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HM Treasury – Public Financial Guidance Review

Response to the consultation

We respond to this consultation specifically in relation to the Money Advice Service and its successor organisation which is relevant to credit unions in that its work in supporting financial awareness and the Financial Capability Strategy links to credit unions’ role in enhancing the financial education of its membership.  Many credit unions provide support to their members in budgeting and providing generic financial guidance alongside their core financial products.  Still more provide financial education in schools with credit unions reaching at least 600 schools around the country.  Furthermore some credit unions involve themselves in debt advice and debt adjustment activities in order to assist over-indebted members.  Finally, credit unions – as FCA-regulated entities – fund the activity of MAS through the money advice and debt advice levies respectively.

ABCUL and our members support the need for a co-ordinating body to support efforts to extend financial capability and money guidance across the UK.  Our members experience the negative results of poor financial capability every day in the work many do to support financial inclusion through extending sources of affordable credit and a convenient and safe place to save. 

While we do not have a strong view either way in relation to the Money Advice Service’s public facing brand and presence, we believe a role remains for funding and co-ordinating money and debt advice which the proposed new body will seek to fulfil.  We believe this should continue to build evidence such as through the Insight and Evidence Hub and that the new body should retain a focus on schools and financial education. 

Specifically, we would like to see the new body continue to lead the efforts around the Financial Capability Strategy.  This is crucial work which ABCUL fully supports, not least through membership of two steering groups within the Strategy’s structures – those on savings and working age adults.  We believe that the work of the Financial Capability Strategy should be central to informing the commissioning work of the successor to the Money Advice Service.  In particular, areas identified as potentially helpful interventions to advance financial capability should be explored through the use of research to validate the Strategy’s thinking and identify gaps where the new organisation might then commission specific interventions.  

This role in identifying and validating what works in supporting financial capability ought to be affirmed in the statutory objectives of the new organisation alongside those that are suggested in the consultation.

We agree that the new body’s role in supporting debt advice should be limited to supporting regulated providers of debt advice.  This would be helped by further work to clarify the scope and extent of debt advice, similar to the proposed reforms to financial advice as confirmed in the Budget 2016.  Guidance and support around money and debt – as distinct from formal advice which provides a recommendation – is something many credit unions provide informally to their members and it would be helpful for the boundaries between this and debt advice to be clarified. 

We believe the budgeting tools that Money Advice Service has developed are helpful and well-liked and we would suggest that these are at least one area that is maintained – perhaps in a white-labelled format, to be used by the likes of credit unions – following the closure of Money Advice Service and its replacement.

Finally, we would like to reiterate a point we have made in such consultations on many occasions.  While we accept that the funding arrangements for MAS are a matter for the Financial Conduct Authority to resolve, we are strongly of the view that it remains entirely unsatisfactory that the consumer credit industry – despite having been under the purview of FCA for over two years – continues to only contribute a fraction of the costs of the debt advice levy which is, in the vast majority, met instead between the deposit-taking and mortgage-lending fee blocks.  It cannot be fair that the consumer credit sector which generates some of the worst consumer detriment and over-indebtedness in the country is not contributing more significantly to the debt advice levy.  We hope that this anomaly can be resolved soon. 

The full PDF version of the response is available to download on the right-hand side