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The Economic Secretary to the Treasury (Andrew Griffith)
It is a pleasure to serve under your chairmanship, Dr Huq. I congratulate the hon. Member for Livingston (Hannah Bardell) on a thorough and thoughtful contribution to this subject. She said that one of her objectives was to raise awareness, and she should feel that she has fully achieved that. I also congratulate the West Lothian Credit Union, which I understand will be celebrating a quarter of a century since its establishment this year. All my colleagues in the Treasury and I send our congratulations to that very important institution, which does great work.
As the Economic Secretary, I am committed to supporting the credit union sector. From helping people to set aside savings—the hon. Member talked about the work done with employers as well as in schools to help to promote the savings habit—to probably its most vital role of offering credit at affordable rates, the Government really value the unique role played by credit unions for all their members, and particularly the financial inclusion agenda. The reach of credit unions is significant. There are 385 of them—not quite enough for one for every constituency, but would that not be lovely? I share the hon. Lady’s goal of having more credit unions, seeing those we have being even more successful and wanting to grow the number of users. There are 83 in Scotland, which, in this respect, is punching above its weight. Together, credit unions represent more than 2 million members and have assets of more than £4.5 billion.
The hon. Lady is right that recent cost of living challenges have proven that the trust placed in the credit union sector by their members, the Government and regulators is well deserved. That trust will be vital as people across the country continue to face cost of living pressures and must stretch every pound as far as possible. People’s money needs to work hard for them.
We know that there are global challenges, and we are not alone in facing challenging levels of inflation: in May, core inflation was higher in more than half of the countries in the EU than in the UK. Inflation erodes living standards for households, and particularly for the most vulnerable in society. That is why it is right that the Government continue to make it one of our priorities—this is one of the Prime Minister’s priorities—to halve inflation by the end of the year, and we will not hesitate to do what it takes to achieve that. Access to affordable, inclusive credit, such as that provided by credit unions, can make a real difference.
Hannah Bardell
Does the Minister agree that when the chips were down during the financial crisis of 2008, the Government had no choice but to step in and save the banks, but that it is now time for the banks to step up and help people who need to borrow and those who need help?
Andrew Griffith
The hon. Lady is right that people need help. Across the House, we all support that. The Chancellor has made it very clear, with the mortgage compact and in the conversations that he and I have had with all of the banking sector, that now is the time to ensure that people have fair products and that, wherever the banks are able to do so, they pass on the benefits of that.
That is one reason why it is important that we have genuine diversity and competition in the sector. Credit unions play such an important role, alongside co-operatives, mutuals and other forms of financial institution, because they are often rooted in place, people or the community. The Government are firmly on the side of credit unions, and I will try to support them. We are taking action to help them wherever there are legislative levers, although they are not the only answer. We amended the Credit Unions Act 1979 through the Financial Services and Markets Act 2023 to allow credit unions across the United Kingdom to offer a wider range of products and services. That allows them to grow, diversify, build their resilience and offer more products to their customers.
We set out Vision 2025, in consultation with stakeholders, to deliver on the sector’s priorities. That includes such things as offering hire purchase agreements, conditional sale agreements and distributing insurance services. The hon. Member for Livingston said that the West Lothian Credit Union offers funeral plans. Many people want to access that sector to give them some peace of mind, so I was genuinely interested to hear that. I will ensure that we seek the right legislative framework for that.
The 2023 Act also makes amendments to support best practice in corporate governance, including a legal requirement for credit unions to submit annual accounts to the Financial Conduct Authority. It gives credit unions permission to temporarily lend to or borrow from each other. That is about designing more financial resilience for a sector that we are on the side of and want to see grow.
The hon. Lady mentioned a number of initiatives. We are providing Fair4All Finance—that little tongue twister—which is an independent not-for-profit organisation, with significant amounts of money from the dormant assets funds. We are piloting no-interest loan schemes—another product that will be delivered hand in hand with credit unions. Credit unions, with their roots in the community and communities of interest, are a very good way of delivering that, and I will continue to work with them. There is about £145 million, in aggregate, from the dormant assets scheme.
The hon. Lady also talked about financial literacy, and a key priority as we go forward is what we can do about the real challenges of that. Wherever possible, it makes sense to work upstream and try to tackle problem debt before people get into it, because it can be a terrible place to be trapped. We are doing a lot of work on that.
Finally, as well as providing credit, credit unions are obliged to focus on financial inclusion. They have a role of advocacy in helping their members to take steps to accumulate savings. Even a small amount of savings can provide the resilience for exactly what the hon. Lady talked about: unexpected bills, white goods that fail, or perhaps the cost of a child’s uniform and a school trip falling in the same month. Even a small amount of savings can help to build financial resilience, and the Government are very supportive of that. We have the Help to Save scheme to try to help those in work and on universal credit to build a savings habit, and obviously the ISA programme is a strong part of that. Again, credit unions distribute cash ISAs as a very simple product that does not get anybody into difficulties with their tax.
I thank and congratulate the hon. Lady and those who contributed to the debate, including the hon. Member for Barnsley East (Stephanie Peacock). Across the House, we can always challenge ourselves to do more on this issue.
Stephanie Peacock
The Community First Credit Union in my constituency raised some issues with me about the operation of the eligible loan deduction scheme by the Department for Work and Pensions and some of the work that the Government do with credit unions. I wonder whether I could write to the Minister, because he might be able to look into some of those issues for me.
Andrew Griffith
I would be happy to do so. I support anything that removes a point of friction and allows credit unions to do their important work. Regardless of whether it is me or one of my colleagues in the DWP, we will certainly take that forward and do what we can to support the hon. Member.
We value the work of credit unions. In seeking this debate, the hon. Member for Livingston has built a good level of awareness, and there is consensus that we can and should do more. That is the Government’s policy, and we are very keen to engage with the sector. Maybe one day there will be an opportunity to meet or have a call with the wonderful West Lothian Credit Union, and I am certainly happy to do so. The hon. Lady has done a magnificent job of putting the credit union on the Treasury’s radar, and I will be interested in following its continued success over the years.
Question put and agreed to.