National Health Service and Care Sector Workers (Credit Union and High Cost Credit)
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
I beg to move,
That leave be given to bring in a Bill to require the Secretary of State to promote membership of a credit union for staff employed by the NHS, other care sector workers, and family members who live in the same household; to facilitate payroll deductions for staff employed by the NHS and other care sector workers who are members of credit unions and to report regularly to Parliament on compliance with these requirements; to place a duty on payday lenders to encourage staff employed by the NHS and other care sector workers to take advice on debt management before acquiring high cost credit; to require the Financial Conduct Authority to report annually on payday lenders’ compliance with this requirement; and for connected purposes.
The Bill is designed to ensure that NHS and other care staff have access to low-cost loans and other low-cost financial services and, as a result, are not vulnerable to high-interest payday loan companies or at risk of mounting debt costs from using credit cards or bank overdrafts. I should declare at the outset that I am a member of my local credit union, M for Money, and also the excellent Rainbow Saver credit union.
For those who are in work and on a low income, debt is an ever-constant fear. One major unexpected financial problem—perhaps the cost of a funeral or a relationship breakdown—can push people into financial difficulty and put them at risk of using high-cost sources of credit, such as unauthorised bank overdrafts, the charges on which can be crippling financially, or other high-interest credit, such as that offered by payday loan companies or credit card companies.
According to the debt charity, StepChange, 6 million adults are using credit to see them through to pay day, and 3 million adults are using credit just to keep up to date with existing debt repayments. These debts are overwhelmingly because of financial hardship, and not over-the-top consumption. Indeed, some economists have suggested that this problem debt could be as high as £50 billion in the UK at the moment. It is a huge social and economic issue. Some of those in trouble with debt work for the NHS or other care services. We in this House surely have a responsibility to do what we can to help those looking after our most vulnerable citizens so that they are not going off to work worried about whether they can make ends meet.
The living wage and higher minimum wages are undoubtedly one part of the answer to the low pay crisis in the UK, but expanding credit unions is another part of the solution too. Sarah is a 44 year-old community nurse with a daughter who is now six years old. In 2010, her husband left, which, quite apart from anything else, left her in real financial difficulty. Up until the separation, Sarah’s income paid the rent, food and nursery fees, while her husband paid for the council tax and fuel bills. When he left, Sarah had to try to find an additional several hundred pounds a month to make ends meet. She found herself getting deeper and deeper into debt and had to face bailiffs coming to her door. She could not afford to pay her daughter’s nursery fees and, rather than have her thrown out, she decided to get a payday loan. Soon she found this loan impossible to pay back and subsequently ended up with five loans with different companies, totalling around £6,000. The stress as a result has been considerable. If Sarah had joined a credit union, linked to her employer, the interest on the loans she paid would have been nothing like as high as she had to pay using payday loans.
I have been given similar examples of nurses and care staff who have got into considerable debt as a result of high-cost credit. To indicate the scale of the problem, the Royal College of Nursing Foundation has reported a 20% increase in applications for hardship grants compared with 2012. In 2012, its average grant was £422; by this year, the figure had risen to £600, which is a 30% increase.
A credit union is a financial co-operative. Members save money with their credit unions and those deposits are used to make loans at far cheaper rates than the high-cost credit offered by payday loan firms, for example. Credit unions help to keep money in communities and offer cheap financial services. In short, this is about people in one community—in this case a workplace community—looking out for each other and pooling their money so that everyone can get a better service.
There are already many successful credit unions in the UK, including police credit unions, Plane Saver, the former British Airways credit union, and London Mutual Credit Union, which has more than 15,000 member-owners and which offers, among its crucial financial services, an affordable payday loan service. For a 30-day payday loan, London Mutual typically charges an interest rate of 27% or £19. For the same loan, a commercial payday loan company could charge in excess of 5,000% or £127 —in short, the loan would be £100 more expensive.
Some credit unions already have a relationship with NHS staff in their areas, but there is not one established credit union serving all NHS and care staff. Little publicity is put out in hospitals and care homes, or by other employers of care staff, to encourage staff to join a credit union. An NHS credit union that was recognised by NHS England would provide a central opportunity for NHS staff to access all the benefits that credit union membership can offer.
If Ministers cannot be persuaded at this point to support an NHS credit union, perhaps they could offer clear guidance to all NHS employers and other care providers that they should offer payroll deduction facilities to help staff who want to join a credit union, and that they should encourage advertising by local credit unions to make staff aware of the benefits of credit union membership.
Credit unions themselves need more sympathetic support from mainstream banks. While several banks are giving financial support, and some branches are signposting to credit unions those whom they have turned down for help, that is small beer, frankly, and the Financial Conduct Authority and the Prudential Regulation Authority should be demanding more from the banks. Credit unions that want to earn interest on their holdings in the UK’s mainstream banks often get very poor rates compared with social enterprises and charities. Given the huge amounts that the banks have received through quantitative easing, I hope that the PRA will undertake a quick review of this issue to determine whether credit unions could be given a better deal.
I am grateful to the RCN, Unison, Citizens Advice and the GMB for their interest in the Bill and for supplying me with case studies of real people hit by debt problems in the NHS and the care sector whom they have helped, and for whom a credit union could have made a significant difference. I suspect that debt and low pay are common themes in many of our surgeries, and we undoubtedly need a significant expansion of credit unions. An NHS credit union would represent an especially powerful way of providing debt assistance to those who do such crucial work in our communities for our most vulnerable, so I commend the Bill to the House.
Question put and agreed to.
Mr Thomas
A particularly talented and handsome group, Mr Speaker, with the exception to that classification being myself.
Ordered,
That Mr Gareth Thomas, Stella Creasy, Mr Virendra Sharma, Stephen Pound, John Cryer, Barry Gardiner, Seema Malhotra, Rushanara Ali, Mr Andrew Love, Mr Adrian Bailey, Meg Hillier and Lyn Brown present the Bill.
Mr Gareth Thomas accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 6 March 2015 and to be printed (Bill 123).