Co-operatives and Mutual Societies

Debate between Mark Hendrick and John Glen

Tuesday 14th December 2021 Westminster Hall

[John Glen]

I am extremely grateful for the prompt; one of my kind officials passed me a note on this matter and reminded me that there has been progress in this area. We saw some changes in the way that was delivered last year. In 2020, the PRA implemented a simplified capital regime for credit unions to remove barriers to growth. This created a graduated rate approach, removing the 2% capital buffer and the link between capital requirements, activities and memberships. These changes were broadly welcomed by the sector, but I have committed to continuing to work with the sector further. I hope I will be allowed to introduce legislation next year to address some outstanding concerns that exist within the sector as a whole. I am grateful for the prompt and to the hon. Member for Glasgow South West for raising that matter.

As I said, affordable finance is key to generating opportunity, wealth and liberty for people around the country. We provided £3.8 million to fund the pilot for the no-interest loans scheme, which I have championed over a number of years. The scheme is run by Fair4All Finance, which encourages credit unions and other non-profit lenders to offer these loans. I believe that when this gets through the “proof of concept” phase imminently, it stands to be able to expand significantly. A number of individuals have approached me wanting to support this work, and I look forward to campaigning to broaden that pool on a sound foundation of how it would operate.

We have introduced other changes to help credit unions to generate greater opportunity and wealth for communities. For instance, we introduced and ran a pilot prize-linked savings scheme for credit unions until March this year, which was a real success. Independent research found that it helped to increase positive awareness of credit unions, enabled individual savers to build financial resilience and demonstrated that prize-linked savings be an effective tool in encouraging people to build a nest egg. We have 13 credit unions around the country and the Association of British Credit Unions Ltd currently involved in continuing the scheme, and I hope more will join them in future.

We have also released £96 million of dormant asset funds to Fair4All Finance, to support access to affordable credit products, including those from credit unions. Last Monday, on Second Reading of the Dormant Assets Bill, we introduced the extension of the pool of moneys that will be available from an extended range of financial instruments—£880 million over the next 10 years—which will be for Fair4All Finance to allocate. We will bring forward legislation when parliamentary time allows. That phrase is used a lot, but I am working hard to generate that opportunity in the next Session. It would allow credit unions to offer a wide range of products and services.

I want to spend a moment on building societies, because they are key to unlocking opportunity and driving positive change across the country. For example, in mortgages, Yorkshire and Skipton building societies are among the first institutions to bring back a 95% loan, when there was a problem in the spring, and 95% loan to value mortgages after the lockdown. That obviously brings first-time buyers on to the housing ladder. In addition, the sector is pioneering new products that will decarbonise the UK housing stock. For instance, Nationwide offers a green additional borrowing mortgage, and the Leeds building society has launched two new mortgages for the most energy-efficient homes.

To help building societies continue to flourish, we want to ensure they benefit from an appropriate legislative framework. That is why last week we published a consultation proposing several changes to the Building Societies Act 1986, working with their representatives, to try to provide them with greater flexibility in their funding model, and maintain their key mutual status, which is so important. The consultation also includes proposals to update their corporate framework in line with companies.

[Sir Mark Hendrick]

The Minister has waxed lyrical on the good work that the Government are doing on credit unions and is now touching on building societies. Is he considering changing some of the regulations on demutualisation? As I mentioned earlier to the hon. Member for Wycombe, if we cast our minds back, we will remember that the demutualisations of the past gave a number of those building societies, which were more dependent on mortgage lending, a lot of leverage that made them very vulnerable during the financial crisis. Will the Minister comment on that, and on how he will be proactive in developing the co-operative sector, as well as building societies, through his work on mutuals?

[John Glen]

I mentioned the response we are considering when I talked about the hon. Member for Harrow West and LV=. The reason I am waxing lyrical is that we have genuinely put in place specific interventions across a number of dimensions of the broader sector to ensure that building societies can continue to operate more effectively, offering services that their customers want, and retain their current status. I mentioned the community ownership fund as a source of support for individuals and community groups, encouraging them to form new business models that might be more effective in dealing with their long-term community interest.

I am conscious of the time, but I hope I have illustrated that the Government are committed to supporting mutuals and co-operatives and the unique qualities they provide. Just as those organisations provided opportunity, wealth and liberty to those Rochdale pioneers, we see them as key to strengthening communities, expanding possibilities and increasing prosperity for people today. I look forward to continuing the conversation on specific interventions. As I said to my hon. Friend the Member for Wycombe as I entered the Chamber this morning, it is important that we strike the right balance between hearty aspirations for a healthy sector receiving appropriate consideration of reasonable changes to the rules and regulations underpinning them, and a doe-eyed romanticism about things that are not financially secure in the medium and long term. My job is to interrogate those opportunities and take legislative action where I can, but also to be clear that we have to take a clear, economically valid and reasonable approach to this issue if we are going to have a secure and thriving sector, which I sincerely hope we will.