Credit Unions and the Cost of Living

Debate between Amy Callaghan and Hannah Bardell

Tuesday 18th July 2023 Westminster Hall

[Hannah Bardell (Livingston) (SNP)]

I beg to move,

That this House has considered credit unions and the cost of living.

It is a pleasure to move the motion, Dr Huq. I am grateful to the Backbench Business Committee for granting this short debate and to the Minister for responding. I am sure that other colleagues will want to make an intervention along the way in this debate on the importance of credit unions during a cost of living crisis.

First off, I declare an interest as someone who saves and borrows with credit unions, including my own in West Lothian—the great West Lothian Credit Union. I start by paying a passionate tribute to West Lothian Credit Union, its chair, Nancy MacGillivray, and her team, who work and fight tirelessly to develop their services and support our local community through that local credit union. I also thank my own team for the work they have done to prepare for today and the work they do every day for our Livingston constituents throughout this cost of living crisis. I am sure all of us here in the House are very conscious of the pressures on our constituents and the work that our teams are doing for us—in particular Marcus, Yvonne and Adam, who have had a close hand in today’s preparations.

Similarly, I pay tribute to my constituency colleague Angela Constance, the Member of the Scottish Parliament for Almond Valley, and her team, who have worked closely and fought for our local credit union over many years. My hon. Friend the Member for Glasgow South West (Chris Stephens) was not able to stay for this debate, but he wanted me to mention the work that Pollok Credit Union does in his constituency and the fact that so much great work is being done by credit unions with affordable food larders and community supermarkets—particularly a programme in his Glasgow South West constituency.

The role that credit unions play in supporting hard-working families across Scotland and the rest of the United Kingdom during this unprecedented cost of living crisis is indisputable. Unlike the high street banks, credit unions are run and owned by their members and distinctly operate under a co-operative principle. While credit unions are a relatively new form of banking in historic terms—they were first established in the UK in the 1960s—their founding principles of mutual co-operation and collective benefit were born of the friendly society movement of the 18th century.

Credit unions even predate the creation of the welfare state. My own grandparents were active members in the co-operative movement in West Lothian and beyond, and its importance in our communities is a long-held tradition. As we become increasingly globalised and vested interests creep further and further into our lives, the role of credit unions and co-operatives is increasingly important and potentially under threat.

The formation of the first credit unions in the UK was inspired by those in Ireland. The first recorded credit union in the UK was formed in 1960, in Derry, Northern Ireland; that union now has over 30,000 members. In Scotland and in other parts of the UK, several credit unions were established by immigrants who came to the UK with very little, but simply wished to tackle the inequalities and the financial hardship of others—what a worthy cause. Over the last 50 years, credit unions have grown to provide loans and savings to more than 1.2 million people across England, Scotland, and Wales. I am incredibly proud of West Lothian Credit Union and in awe of the work that it does in supporting my community. I have seen that first hand, and once again pay tribute. It offers a range of services, from banking to funeral plans. Its services are available to all those who live or work across West Lothian.

As colleagues will know, credit unions are regulated by both the Financial Conduct Authority and the Prudential Regulation Authority. The objectives of all credit unions are simply this: to promote thrift among their members by the accumulation of their savings; to create sources of credit for the benefit of their members at a fair and reasonable rate of interest; the use and control of members’ savings for their mutual benefit; and the training and education of members in the wise use of money and the management of financial affairs.

Those objectives may sound simple, but many of the high street lenders and other financial service providers would do very well if they simply applied the same ethical standards. Not only would they be better viewed by the public, but they would be able to act in the public interest—rather than for private profit, as we so often see. Credit unions work with many employers to set up payroll saving schemes for their employees. Many credit unions operate school credit unions, encouraging a savings habit among young students, as well as giving them life skills in operating a cash collection. My own credit union has done fantastic work in my constituency.

These are fantastic initiatives that help foster better relationships between individuals and their employers. They also help create greater educational awareness about the importance of money for young people. Despite those successes, more employers could be encouraged to participate in payroll schemes for their employees. Similarly, operating school credit unions can be a costly process for which limited funding is available, and I hope the Minister can give some thoughts on that. There is a clear need to provide better support to our children and for financial education to be done not just by banks. It is one of many ways we should be doing more to ensure that every child has the best opportunity in life.

We are already seeing change for credit unions. For instance, the community banking platform Engage has partnered with 10 credit unions to deliver its faster payment service to nearly 100,000 customers. That is a great example of how technology can help, and I note with interest the article shared by Electronic Payments International. Sofia Dogan, CEO of Kingdom Community Bank, based in Glenrothes, highlighted that the cost for its service was less than 50% of the cost that its bank was preparing to charge and that payments could now be sent to members’ accounts in minutes. The Bank of England’s latest report in April shows that the number of adult members of credit unions in the UK has risen to an all-time high of 1.98 million. The starkest increase was in loans to borrowers, which has jumped by a staggering 18.9% to £785 million last year in England alone.

[Amy Callaghan (East Dunbartonshire) (SNP)]

It is worth reflecting on the point my hon. Friend just made. The number of people borrowing with credit unions has increased, and one part of that is that we are seeing such high interest rates from high-street banks and those more typical lenders. Credit unions certainly play a far more vital role during this Tory-induced cost of living crisis.

[Hannah Bardell]

My hon. Friend makes an excellent point—perhaps she has foreseen what I am about to say. It is an important point to highlight because although it is welcome that more people are using credit unions, the root cause is increasingly concerning. The cost of living crisis has placed a huge economic squeeze on hard-working families.

A report from Responsible Finance found that 41% of people borrowed to pay for essential bills and expenses, while 20% borrowed to pay for appliances and white goods. Analysis from Freedom Finance found that credit unions are lending record sums to UK borrowers following the surge in borrowing costs. Again, it is great news that people are getting their money through responsible borrowing from credit unions, but it is concerning that they are having to borrow such high levels just to get by.

Total loans exceeded £2 billion for the first time by the end of 2022—an annual increase of £251 million, or 15% over the course of 2022. Time and again, evidence shows that increases in the cost of living disproportionately impact the poorest in our society. Those individuals are often helped by credit unions, but some fall victim to unscrupulous lending practices, such as high-interest payday loans, simply to meet basic needs. The Freedom Finance credit monitor has revealed that the average household quoted on credit cards rose to its highest level last year since 1998, reaching 22.8% at the end of December. We can all reflect that if things worsen and interest rates go higher, more and more people will be tipped over the edge.

Social Security (Additional Payments) (No. 2) Bill

Debate between Amy Callaghan and Hannah Bardell

Committee stage
Monday 6th March 2023 Commons Chamber

[Amy Callaghan (East Dunbartonshire) (SNP)]

It is great to see you back in the Chair, Dame Eleanor.

We are all broadly united in this Chamber today, in that we recognise that our constituents need additional financial support, but the reality is that we are here today because of 12 years of Tory austerity. The cost of living crisis has occurred because of Brexit and because of the policies of austerity, so it is welcome that we are having a debate on this Bill if even so we can go over broader DWP failings and mismanagement.

One example is that a very recent 38 Degrees poll found that 20% of my constituents fear that they may have to use a food bank. I am not convinced that these payments will help with that figure at all. This Government are giving our constituents the additional payments outlined in the Bill, yet they still impose the benefit cap, the bedroom tax, the rape clause and cuts to universal credit. Naturally, the British Government will sit here today hoping for a round of applause for these additional payments, but frankly, these pennies are nowhere near enough to make up for the grossly flawed benefit system that this Government preside over. This support is a start, and it needs to be just that. In the face of a Tory-made, Brexit-induced cost of living crisis, we need this Government to step up and step up more, again and again.

I have previously spoken in this House about my constituent Stacey, who I met in hospital while we recovered from our strokes together. Stacey and her family struggle to make ends meet. The Government will be aware of the significantly increased costs that disabled people face, so I would be keen to hear exactly what difference the Government think this £150 payment will make to them. I also echo the call of my hon. Friend the Member for Glasgow East (David Linden) that an assessment should be made of the fact that legacy benefits were not uplifted during the pandemic in the way that universal credit was. It would be revealing to see the impact that has had, particularly on disabled people.

My constituents and people across Scotland are being failed by this Tory Government. Week by week, this Government try to steer conversation towards one topic or the next, but when I speak to my constituents, the issues caused by this Government’s failing, broken social security system are consistent. Dignity and the basic living conditions of our constituents are simply not a priority for this Government but an afterthought, hence them not bringing forward the uprating of benefits to before April. The House of Commons Library has published information showing that inflation is being felt worse than ever, and also that it is usual or the norm for this uprating to occur in April, but that no Government are bound by that; it is just common practice. These are not normal times we are living through, and support should be accelerated, instead of civil servants’ time being wasted applying the Retained EU Law (Revocation and Reform) Bill. I would also appreciate some clarity on the timing of these additional payments—that should have been laid out before now.

Amendment 2 would fix a flaw in the Bill as it stands. It seems utterly unreasonable that any one of our constituents could miss out on this additional support because they have been sanctioned under this Government’s cruel sanctions regime.

[Hannah Bardell (Livingston) (SNP)]

My hon. Friend speaks about sanctions. Does she share my concern that in probably one of the grimmest league tables around, my constituents are No. 4 in Scotland for the number of people being sanctioned? Some 10% of claimants are being sanctioned, and one reason is public transport. We have significant challenges with public transport, because we cannot get enough bus drivers, and we cannot get enough bus drivers because of Brexit. Those constituents are facing a triple whammy—from the cost of living crisis, from being sanctioned because they cannot get there, and from the increasing cost of living and energy costs—because of the policies this Government have pursued.

[Amy Callaghan]

Unfortunately, my constituency of East Dunbartonshire rivals my hon. Friend’s and has a similar statistic for sanctions. It is not a position we want to be in, especially when we know that many of our constituents are sanctioned due to legitimate reasons, such as transport issues or potentially having to take their children to school.

Any Member walking through the Lobby tonight to vote against amendment 2 is condoning the Government’s sanctions regime—in fact, they are breathing more life into it by denying the most vulnerable much-needed support. We on the SNP Benches always welcome additional support for our constituents, especially in these times, but will the Government consider whether they are offering enough? What about the Women Against State Pension Inequality Campaign? Those women have been continuously let down by the failings of this British Government. They have run an incredibly powerful campaign so that politicians will listen. Are they supposed to be appeased by this additional payment? I know with certainty that they will not be.

What about UK pensioners living overseas? Will their pensions be uprated this time around? Will they receive this additional support? What about our pensioners who have remained in the UK? Additional support for them is of course welcome, but it highlights a glaring need for a concerted effort, or a more concerted effort, around the uptake of pension credit, of which £3 million goes unclaimed each year in my constituency of East Dunbartonshire alone. Hopefully that will be less this year, given the effort by me and my hon. Friend the Member for Glasgow North East (Anne McLaughlin). When will we see a much more active campaign directly reaching out to pensioners, encouraging them to sign up for pension credit?

What about single-parent families, already discriminated against by the British Government’s child maintenance system, which charges them to access money they are entitled to and places vulnerable women at further risk of manipulation and abuse? Where is the relief from their deductions? What about young parents on universal credit? They face the young parent penalty, denying them the same level of social security as parents over 25. Where is the relief from their deductions?

These additional payments are welcome, particularly against the backdrop of this Tory cost of living crisis and a fundamentally broken social security system, but these payments need to be made with the highest degree of urgency, and a timescale would be much appreciated. If the Government wanted to make a real difference, they could reintroduce the uplift to universal credit and extend it this time to legacy benefits. I urge Members to vote for our amendment 2 tonight, to stop our constituents missing out on this much-needed support due to sanctions being imposed upon them.