In his March budget, the Chancellor announced the scrapping of the Money Advice Service. For some, it signalled a long overdue rethink on the role of MAS. For others, it suggested a downgrading of financial capability within government policy. It seemed curious timing, in the wake of the publication of the UK Financial Capability Strategy and with ongoing welfare reform expected to increase pressure on low income households to keep their heads above water.
MAS has long been dogged by criticisms of duplicating existing services and wasting money building itself up. Martin Lewis told a Select Committee MAS was “abominable”. After the Budget announcement, he commented: “MAS was starting to point in the right direction. Instead of spending what is effectively public money duplicating services that already exist, it was starting to look at gap provision and financial inclusion for the people who aren't reached by websites and financial advisors, and going for the vulnerable communities… However, none of that gets over the fact that over the last five years since it was founded, certainly £50 million has been wasted on a brand-building and rent-seeking exercise.” [More]
Now time has run out for MAS and all resources will now be put into efficient delivery of services. MAS has just announced a £7 million funding pot to identify and pilot ‘What Works’, a principle made central to the UK FinCap Strategy. In theory, the funding should highlight the best interventions so its smaller, commissioning-oriented successor can invest in the most effective programmes when it is established in 2018.
“The recommendations in the Public Financial Guidance consultation response highlighted that financial capability should be an area of key importance for the new money guidance body and as such we hope that the work we are currently undertaking will lay the groundwork for this,” David Haigh, Director of Financial Capability at the Money Advice Service tells QIPN.
It is a critical time. With the roll out of Universal Credit (UC), and huge levels of arrears among claimants on pilot programmes, getting support right will be essential. Investment will be required in basic budgeting skills, ensuring banking facilities that enable people to protect rent and bills money are open to them, and that the ‘digital by default’ system is accessible in terms of availability of the IT and the skills to use it.
In the UK Financial Capability Strategy, migrating to UC was listed as a key life event, and it is expected there will be some emphasis on this in MAS’ forthcoming What Works funding. The Strategy says: “Changes to welfare will affect large numbers of working-age people. One pilot to estimate the support needs found that up to 77% of Universal Credit claimants will need help budgeting. The key challenge for this group is to improve their financial resilience by focusing on the capability to save for the future, plan ahead and manage life events. There is a considerable savings gap – only 28% of working-age people have savings equal to three months’ income.”
On the ground, agencies linked into the Citizens Advice-led financial capability forums and other financial inclusion networks aim to strengthen the safety net for consumers confronted by debt, welfare reform and poverty, while also enabling resilience by promoting savings and other habits to weather money shocks. The Social Publishing Project has established its first formal partnership with the West Midlands Financial Capability Forum, hoping this will lead onto more across the UK. Like other Forums, it ultimately aims to increase people’s money management skills by sharing good practice, networking with other practitioners, working collectively to raise the profile of education work, and looking to attract funding for future services.
“The partnership with the Social Publishing Project means we will co-host our Forum,” explains David Gooding. “This will bring added benefits like reaching a wider audience through its extensive professional network, developing campaigns and awareness-raising work, and bringing a national perspective to our local work. The plan is to build on existing activity which already attracts a range of practitioners from the third, public and private sectors. Forum meetings consist of guest speakers, sharing information, materials and best practice around the services we deliver and funding opportunities that arise. Informal networking between partners is an important element of every Forum meeting, as is lunch, which is provided.”
For David Gooding, financial capability is a top priority. “The statistics speak for themselves: 12 million people in the UK are not saving enough for their retirement, 27 million don’t have sufficient savings to cope with a significant income shock, 21 million people don’t have a £500 savings buffer to replace a fridge or repair a car. 19 million don’t have an approach to budgeting they think works. Around 8 million people have debt problems yet only one in six seeks help.
“We need to work collectively to enable people to build their confidence in handling their financial affairs, access best deals and make provision for the future and plan ahead. This leads to a greater sense of personal wellbeing and self-esteem, improves health and helps people lead successful and independent lives.”
For its remaining two years, MAS says it remains committed to financial capability, especially in the context of the UK Strategy. On 24th May, it launches its Financial Capability IMPACT Principles and Evaluation Toolkit, that will support its aim to get behind and prove ‘what works’. This may address how financial capability activity has been characterised by piecemeal and small scale services, some effective, some not, sorting good from bad, but it inevitably favours the larger players with the resources to plough into deeper monitoring processes.
“Financial capability remains a key focus for the Money Advice Service,” says David Haigh. “Millions of people are still not in control of their finances – there’s clearly a great deal of work still to be done to improve levels of financial capability. By gathering evidence around which interventions are most effective and funding schemes that will make a lasting, positive difference to financial capability in the long term, the Money Advice Service will continue this vital work.”