Military Credit Union

Jim Shannon Excerpts

Tuesday 8th April 2014 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

I had anticipated that a large number of other Members would be here to speak about this issue, because of its importance. I congratulate the hon. Member for Harrow West (Mr Thomas) on bringing the matter to the House. The Minister is in his place and has heard a lot of what he said, and I will be adding to those comments. Other Members might have contributions to make and the shadow Minister will be making a valuable contribution, too.

I am very pleased to come along today and give my wholehearted support to the hon. Gentleman for bringing the issue to the Chamber for our consideration. We are aware of such issues not only as elected representatives, but because of previous service. I served in the Ulster Defence Regiment for three years and in the Territorial Army for 11-and-a-half years in the Royal Artillery: in the UDR, in a terrorism role—or an anti-terrorism role, I should say—and in the Royal Artillery in a role that had a more global and European impact. That is where my interest in the issue comes from.

I represent Strangford, which is renowned for service in Her Majesty’s armed forces. The largest town in my constituency, Newtownards, is to host the Armed Forces day in Northern Ireland this year. I have no doubt that the streets will be thronged to capacity with people coming along to express the high esteem in which they hold service personnel and veterans. As I meet each of those veterans and personnel, I will do so with the knowledge that I support them in every way that I can. This debate is a way of doing just that. It reflects some constituency issues that I have had over the past four years as a Member of Parliament, and before that, as a Member of the Northern Ireland Assembly. I seek to help the personnel’s families at home while they are serving and when they return home from their service. Some return home with not only physical and emotional but financial issues, as the hon. Gentleman highlighted.

What the hon. Gentleman presented was about support for service personnel and their families. I completely agree that the fluctuation of pay of those serving due to the different rates depending on where they are serving means that some payday lenders can take advantage of our armed forces personnel. Serving personnel get an allowance on active duty, but some find it hard to get by without the top-up cash. Sometimes, there is a change of financial circumstances. Will the Minister indicate what help is given to service personnel when it comes to managing money and their wages better? I believe that there is some, but sometimes it takes more than a bit of paper; it takes a one-to-one, and if that is possible, has it been done?

A regular soldier’s wage is £17,767, and when they become used to the uplift in cash, it takes time to go back to a smaller budget. I am privileged to be in the armed forces parliamentary scheme, which has given me a chance to visit army camps. Catterick is one that sticks in my mind because it offers accommodation to soldiers who are single and have no families or dependants. The officers told me that many of those young men in uniform perhaps have a level of cash that they did not have before, and they very quickly spend it and frequently run into debt. Will the Minister say what help is given directly to service personnel to ensure that they manage their money and wages much better?

I have spoken in this place numerous times about the difficulties with payday loans, as have others. We are all aware of the story in the press in the past week or two about the lady who borrowed £500 and suddenly found, before it was all finished, that she owed £120,000. That is an extreme example, but none the less, it indicates the serious problems that people can have when they get into borrowing from payday companies. I have spoken about the number of people who come into my office seeking help to get themselves back on an even keel due to the high interest of these loans. We are fortunate to have debt advice organisations such as Citizens Advice, Debt Action, and Christians Against Poverty, just to think of three in my constituency that deliver specific help to those who need it most. Increasing numbers of ex-Army personnel come with their families to seek help for their circumstances. They are real issues and they show why today’s debate is so important.

Many people are seeking to get themselves back on an even keel, due to the high interest of the loans, as they try to manage their money in relation to their wives and children and to their new circumstances perhaps of not being in the Army. It is a vicious circle that is so difficult to get out of. Citizens Advice has said that it is dealing with an increasing number of cases where military personnel and their families had run into financial problems after taking out high-cost payday loans. Research by the Royal British Legion has found that about a third of veterans experience financial difficulties, including almost half of those who are recently injured. That is, again, a pointer to how important the issue is. We all greatly respect those soldiers who serve and those who come back injured, either emotionally or physically. It is a terrible tragedy when half of the recently injured and a third of veterans, as the Royal British Legion found, experience financial difficulties and need help, which lead many of them into very high levels of debt.

I place on record my thanks to the organisations that work in my area. Obviously, I thank the Royal British Legion first, but I also thank the Army Benevolent Fund, to which the hon. Member for Harrow West referred, and the Soldiers, Sailors, Airmen and Families Association, which does great work with serving personnel or ex-personnel and their families. I hold a coffee morning once a year for SSAFA—it is basically coffee, tea and sticky buns—and last year we were very pleased because people from the town gave £4,500. That immense contribution was an example of the good that people can do and of their generosity. We never fail to be overwhelmed by people’s generosity. That contribution was an indication of the good that the people of Newtownards and district can do.

Last year, the Royal British Legion’s benefits and money advice service—this information is from the Royal British Legion—helped 11,000 Army personnel. That was in its second year. It was an increase of 8,600 on its first year. That clearly shows the magnitude of this issue and the need to respond. It is clear that there is an issue. It is equally clear that we have a role to play in providing the solution. The proposals were outlined by the hon. Gentleman. I am sure that the Minister, in his response, will be able to give us some indication of the importance of that and how he will address the issue.

At home, I always encourage people to use their local credit union, which allows money to be borrowed only when money has been saved. That has helped many people to get loans at an affordable rate of interest. The fact that the American military run a successful version in Navy Federal shows that such a service would be of use to our personnel.

I want to touch on the options or solutions that are available. Like other MPs, I would say that when people come to see me with their problems, it is about solutions. It is not about the problem; it is about how we make the situation better, how we can help the people. I believe that we have a solution here today if the Minister is minded to give us the response that we seek.

Navy Federal is the largest credit union in America, with more than 4 million members. It has branches on every military base in the country. My hon. Friend the Member for North Antrim (Ian Paisley) spoke to me last year when he had the chance to be in America and speak to some navy personnel. He was aware of the good work that they do. Army personnel and navy personnel were depending on payday loans and creditors, so Navy Federal moved in and ensured that there was a branch on every military base in the country. The payday loaners used to target the military bases to hook American sailors and soldiers with their high-cost financial services. However, legislation and the low-cost financial products that credit unions offer have led to the Navy Federal credit union having branches on every military base in the United States of America and offering a very direct and personal service to its members. It is greatly utilised by service personnel.

According to the Library debate pack, a meeting took place of the all-party group on credit unions last October. The Minister for the Armed Forces used that meeting to express the Government’s interest in exploring the idea of a service personnel credit union further, so perhaps the Minister today could tell us where we have advanced since October, whether we are any closer to having this type of scheme in place—I hope that we are—and, if not, whether we have a programme that will lead to that happening. Like the hon. Member for Harrow West and other hon. Members present, I genuinely believe that this proposal could be the catalyst for a scheme that can change things round and help our soldiers, sailors and Air Force personnel to manage their money better.

Abbie Shelton, policy and communications manager at ABCUL, said:

“Payroll deduction is an easy and convenient way for employees to get a savings habit and access affordable credit and we welcome any support for new partnerships which will help more people access credit unions in this way.”

I will not express a preference for any one building society. None the less, getting into the habit of saving is a good thing to do. If we do get into the habit of saving early and start to save regularly, that becomes a discipline in itself. Again, perhaps the Minister could comment on this issue in his response. The hon. Member for Harrow West focused greatly on payroll deduction, and I think that it is a tremendous idea, because it enables people to save directly. It is important that we all try to manage our money as best we can.

[Ian Paisley]

Does my hon. Friend agree that if such a scheme were introduced, the Government could make a forward calculation as to how much money could reasonably be expected and therefore underwrite the establishment of a military credit union for a period of five to 10 years to allow it to get established and thereby really give it the support that it needs to get off the ground?

[Jim Shannon]

I thank my hon. Friend for that very constructive intervention. Yes, I do believe that what he describes could be done. Again, perhaps the Minister can give us some idea of how he sees that particular scheme working. If we have a prediction, if we have an idea of what we will have coming in over five to 10 years, we can start such a scheme. When I visited Catterick camp in September two years ago, that was one of the things that the officers told me they wanted to see happening. I fed that back to the MOD in questions and I would like to know whether it has been activated and where it is going.

The example of the Navy Federal credit union in the United States is powerful. It shows what can be done. Where there is a will, there is a way, or, in this case, where there is a will, there must be a way. It can be delivered. We have a duty of care to our service personnel to help to support their families and to ensure that their sacrifices in service are acknowledged at home, and this is one way of doing just that. I wholeheartedly support the proposal and offer my help in any way possible to see this legislation being made in the House. It is critical, it is important and it is needed urgently. Everyone here is of that opinion. I know that the pledge that I have made is something that the rest of my party, the Democratic Unionist party, at Westminster will also support.

We have talked about the issue. Now it is time for action to be taken, for our serving personnel to become saving personnel and for them and veterans to see yet another tangible sign of our appreciation of and support for those who put their safety, mental health and lives on the line in service to the Queen and this tremendous country of the United Kingdom of Great Britain and Northern Ireland.

--- Later in debate ---

[Mr Dunne]

I am sorry that the hon. Gentleman seems to want to bring the debate to a premature conclusion. We have plenty of time left, and I am sure, given that he called the debate, he would like to use as much of it as possible. He already asked that question in his remarks, and I hope to deal comprehensively with all his questions before the debate finishes.

I referred to the website because of the impression that may advertently or inadvertently be given that websites directed at the armed forces carry some endorsement from the armed forces. That could not be further from the truth, but it highlights the risks for the Ministry and the service branches in any involvement in the provision of financial products, should personnel or their families get the impression that the military was endorsing a particular product. Such a financial product would carry the same kinds of risk as any other regulated entity, and we take that seriously.

[Jim Shannon]

The hon. Member for Harrow West and I cited the Navy Federal credit union in the United States as an example of something that is clearly personnel-oriented but is acceptable and does what it should: it does what it says on the tin, as we say. That is an example of what could be done.

[Mr Dunne]

I completely accept that there are examples elsewhere, as the hon. Member for Harrow West said—not just in the United States but also in Australia—of credit unions receiving support from the armed forces. I shall come on to that but I was just highlighting the level of associated risk.

--- Later in debate ---

[Mr Dunne]

I am not in a position to commit the Ministry’s budget here and now. What I am willing to do, as I think I have already indicated, is to offer further support to explore the possibility of establishing a military credit union. If an existing credit union felt that it had the resources and the experience to bring to bear, that would be a very positive development; equally, if an existing service charity felt that this was an area that it wished to explore, that would also be very welcome. I am not closing the door to providing assistance for a feasibility study, but I will not commit at this point to conduct one without knowing to whom I might be making such a commitment.

[Jim Shannon]

Further to the point made by the hon. Member for Harrow West, I have a question. My hon. Friend the Member for North Antrim and I suggested that, by making payroll deductions during a five or 10-year period, we could build in the moneys that would be needed, while being ever mindful that it is a credit union that is being established. Would such a scheme be part of the feasibility study?

[Mr Dunne]

The subject of payroll deduction has been raised by a number of hon. Members. We make payroll deductions in certain areas. Insurance services were specifically mentioned as possible services for a credit union to provide and it was said that a payroll deduction might be a way of helping to fund insurance premiums. We already make such deductions for armed forces personnel. We have a payroll deduction scheme that is financially supported by the Government, over and above our merely facilitating contribution payments. That is to ensure that life insurance is available to armed forces personnel who are on operations, irrespective of their role. That is a specific product that is funded through payroll deduction.

--- Later in debate ---

[Mr Dunne]

The hon. Gentleman referred to Plane Saver before, and I am not aware that it has directly approached us. We have clearly had an approach from ABCUL. It participated in meetings earlier this year and wrote again last week, perhaps prompted by sight of this debate. I am confident that the Under-Secretary of State for Defence, my hon. Friend the Member for Broxtowe (Anna Soubry), who has responsibility for defence personnel, welfare and veterans, would be willing to meet the hon. Gentleman and ABCUL. If he wanted to bring Plane Saver along, it would be welcome, too.

The hon. Gentleman asked some specific questions about the promotion of credit unions within military publications. Were the credit union to be established with support from the military, it would be more than welcome to take space in the military publications. I cannot, however, commit to the charging basis on which that space would be available; that would be a matter for the normal procedures for each publication. He asked whether we could institute a ban on payday lenders advertising in military publications. This Government are not in the business of prohibiting freedom of speech. Payday lenders might be unethical, but they are not unlawful, so we should not ban their adverts. We should, however, look to support the credit union going forward.

The hon. Member for Strangford (Jim Shannon) asked whether we could underwrite a scheme, but I have to disappoint him. The Ministry of Defence budget might appear to be large, but it appears from the inside to be somewhat constrained. We have to devote our budget to our front-line duty, which is protecting the nation. We are willing to provide opportunities to access military publications and that kind of thing, but we are not in a position to underwrite a financial offering to our personnel.

[Jim Shannon]

I also asked the Minister about giving advice to soldiers and serving personnel on how best to manage their money. I said that, often, those who did not have the level of income they currently have found managing their money overawing. Has offering that advice been considered?

[Mr Dunne]

Indeed. The hon. Gentleman raised the role of the Money Advice Service, which we established two years ago, and I am grateful that he gave it a positive endorsement. The advice is proving effective and, as the hon. Member for West Dunbartonshire said, the number of people taking advantage of the service in its first two years demonstrates that there was a need for it. We think that it is being delivered in the right way. I also thank the hon. Member for Strangford for the advert he gave to Armed Forces day this summer and the celebrations that will take place in his constituency. I wish them well.[Official Report, 28 April 2014, Vol. 579, c. 7MC.]

I conclude by confirming that the Government support the notion of establishing a military credit union. We are in active discussions with the credit union trade body and the service charities. I have indicated that we are willing to commit the Minister to meet them again, with the hon. Member for Harrow West, who takes such an interest in this matter. In closing, I encourage all parties with an interest in developing this kind of financial service for our armed forces personnel to get together, to pool resources and to try to find a way of making it happen.