Credit Unions

Lord Dodds of Duncairn Excerpts

Wednesday 23rd November 2011 Westminster Hall

[Mark Durkan (Foyle) (SDLP)]

It is a pleasure to serve under your chairmanship, Mr Streeter. I commend the hon. Member for East Hampshire (Damian Hinds) for obtaining the debate and for his good and active work as chairman of the all-party group on credit unions. I am conscious that the Minister who is to reply to the debate is from the Department for Work and Pensions because that Department has been closely involved—recently, in particular—in the long awaited LRO, which is so welcomed by credit unions in this country. However, without detracting from the positive points that have been made about the development and potential of credit unions in Great Britain, I want to highlight some points about credit unions in Northern Ireland. I am aware that there are in the Chamber not only officials from the DWP, but some with a relevant interest from the Treasury.

The LRO has long been sought by the credit union movement in Great Britain. It is great to see that advance, some of whose benefits were highlighted by the hon. Member for East Hampshire. Of course, that development, of itself, will not extend to credit unions in Northern Ireland, as he mentioned, so we have a little source of frustration. The Northern Ireland credit unions have spent many years campaigning to be able to offer as many services as their counterparts in Great Britain—their much smaller counterparts, both as to member numbers and savings. At a time when it looks as if that will now happen—at least the primary measure to permit it is coming with the draft Financial Services Bill—one frustration makes Northern Ireland credit unions a wee bit jealous: the LRO will further enhance what their counterparts in Great Britain can do compared with what they can do. Also, of course, there are issues to do with some of the details of the regulation that might come from the Financial Conduct Authority, courtesy of the Treasury’s plans in relation to the draft Bill and associated developments. Issues of context and content arise in relation to the change.

As the hon. Gentleman and other hon. Members acknowledged, the credit union movement in Ireland at large is very strong. It has a long history, well rooted in communities. It is also particularly strong in Northern Ireland. The roots of my predecessor, John Hume, were in the credit union movement: not only did he help to found the movement in my constituency, but he led it in Ireland in the 1960s. In Northern Ireland, we have 163 credit unions, 103 of which are affiliated to the Irish League of Credit Unions. Those tend to be more mature; they have been longer in existence. Some 60 credit unions are associated with the Ulster Federation of Credit Unions. The Irish league has 370,000 members and there are 148,000 borrowing members with total savings of more than £700 million and total loans of more than £430 million, so, given the size of the Northern Ireland population, we are talking about something quite significant.

That is the situation while the credit unions are able to offer their members limited services—essentially just deposits and loans. The beauty of the measures that we hope will proceed—courtesy of the draft Bill and the consultations undertaken by the devolved Department and the Treasury in the past while, in response to the report to the Northern Ireland Assembly of an inquiry that I chaired—is the creation of at least the regulatory openings to allow credit unions in Northern Ireland to offer increased services. That is because some historic anomalies and legislative warps have limited what credit unions in Northern Ireland can do. They are not regulated by the Financial Services Authority. Therefore, they cannot offer services that are, by their nature, regulated by the FSA here.

It looks as if we may be coming to a path forward in that respect, but the credit union movement—both the Ulster federation and the Irish league—have concerns about the context and the detail of what is happening. The recent consultation was shortened to two months instead of three. People are worried that it has been rushed, and that although the changes that could be made afterwards have long been awaited, they may take place relatively quickly, before credit unions have been able to prepare themselves properly, internally and externally, for their impact, and for all the requirements. There is no point imposing change that will add to difficulties and make life hard for busy and effective credit unions.

The federation and the Irish league are also concerned about the content of some of the changes. Some of the proposed changes would take credit unions in Northern Ireland backwards in relation to existing functions. One is the planned reduction in the maximum deposit limit. Credit unions in Northern Ireland have a maximum deposit limit of £15,000. It was raised to that amount in 2006, because it needed to be. The proposal is that under the new arrangements it will be scaled back to £10,000. That will affect 48 credit unions in Northern Ireland, in which there are already people over that savings limit. That is entirely consistent with the culture of credit unions, which is about encouraging thrift through growing savings. To ask credit unions to tell some of their savers that they must take money away seems perverse.

The credit unions that belong to the Irish League of Credit Unions also offer, essentially, a free life-savings insurance service to their members. Whatever the value of a member’s savings on death, a multiple of that will go to their next of kin. Therefore, imposing the new limit will mean a significant change in the benefit that credit unions can offer their members.

[Mr Nigel Dodds (Belfast North) (DUP)]

The hon. Gentleman is right to point out the issues affecting credit unions in Northern Ireland, and I agree with him. I have received representations on the issue of borrowing, as have several hon. Members, and it is clear that members’ borrowing ability will be adversely affected, with the effects that he suggests. In the case of Northern Ireland, which has such a mature credit union movement, would it not be a good idea for the FSA and the Government to consider the best examples of what has happened there and perhaps import those, rather than imposing what is suggested for Great Britain on Northern Ireland?