Credit Unions

Lord McFall of Alcluith Excerpts

Thursday 16th October 2014 Lords Chamber

[Lord Newby]

The noble Lord is right that the number of members of credit unions and the amount of money involved is a lot less here than it is in some other countries. There are now about 1.1 million members of credit unions. Although by the standards of some other parts of the world that is not very high, it does represent something like an eightfold increase over the past 20 years, so credit unions have been growing. The challenge for everybody now, having got to a firm base, is how to get a step-change up in professionalism and the ability of credit unions to manage larger volumes, and a better marketing campaign to ensure that people understand why credit unions might in many cases be better for them than the traditional banks.

[Lord McFall of Alcluith (Lab)]

My Lords, I bring attention to my membership of the Credit Union Foundation and the Lloyds Banking Group grants committee for credit unions. One of the lessons of the past has been that grant funding has made the sector weaker rather than stronger. Capital ratios are the key. Given that mutuals are unable to raise capital, any proposals by the Government should ensure that the capital allocation of credit unions is improved. Will the Minister keep this point in mind so that we have a credit union sector which is growing, is more stable and can serve the best interests of the poor members of this country?

[Lord Newby]

I begin by recognising the valuable work that the noble Lord does with Lloyds in this respect. The part that the big commercial banks can play, not so much in funding—although that is useful—but also in transferring expertise, is very important. One of the key things now for credit unions in increasing the amount of capital they have at their disposal is to encourage large numbers of people with some relatively small amounts of capital to become members of a local credit union and deposit some capital with it. The work of the Church of England, for example, is potentially very important. There are many members of the church who would be able to join a credit union and put in a relatively small amount of money which could collectively transform the capital position of the many credit unions with a very small capital base.