Credit Unions (Modernisation)

Jessica Morden Excerpts

Tuesday 10th July 2012 Commons Chamber

[Mrs Madeleine Moon (Bridgend) (Lab)]

I declare an interest as a member of Bridgend Lifesavers credit union. Bridgend Lifesavers is a community-based credit union founded in 2000. It has gone from strength to strength, with 3,000 people benefiting from its services and an expanding network of collection points, including a high street collection shop in Bridgend town centre. Last year the union had savings of more than £1 million and had made loans of more than £500,000. I would like to put on record my admiration for the hard work of everyone connected with Bridgend Lifesavers who have made it such a success. I would also like to put on record the fact that I am the vice-chair of the all-party parliamentary group on credit unions.

This debate has come at an important time for credit unions and the financial services sector. Not a day seems to go by without another story of mis-selling, rate fixing or large bonuses, and it is little wonder that trust in banks has dropped to an all-time low. A ComRes poll at the end of June found that only 10% of people trusted bankers to tell the truth. Increasingly, people are looking for financial services that have the sense of social responsibility and the credibility that credit unions represent. Credit unions already fulfil a vital role helping people who ordinarily struggle to get a bank account or affordable credit.

With the publication of the Department for Work and Pensions feasibility report on credit union expansion, credit unions are at a crossroads. I want to use the time that I have to examine that expansion and to seek assurances from the Minister that any changes that he makes will be carefully made and considered to avoid the goose that laid the golden egg meeting an untimely and scrambled end. The feasibility report concluded that no change is not an option, and it is clear from credit unions themselves that they feel that they are not reaching their full potential.

The report picked up on the gap in the financial services market. Financial exclusion needs to be addressed urgently. Some 1.4 million people in the UK do not have a transactional bank account, but credit unions can fill that gap where banks appear unwilling to do so. Around 7 million people in the UK use high-cost credit. A survey carried out by Unite concluded that the third week of every month is rapidly becoming Wonga week, with 82% of the 350,000 respondents saying that their wages cannot last the month and 12% saying that they turn to payday loan companies to see them through to the end of the month. The House has heard frequently of the exorbitant rates of interest those companies charge and the financial hardship that that can lead to. A survey carried out by Save the Children on the costs of child care found that a third of parents in severe poverty have had to go into debt in order to meet those costs.

[Jessica Morden (Newport East) (Lab)]

Does my hon. Friend agree that it is easy to understand how child care costs can push people into debt, because for many families those costs are equal to the cost of their mortgage or rent?