Catholic Schools (Admissions)

Debate between Damian Hinds and Andrew Turner

Wednesday 30th April 2014 Westminster Hall

[Damian Hinds]

Catholic schools and all maintained, state-funded schools are, of course, subject to fair admissions procedures, which I will address later.

[Mr Andrew Turner (Isle of Wight) (Con)]

Will my hon. Friend bear in mind that some areas have no boundaries other than the sea? The Isle of Wight has the best secondary school, a Catholic-Anglican school, and it can be chosen by anyone.

[Damian Hinds]

I am grateful for my hon. Friend’s unique geographical perspective. This comes up time and again, and I will shortly address some of those instances, but on the key point of whether Catholic schools are some sort of filtering device for middle-class, wealthy and bright kids, the answer is no. That would be a fundamental misunderstanding of the demographic profile of this country’s Catholic population, the location of those schools and the communities that they serve.

There is a school about a mile from here across the river that may be a contender for England’s most diverse school: St Anne’s Catholic primary school in SE11. The school’s pupils come from a wide variety of ethnic backgrounds. Half of key stage 2 pupils are classed as disadvantaged, with most coming from the immediate wards, which are among the poorest in London. The school’s deprivation indicator is in the top 10%, but there are also families from higher income brackets. Altogether, pupils speak 32 different mother tongues, and 99% of pupils have English as an additional language, which is what we used to call English as a foreign language. The one thing that almost all pupils have in common is their faith, with more than 95% being baptised Catholics.

That is a striking example—that is why we politicians use such examples—but overall the profile of Catholic schools is more diverse than schools in the maintained sector in general. At primary level, the proportion of schools at which more than 5% of pupils do not speak English as their mother tongue is 57% for Catholic schools and 38% for schools overall. Some 34.5% of Catholic primary school pupils are from ethnic minority backgrounds, compared with 28.5% in the maintained sector as a whole; at secondary level, the figures are 30% for Catholic schools and 24% for other schools.

The proportion of children on free school meals at Catholic schools is somewhat lower on average than at other schools, and there are various explanations for that, but I do not think we know the answer conclusively. One thing that we do know conclusively is that pupils at Catholic schools tend to come from poorer places than children at schools in general. At secondary level, 17% of children at Catholic schools are from the most deprived wards, compared with 12% for schools overall. At both primary and secondary, Catholic schools over-index in the bottom four deciles and under-index in the top six deciles.

The diversity of Catholic schools, notwithstanding the water boundaries of some places, is partly due to the potential for much larger catchment areas. Typically, a Catholic school may have a catchment area 10 times the size of a typical community school’s catchment area. I saw a bit of that in my own schooling. The school that I went to in south Manchester had kids from leafy north Cheshire, but it also had kids from Stretford, Old Trafford, Stockport and Warrington. It really had a very wide intake.

Schools must comply with the schools admissions code, and over-subscription policies mean that Catholic schools typically give priority to Catholic children over the wider area and welcome others where there is remaining capacity. That system enables more parents who desire a Catholic education for their children to get one, bearing in mind that it is a minority religion in this country, so the population is likely to be more sparsely spread.

As has been mentioned, the admissions criteria of faith schools make regular media space-fillers. Headlines have included, “Faith schools ‘biased towards middle classes’”, “Faith schools ‘skewing admissions rules’” and, “Faith school admissions ‘unfair to immigrants’”. Those came respectively from the Daily Mail, The Daily Telegraph and The Guardian after the publication of the schools adjudicator report in 2010. As was alluded to, we had the chief adjudicator into the Education Committee to discuss that report, which was extremely fair and balanced and made hardly any reference to faith schools. Somehow, between the publication of that report, the press conference and journalists filing their copy, the story became about bell ringing, schools insisting that parents clean churches and giving priority to white middle-class families. I do not know about you, Mr Dobbin, but I struggle to think of many Catholic churches that even have a bell tower. Anyone saying that people who clean churches having priority somehow advantages white middle-class families has a poor understanding of the demographics of those who clean churches.

Credit Unions

Debate between Damian Hinds and Andrew Turner

Wednesday 23rd November 2011 Westminster Hall

[Damian Hinds]

I agree with the right hon. Gentleman. That is the single most exciting potential opportunity for the sector, and I will come to it shortly.

The key piece of deregulation, and what makes this debate particularly timely, is the passing of what in the credit union movement is known as the LRO. Politicos, however, prefer the longer title of Legislative Reform (Industrial and Providence Societies and Credit Unions) Order 2011, which is an awfully long phrase to get one’s head around. It is very important to the sector and has been an awful long time in the making. When speaking to credit union groups, we always get a groan when we say, “Soon, the LRO will be with us.” I am pleased to say that the order has now been passed and will be with us in the new year.

There are three critical elements to the LRO. First, there is the liberalisation of the common bond requirements. Traditionally, there has to be something in common between the members of a credit union. Although that has some advantages, it is also restrictive of growth. In future, credit unions will be able to open up membership to residents of a local housing association, which may have tenants outside the common bond area, or to employers who may have different branches and operations elsewhere. It will also help to facilitate the growth of the strongest credit unions, thus helping to serve more people.

The second key element is the capacity to pay interest on savings rather than the traditional dividend. The divvy, as it is known, has many advantages. However, it is rather difficult to explain, especially if someone is trying to persuade people to put their savings into a particular product. They may say, “Well, it depends how much money is left at the end of the year and then we will divide it all up and you will get whatever you get.” When a credit union is trying to compete in the market against individual savings accounts, it needs to be able to demonstrate a competitive rate. In future, it will be possible for credit unions to do that.

The third important change is in the type of members. It will be possible for credit unions to engage with not only individuals but organisations for a portion of their business. I do not think that we will see many large plcs suddenly starting to bank with their credit union, but it will work for local community groups, not-for-profit groups, small traders and so on that keep relatively small, but not totally insubstantial, positive balances in their account.

On a wider basis, we could say that credit unions have the potential to be the banker to the big society. Importantly, these changes are enabling; they are not compulsory. Three-quarters of credit unions intend to extend their membership base as a result of the changes.

What are the critical success factors for credit unions to be able to promote financial inclusion? We have to look at that on two levels: individual credit union and system-wide. For an individual credit union, scale is needed. It then needs a proportionate cost base so that it can run a surplus. It needs a good mix of savers and borrowers and income groups. To be successful, credit unions cannot just be for the most disadvantaged; they need a good mix. MPs and our local media can play an important part by encouraging more people to put a proportion of their savings—it does not have to be all—into credit unions in the knowledge that they are totally safe and that they will be doing some good in the local community.

On the system-wide level, scale is again at the top of the list of success factors. Alongside that are awareness, visibility and accessibility. Credit unions suffer on that count at the moment. Not as many people are aware of credit unions as they are of the sort of organisations that can afford to advertise constantly on daytime television. Credit unions need attractive, competitive products and substantial, robust back-office processes and interfaces.

[Mr Andrew Turner (Isle of Wight) (Con)]

My hon. Friend is drawing our attention to a number of issues; one of which I am aware is that the Isle of Wight credit union died earlier this year and was helped to amalgamate with the Hampshire credit union. We were greatly helped by the Financial Services Authority, and of course the local people were helped too, but it is important that people should feel some local connection. We do not need huge credit unions that go all over the country.

[Damian Hinds]

My hon. Friend makes a fine point. There will be variety. One of the things that sets credit unions apart is having something about them other than just being a financial institution, and that aspect will absolutely continue. However, these deregulatory changes will also enable stronger credit unions to grow and reach out to more people.

The other thing that can facilitate great change, improvement and growth in the sector is the modernisation fund of up to £73 million, which the Government are making available to help credit unions that can expand to reach self-sustainability in four to five years. I know that Ministers are considering a feasibility study on this issue, and whether and how best to use that money. There are some ways that Government capital can make a big difference. First, it can help the sector to develop a common banking platform and business processing. The sector has already demonstrated its potential for doing that with the credit union card account and the credit union prepaid card.

Secondly, as has been alluded to already, there is the possibility of linking credit unions with the Post Office, marrying a huge, trusted, visible and, for most people, accessible network with financial services from credit unions, which currently suffer from not having that presence. Thirdly, there is the development of the brilliantly named Jam Jar budget account, which is all about helping people to mimic the way that our mums and dads’ generation organised their finances. They had a jar for the rent, a jar for this outgoing, a jar for that outgoing and then they knew what they had left. It is a lot harder to know that these days. I mentioned some of the bank charges that people can incur, particularly in the first year they have a transactional bank account and move away from operating on a cash-only basis. Of course, that is of particular interest at the moment, not least because of the Government’s ambitious welfare reform programme.

There is another idea that I want to throw into the debate. It is not something that the sector is calling for, but I want to see new and innovative ways for people right across the country who may not have an immediate association with a credit union to put part of their investment portfolio through something like a social ISA, to hook them up with opportunities with credit unions and perhaps also with community development finance institutions or other social enterprises, social impact projects and so on.

We want growth in the sector and we want more financial inclusion, but we have to note and accept that particular costs are associated with inclusive growth. I am not a banker—thankfully—but to oversimplify things hugely I suggest that there are three key cost drivers to extending credit: the first is the riskiness of the customer base; the second is the term, or length, of the loan; and the third is the cost of collecting repayments. On those criteria, operating in the sub-prime segment of the market and reaching out to riskier types of customer, particularly with small loans and shorter-term loans, carries an additional cost.

Credit unions are known as an affordable option; that is what makes them so attractive. Their 26.8% APR limit is absolutely key, but the thing that we perhaps do not speak about often enough is that the limit has limits and it restricts what credit unions can do. With the growth fund, credit unions were able to reach out to a more excluded segment of the market. For the people that process helped, the savings have been quite substantial; there have been total savings in interest of more than £100 million and there has been a big drop-off in that group in the use of high-cost credit. However, for the credit unions themselves it is a costlier segment of the market, which is part of the reason why we have seen an erosion of the growth fund over time. Of course, with the growth of payday loans in particular it is especially difficult—actually, it is mathematically impossible—for credit unions to compete with organisations that are able to charge an APR in the thousands per cent, when credit unions themselves are capped at an APR of something less than 30%.

Some of the increased costs may be mitigated by technology. Of course, part of the point of the social fund is that if there is direct benefit deduction it greatly reduces the cost of collection and the cost of default. Jam Jar budget accounts are another development that would help in that respect, as would different channel developments. Those developments may mitigate the increased costs, but they are not the whole answer.

The sector is not calling for a lifting of the 26.8% APR limit, but I am sure that some right hon. and hon. Members have heard from individual credit unions, as I have, that they would like a liberalisation of the limit. There are big perception issues around that question but we must keep the debate active, because even if the limit on credit unions was somewhat higher than it is today there would still be a huge gap between the APR of credit unions and the 272% that someone might pay a home credit provider, or the thousands of per cent to a payday lender.

In recent months, a wider debate about APR caps and restrictions overall has had quite a lot of currency in this place, although as I said earlier, that is not a debate for today. Suffice to say, however, that everything I know about economics tells me that a blunt general cap on APR would be a terrible idea for multiple reasons, with all sorts of unintended consequences. I know that the Government are actively engaging in debate and analysis of the issue, so perhaps it is possible to have a different sort of regime—a different structure to the restrictions—which would get rid of the worst excesses of the market without denying people access to credit altogether. Personally, I have been kicking around the idea of a double-restriction scheme, whereby there is a limit on the initial set-up fee and then a separate limit, or set of limits, on the interest rate charge, which would enable payday loans, home credit and all sorts of things to continue while getting rid of the worst excesses of the market. In that different way of thinking, it might also be possible to create a different sort of regime for credit unions, although I stress again that it is not something that the sector is calling for.

To conclude, credit unions can deliver in Britain on a much bigger scale than they do today; we have only to look to Northern Ireland for a model of what things could look like. Credit unions can also deliver greatly enhanced financial inclusion. Let us not forget the human angle: more stable lives, less pressure on relationships and families and, essentially, happier people. Credit unions can also target and reach at-risk groups, such as those leaving care or ex-offenders.