that you are taking the £34million that should be going to debt advice andspending only £30 million, yet that pales totally intoinsignificance compared with the money you spend onthe bigger part of the money, which is £46.5 millionthat you get for Money Advice Service. Your ownreport says you spend on service delivery—out of that£46 million—£8.8 million. Now, on the debt side,your service delivery is £30 million out of £34million. On your Money Advice Service of £46million, you spend only £8 million. Now, that is theunderlying unease we have about the flowerylanguage in this report. We do not know what the hellyou are doing with it.Caroline Rookes: Okay. Well, can I—Chair: No, I will tell you what you are doing with it,but why you are doing it and how you can justifyit: £18.1 million on marketing; £2.6 million on coreoperatives or operations—this is in my writing, so Iam having some difficulty with it—and £6.8 millionon transition costs. Well, what are transition costs?



Then at a time when every day of the week queuesare forming around the block for the citizens advicebureau in my place, you are under-spending on debtadvice and handing back, or keeping, the £3.9 millionsurplus. If you cannot find a way of delivering aservice on money advice and you have to spend it onmarketing, transition costs and core operations, andthat adds up only to something like £30 million, itleads us to believe your organisation does not knowwhat on earth it is doing on money advice. We cansee the position on debt advice: it is going out andcitizens advice bureaux and other organisations aretaking the money, adding to that money with theirown volunteers and delivering a much needed service.A bigger amount, £46 million, is going to moneyadvice and being spent in headquarters on this or that.Now, I am just marking your card, I suppose, and Ihope that I am doing it as gently as possible, but thebig question is: you now have a budget for 2013–14,so how much is in it for marketing?Caroline Rookes: For 2013–14 it is £12.5 million.Chair: That is this year.Caroline Rookes: Yes.

Q542 Chair: How do you break down the rest of themoney on the Money Advice Service side? You had£46 million.Caroline Rookes: Well, certainly £12.5 million isyour marketing. Around £9 million—

Q543 Chair: Caroline, when do we get your budget?When do we see your budget? When is it published?Because I do not want to put you through this,seriously, if you want to send us your budget and weare able to see it—Caroline Rookes: I am happy to do that. The resourcesummary for this year is on page 41 of the businessplan.

Q544 Chair: Well, go through the headings just forthe record.Caroline Rookes: Digital, £1.17 million; finance£354,000—Chair: Sorry?Caroline Rookes: Finance. That will be our financepeople—the people who manage procurement andmanage our accounts.

Q545 Chair: They must be in your core operations,mustn’t they? What are the headlines?Caroline Rookes: This is the whole resource—

Q546 Chair: There is £12 million on marketing, yes.So you now have £32 million left.Caroline Rookes: IT, £2 million; HR—Chair: Headquarters.Caroline Rookes: Well, I can add together—theheadquarters, the overheads, are 10%.

Q547 Chair: No, you are moving away from whatwe are trying to get at. Of the £34 million that hasgone to debt advice, £30 million of it is going toorganisations that open the door, bring people in andgive them face-to-face advice?Caroline Rookes: That is right, yes.

Q548 Chair: You proudly say that 158,000 saw andgot debt advice?Caroline Rookes: Yes.

Q549 Chair: Right. On the other side, there is £46million going in. What is happening to it that is spentoutside on face to face with people? Most of it isbeing spent in head office.Caroline Rookes: A lot of it is being spent ondeveloping and delivering the web service. It is nothead office in the sense—

Q550 Chair: The web service. You have had threeyears of these millions going into developing it.Caroline Rookes: Yes, and it will continue becausethat is the nature of it.

Q551 Chair: Why?Caroline Rookes: Because all the time tools arechanging. For instance, now the main channel thatpeople want to use is the mobile phone. If you want tokeep up with engaging with young people, and youngpeople are the groups that we need to—

Q552 Chair: Well, how does that work, then?Caroline, I do not see where you get that from,because mobile phones are expensive and people withproblems do not go on their mobile phone. They playhell about using an 08 number with HMRC becauseit is expensive. These are people who are broke; everypenny counts. What they want to do is to go througha door and see someone.Caroline Rookes: There are a whole different rangeof people—

Q553 Chair: When are you going to get some ofyour money moved out of head office and into front-line services delivered by organisations that could beexpanded and that are there doing good work nowthroughout the country in every region? That is whatyou are trying to do and have done with the debtadvice, but on money advice, you are intent on doingyour own thing in your own way without face to face.Caroline Rookes: No, not without face to face, but—Chair: A minimum face to face.Caroline Rookes: Primarily our service is a digitalservice. That is the only way we are going to meet theneeds of millions of people. However you define theadvice gap—Otto Thoresen estimated it was 19million; the ABI estimated it was 30 million—there isa whole range of estimates of the numbers of peoplewho need advice, and there is no way anyone couldafford to provide it on a face-to-face basis. The onlyway we can afford to do it is by primarily offering adigital service. Were we to put all our money into faceto face—Chair: I have not suggested that for a second.Caroline Rookes: No, but just for the sake ofcomparison—

Q554 Chair: How much are you spending on face toface for money advice?Caroline Rookes: Around £6 million. I believe it is£6 million to £7 million.



Q555 Chair: Is that this year, this coming year, orlast year?Caroline Rookes: This coming year. Let me see, do Ihave that—

Q556 Chair: Okay, if it is £6.6 million, it is down onlast year. You spent £8.8 million.Caroline Rookes: £7.7 million is our service delivery.

Q557 Chair: We would like to see your budget, so ifyou could send it to us.Caroline Rookes: Just to be clear, it is £7.771 millionon service delivery, which is face to face andtelephone.Chair: Well, it is down on last year. It was £8.8million last year.

Q558 Mark Garnier: You will be relieved to hearthat I am going to steer you away from your financialreporting, although I think they are going to comeback to it in a minute, and move on to financialeducation. If you have been following the BankingCommission and the work of this Treasury Committeeover the last couple of years or so, you will havenoticed that a great many of our witnesses put a hugeamount of importance on financial education inschools. Do you agree with that importance?Caroline Rookes: Yes, I do.

Q559 Mark Garnier: Good. What discussions haveyou had with the Department for Education aboutthis?Caroline Rookes: We have discussions. We have hada lot of discussions regularly with the Department forEducation about what having financial education onthe curriculum will mean and how it will be achieved.

Q560 Mark Garnier: Do you want to expand onthat?Caroline Rookes: Well, our view is that it is very,very welcome and we applaud those who led thecharge, if you like, to get it on the curriculum. Ourview is that the Department for Education probablyshould be funding teachers’ training for that, and thatis what we have been talking to it about. So far wehave not had any success in getting them to sign upto that.

Q561 Mark Garnier: Why not? This is a very, veryimportant point. Upskilling those people who aregoing to be delivering this financial education isincredibly important.Caroline Rookes: I agree with you.

Q562 Mark Garnier: What do you think is theresistance from the DFE, and what is its answer to it?Caroline Rookes: The resistance is resources, and myunderstanding is that the nature of the curriculum issuch that while the subjects are specified and teachersare trained generically in teaching skills, as far as thespecifics go, it is for the teachers and the schools toarrange the training that they need. That is myunderstanding of it.

Q563 Mark Garnier: What is your assessment of theskill of teachers in schools in terms of deliveringfinancial education?Caroline Rookes: I cannot give you an assessment. Iam not close enough to it.

Q564 Mark Garnier: It is quite important, though.Caroline Rookes: Yes, I know, but four and a halfmonths in, I have not yet had an opportunity to reallyreview it.

Q565 Mark Garnier: But does MAS have acorporate view?Caroline Rookes: The Money Advice Service’s viewis that financial education is very important. It isimportant that it is taught in schools. We believe it isimportant that it is taught in primary schools as wellas secondary schools. We support that view. We thinkthat our role on financial education is to add valuewhere we can. We think there is a huge amount ofgood work going on in terms of schools and secondaryschools. At the moment, our focus is on three things.One is very young children and their parents. Anotheris preparing young people for leaving school, whethergoing into the workplace or university. A third islooking at best practice for evaluation. The researchwe did that we published last year suggested that thereis a lot of activity going on, but a dearth ofinformation about what really works. That is wherewe want to do some work and to try to add value mostto the sector.

Q566 Mark Garnier: I still want to press back onthis upskilling the people who are actually going tobe delivering this. I am very pleased to hear that youagree that primary school is where it should bestarting. That is very good, but I still am very keen tohear how you think that is going to be delivered. If itis up to the schools to upskill the teachers themselves,that is not necessarily dealing with the problem, is it?Caroline Rookes: It is not dealing with the problem.I do not think any of us know, I suppose, if there is aproblem and, if so, what the size is. One of the piecesof work that pfeg is leading is a landscape survey ofwhat is happening. I hope that that will tell us theextent to which it is happening and whether it is tothe sort of standard that we want. We can then thinkwith all the organisations in this space about what wemight do about it.

Q567 Mark Garnier: How do you think yourinvolvement might look in the future in terms ofhelping this?Caroline Rookes: I cannot tell you at this point. Thethree areas I know we are going to be working withare the ones that I have spoken to you about. Honestly,I am not really in a position to say anything further; Ijust do not know at this stage.

Q568 Mark Garnier: On a slightly different subject,as you know there are a number of financialinstitutions that go into schools to help witheducation—banks and accountants and that kind ofthing. Have you ever considered developing a



kitemarking system to demonstrate that thoseinstitutions are valid, viable and good at what they do?Caroline Rookes: I do not believe we have, no.

Q569 Mark Garnier: Might you in the future?Caroline Rookes: I do know that pfeg has a qualitymark on resources for teaching.

Q570 Mark Garnier: You do not think that MASshould be doing it as well?Caroline Rookes: Well, we certainly do not want toduplicate what pfeg is doing.

Q571 Mark Garnier: You have mentioned pfeg ona couple of occasions. What is your view of pfeg?Caroline Rookes: I think it does a very, very goodpiece of work—sorry, not a piece of work; I think itprovides a huge input to financial education. We workvery closely with it. I meet Tracey quite regularly, andI think it does some very, very good stuff.

Q572 Mark Garnier: I am pleased to hear it. Do youthink there is a more formal role for it to play in this?Caroline Rookes: I cannot really say. I think what itis doing is great.

Q573 Mark Garnier: But you see it as a partner,rather than a deliverer of an outcome?Caroline Rookes: Sorry?Mark Garnier: You see it more as a partner in termsof trying to drive an agenda?Caroline Rookes: Yes.

Q574 Mark Garnier: Rather than necessarilyactually trying to be, if you like, an executive armalmost of MAS in terms of trying to—Caroline Rookes: Yes. Yes, I do.Mark Garnier: All right. Okay, I think I am done.Chair: Well done, Mark. What a civilised man youare. Why are you on this Committee?

Q575 John Mann: My point, Chairman, is just arequest for information rather than a question. Itwould be useful to get further details of what you areproviding digitally via mobile phones.Caroline Rookes: We are not yet. Some of ourservices are available on the mobile phone, but weknow that actually our web does not come across aswell on the mobile phone as it should. That is one ofthe areas we want to look at. We are also looking atdeveloping one or two apps that might helpyoungsters particularly to save.

Q576 John Mann: So it is apps?Caroline Rookes: Primarily it is not apps. Primarilyit is about being able to see and view the websiteproperly on a mobile phone. We need to do some workto make sure that ours is accessible effectively on themobile phone.

Q577 Jesse Norman: What is the total amount thatyou spent on software development over the last yearand the year before that?Caroline Rookes: I cannot tell you, but we can havea look and let you know.

Q578 Jesse Norman: Just take the apps you weredescribing just then—how much was spent on those?When we looked at the proposition that you describedearlier in your resource summary, which I think yousaid was for two online tools, that was just under £3million.Caroline Rookes: Yes.

Q579 Jesse Norman: Have you done any work toestablish whether you are getting good value formoney from that expenditure, because technologycosts are notoriously variable, and you can often getvery good results for very little and very bad resultsfor an enormous amount?Caroline Rookes: The key tools are those mortgagecomparison tables, the mortgage calculator and thebudgeting tool. I know the health check has come infor criticism, but we know that a lot of people valuethat. We have information on the extent to whichpeople use those tools and the extent to which theythink that helps them. That is probably as much as wehave. Just going back to your question about what wespent on apps, we have not spent anything yet. It isunder consideration.

Q580 Jesse Norman: That would be another lineitem of technology expenditure, would it?Caroline Rookes: That would be within theproposition development.

Q581 Jesse Norman: So proposition developmentmight go up if it included proposition developmentvia apps.Caroline Rookes: Well, it might go up, but it wouldgo up, if it did, at the cost of something else.Something else would have to go down to pay for it,and it may be that we would reduce our developmentelsewhere, which we will do anyway because our newbudget planner will be coming on stream in theautumn—our new health check will. So, work willstop on those, and we can start up on new things. Butif we are going to deliver a digital service—effectivelywhat Thoresen recommended was that primarily itwould be digital, because it is the only way to reachpeople—we have to keep up with ways of engagingpeople and with the most effective routes for gettingthrough to people.

Q582 Jesse Norman: Yes. I guess I am just askingwhether any work has been done on how cost-effective those routes are and how cost-effective thetechnology provision that you have made is.Caroline Rookes: I think the cost-effective calculationwill be more global, but I can have a look at whatwe have—at whether we have anything more granulararound the propositions.

Q583 Chair: On budgets, you started in April 2010,so you had 2010–11, 20110–12, 2012–13 and we arenow in 2013–14, so you have had three years of £70million to £80 million, and you are still spendingmoney on—why are you shaking your head, Caroline?Caroline Rookes: Because the £80 million includesdebt, and we only got debt last year.



Q584 Chair: Okay. Well, in fact, Caroline, you havehelped me, because you have had more than that. Ifyou take the debt service off, because you did not getit until later—Caroline Rookes: Around £40 million a year.

Q585 Chair: I am speaking about money advice. Youhave had £30 million to £40 million for three years,and you are still developing and you are still spending.It is very interesting. In your own report, you say youare spending of your money—of your £80 million—51% on service delivery. The other 49% is being spenton other matters. Does that not concern you? Do younot feel worried about that? You see, you are newenough, I hope, to pick up the worries of theCommittee and to see there has been movement onthe debt side and on chief executive salary, but theone thing that is blithely being gone ahead with isspending 51% of the money on service delivery.Caroline Rookes: Can I just say a few things to that?Chair: Yes, as you wish.Caroline Rookes: I do hear your concerns, and I doabsolutely understand them. I am probably not doingjustice to the information that is available. In terms ofservice delivery, I do not think it is quite as binary asthat. The 51% will be the face to face and thetelephone. What you cannot quantify as easily is theweb offering. If you are delivering through the web,which we are going to have to because it is the onlyway of getting to such huge numbers of people, it isabsolutely essential that we are constantly keeping up

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to date with developments. I know that marketing hasbeen a considerable source of concern, and that hascome down, but you are right that there is still asubstantial amount there. Some of that we would sayis less marketing—and you will probably criticise meagain for words and fuzziness—but engagement.Within that, we pay for search tools that bring peopleto the site. It is still included in marketing, but it isnot marketing in the sense of television adverts andthat sort of thing. It is essential as a way of gettingpeople to our site for us to help them.

Q586 Chair: Do you think Martin Lewis is spendingthat amount of money on his site, and that he spentthat amount to develop his site?Caroline Rookes: I do not know how much MartinLewis is—Chair: I do not think he had that sort of money. Onlya Government body could put that amount of financein.Caroline Rookes: Well, I think Martin Lewis willhave spent a lot, but I am not going to get into that,because I do not know.Chair: We will ask Martin. That will be the bestthing, Caroline.Caroline Rookes: Absolutely.Chair: Okay. Anyway, thank you very much,Caroline. Considering you have been there only a fewmonths and you are inheriting the sins of others, youhave done very well. Thank you very much.Caroline Rookes: Thank you.

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