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Spend & Save

Julian Knight: Money Advice Service needs more than cash

The MAS's head has quit, but the agency needs an overhaul to reach those who need its help

Under pressure from the head of the Financial Services Authority, a highly paid executive resigned last week.

No, I am not talking about Barclays' Bob Diamond but Tony Hobman, the chief executive of the troubled Money Advice Service.

It was obvious that Mr Hobman's time was up when the FSA's chairman, Lord Turner, recently described his £350,000 salary to MPs as "set somewhat too high"; that's about as damning as it gets in Turner speak.

Mr Hobman's tenure has been marked by staff, brought in on high salaries, being made redundant and the building of a website quite breathtaking in the patronising nature of its content. Nevertheless, around £20m has been spent promoting the site and the MAS.

And have you ever heard of it? Even the front page of the website recognises that it is failing; imploring users to be one of the "thousands of people" who have taken the offered financial health check. In web terms, thousands are nowhere, millions is where it is at.

The MAS is a government inspired project, worthy, of course, in its aims and joyously spending money like it's still 2007. But you can't just build a website, stick some adverts on the telly and hope people come; you need to really think about the way you are engaging with people, across social media and offering a real route for user expression – that's what works with sites like Moneysavingexpert. com. Forget the disclaimers and the words by committee.

But in many respects the MAS is on a losing wicket. It is trying to replace honest, thoughtful advice which has been destroyed by the moral decline of the financial services sector. In the 1970s bankers took exams including a section on ethics, now they are sending emails to each other promising bottles of Bollinger in return for ripping us all off.

The idea of the MAS was to give people a destination to find impartial advice in a financial world that has become morally warped but it's this culture that needs to be addressed. In the 10 days following the Libor scandal (banking's own Millie Dowler hacking moment), I think we as a nation have finally got the message, let's see where that takes us.

FSA fines

I understand why they do it but for the Financial Services Authority to discount large financial institutions £67m in fines in just two and a half years for simply being deemed to have co-operated sends out the wrong message (see page 90).

Even in the most recent case involving Barclays, the FSA gave its usual 30 per cent discount on the fine, yet the US authorities didn't and that highlights an important point. If you rip people off in the US and get caught there is a good chance that you will be led away in handcuffs. Do it in the UK and you will almost invariably get a discounted fine.

One bank was hauled up in front of the beak three times and each time had their fine discounted because they co-operated. Co-operation should be a given, a basic starting point. We highlighted the practice of discounting fines back in 2008 and for a few months the FSA seemed to be less generous about its discounting – it was focusing at the time on a lot of individual cases of mortgage fraud rather than fining big institutions. But it's back to its old approach.

More pain for pensioners

Another £50bn of quantitative easing has been announced. This was hardly unexpected with the UK economy likely to have been shown to have shrunk again in the second quarter of 2012, but nonetheless it's hugely damaging for pensioners up and down the country.

Since the Bank of England started printing money in 2009, the average annual annuity income received by a 65-year-old male on a £100,000 pension pot has shrunk by £1,000. And with £50bn more about to flood the market and depress the price of the main assets used to pay for an annuity this is only going to get worse.

We are literally destroying the savings of the elderly in order to give money to the banks, with very dubious economic benefit.