Chancellor George Osborne has scrapped the costly Money Advice Service, less than six years after it was set-up in an attempt by the Government to provide people with ‘financial education’.
The service is considered not to have had enough uptake from the general public despite ploughing more than £100million on developing and promoting its website. It will be replaced by a smaller body providing help for those in financial trouble.
The decision to replace the MAS will be announced in this afternoon’s Budget by Osborne.
Waste: The body spent more than £100million on developing and promoting its website (above), according to Christine Farnish, but the website and its marketing products were rudimentary
Founded in 2010 and funded by a statutory levy on the banks, it has been slammed for being a ‘gravy train’ following its excessive spending and pay to its staff.
Former chief executive Tom Hobman was paid £350,000 a year, before he resigned in 2012, while last year’s results show executive Mark Fiander was paid £313,000, despite leaving the organisation in December 2014.
Current chief executive Caroline Rookes had a total pay, pension and benefits package worth £180,000 in the year to April 2015, while the service spent £240,000 on non-executive directors.
The MAS remuneration statement showed just under £1.1million spent on directors that year.
MAs spends in total about £80million per year, funded by a levy on the financial services industry.
It was also felt that the body was duplicating help provided by other services, such as the Citizen Advice Bureau, and had failed those who needed face-to-face assistance with budgeting, debt management and financial planning.
Jo Smith, spokeswoman at the Money Advice Service, said: ‘We will work with the government to fully consider the implications of any announcement.
‘In the meantime we will continue to fulfil our statutory role to help people make the most of their money.’
Gravy train: Many of the body’s top executives received hefty pay packages last year
Costly: The firm employed 112 people last year but failed to drum up recognition among the British public
The writing has been on the wall for MAS for some time.
In March last year a Treasury-commissioned review led by by financial policy veteran Christine Farnish, concluded that the MAS needed to ’embark on a programme of transformation’ away from its focus on money guidance provision.
The review suggested MAS that its advice budget should be shrunk run and its staff cut from 130 to about 50 to 70 permanent staff. Following the report MAS developed a new three-year corporate strategy.
This included a cut to its budget allocated for money advice from £34.1million in the current year to £30.1million in 2016/17.
The body proposed to allocate less than half of its money advice budget on customer engagement and direct services, whereby its marketing budget had been cut by half, from almost £9million to about £4million.
MAS also made a a ten-year commitment earlier this year to improve people’s ability to manage their finances and educating them in the difference between financial advice and guidance and to make them understand when they need advice and how to get it.
This morning’s announcement comes just a day after the Treasury issued a report stating that financial literacy was bad.
Their report said that one in five people cannot read a bank statement, while around half have difficulty understanding pensions. Most Britons also cannot afford professional financial advice, the report showed.