Francie Molloy (Sinn Féin)

The Business Committee has agreed to allow up to one hour and 30 minutes for the debate. In accordance with the Business Committee’s agreement to allocate additional time to Committee Chairpersons when moving and winding up on a motion on a Committee report, up to 15 minutes will be allowed to propose and 15 minutes to wind up. All other Members who wish to speak will have five minutes.

Mark Durkan (Social Democratic and Labour Party)

I beg to move

That this Assembly approves the report of the Committee for Enterprise, Trade and Investment (05/08/09) on its inquiry into the role and potential of credit unions in Northern Ireland.

Before commenting on the substantive matter, I wish to express my gratitude to the people who assisted the Committee during the inquiry — the Committee Clerk, the former Committee Clerk and the Committee secretariat — for their work in supporting the inquiry.

I also thank the Assembly Research and Library Services for the high-quality research and analysis that were provided to the Committee; Hansard for its accurate reporting of evidence sessions involving all the witnesses who appeared before the Committee during the inquiry; and the Printed Paper Office for its prompt and professional handling of draft reports.

The Committee is grateful to all those who provided evidence, including departmental officials who supported the Committee in the course of its inquiry. Some witnesses gave evidence more than once — not least, the Ulster Federation of Credit Unions and the Irish League of Credit Unions.

I thank my Committee colleagues for their constructive and positive approach to identifying what the Committee believes to be the optimum means of providing Northern Ireland with a credit union movement that is allowed to meet the needs of credit union members and the objectives of sponsor organisations and regulatory authorities.

I want to acknowledge the encouraging regard that the Minister afforded the Committee’s inquiry throughout its duration, as well as the engagement of her officials.

As Members will be aware, Northern Ireland’s credit union movement dates back to the 1960s. The movement grew and developed throughout the region and now boasts more than 180 individual credit unions, with membership — according to Department of Enterprise, Trade and Investment (DETI) figures — that represents more than 50% of the population, compared with membership in GB, which represents less than 2% of the population.

Northern Ireland credit unions hold net assets that total more than £800 million, compared with £500 million for credit unions in the whole of GB. Credit unions here are deeply rooted in the communities that they serve and are relied upon by many people in those communities to meet their day-to-day needs for financial services.

Despite their deep-rooted history, and their being so heavily relied upon, credit unions in Northern Ireland have not been able to provide the wide range of services that their counterparts in GB or in the South can offer. Credit unions here can offer, essentially, just three services, compared with 12 in GB and more than 20 in the South. Those services are listed in an annex to the report. That disparity was the key issue that the Committee sought to investigate during the course of its inquiry. One of the report’s key recommendations is the expansion of credit union services.

Credit unions across the water can offer services such as current accounts, electronic transfer of wages, ATMs, debit cards, mortgages, direct debits, and so on. Committee members agreed that a solution must be found that will enable credit unions in Northern Ireland to provide similar services to their members.

Credit unions in Great Britain can also participate in Government savings initiatives. That is a particular area in which the credit union movement can, if given the opportunity, make a significant and lasting impact to tackle financial exclusion.

In Northern Ireland, uptake of child trust fund vouchers by parents and guardians is much less than in GB. In some parts of Northern Ireland, uptake is approximately 50%. The Consumer Council estimates that £11 million of child trust funds are unclaimed by parents and guardians in Northern Ireland — a region that relies much more heavily on the credit union movement than any other GB region, but where, unlike any other GB region, credit unions are prevented from providing that essential service. Given the strength of Northern Ireland’s credit union movement, it is not difficult to see how widening the range of services that it is able to offer could provide substantial benefits in that area alone.

The Treasury report entitled, ‘Financial inclusion: the way forward’, which was published in 2007, suggests that access to affordable credit, savings and insurance products are key factors in determining an individual’s ability to cope with financial pressure. It states that people who are without access to such products are more likely to be:

“forced into using high-cost sources of lending instead, including home credit (“doorstep lending”) or, worse, illegal loan sharks who use fear and intimidation to extort huge sums from their victims.”

For many people in Northern Ireland, there is currently no alternative to some sort of doorstep lending, because credit unions are not allowed to provide the range of services that they need. Credit unions can provide a realistic, trusted and empathetic alternative to those forms of lending; however, they can do so only if they are allowed to provide the services that their members need and cannot otherwise obtain at reasonable rates.

During the course of its inquiry, the Committee explored options to enable credit unions to provide those additional services. Option one was to consider the delegation of regulation by the Financial Services Authority (FSA) to DETI. Option two was to consider splitting or sharing regulation between the FSA and DETI.

Although the Committee was relatively comfortable with either option, particularly option one, they proved unfeasible because, for various reasons, the FSA and the Treasury did not support either option. It was also difficult to detect any enthusiasm for them from the Department. Had the Committee made recommendations along the lines of either option, the consequence could well have been many more years of discussion and negotiation with no guarantee — and, indeed, little likelihood — of an outcome that met the needs of credit union members.

The Committee explored the third option of forming a company, regulated by the Financial Services Authority, to offer the additional services through credit unions but with credit union regulation remaining within DETI. There was little support in the credit union movement for that option, not least because it involved introducing an additional layer of bureaucracy that is not necessary for credit unions elsewhere.

The Committee’s recommendation, therefore, is option four which is for DETI’s Companies Registry to retain responsibility for the registration of credit unions as a devolved matter in Northern Ireland, while inviting the Financial Services Authority to regulate all Northern Ireland credit unions under the Financial Services and Markets Act 2000. That recommendation has the advantage of credit unions being able to retain the close, amicable working relationship that they have built with the Department’s Companies Registry. It also retains credit unions as a devolved interest for the future and protects possible policy opportunities for the Assembly and the Executive.

The continuing relationship with DETI’s Companies Registry should prove invaluable in providing continuity and in assisting credit unions to manage the transition to FSA regulation. That will also assist the FSA in getting to know the credit union movement here and help it to develop close, productive working relationships with our credit unions.

The Committee arrived at that recommendation after much consideration and having taken into account the needs of credit unions that do not wish to expand their range of services. The Committee received assurances from the FSA and the Association of British Credit Unions Ltd (ABCUL) that FSA regulation in Great Britain is not unduly burdensome.

Indeed, the ABCUL representative who gave evidence to the Committee informed us that FSA regulation:

“is one of the best things that has happened to credit unions in Britain”.

He also said that it has established:

“good controls and desired results for the credit union sector without being too onerous”.

ABCUL stated that the “lighter touch” — or version 1, as it is called — regulation for smaller credit unions there is mainly desk-based with occasional visits and a focus on establishing compliance standards, and that relationships between the FSA and credit unions are positive and constructive.

In order for the recommended option to be implemented, amendments to the Credit Unions (Northern Ireland) Order 1985 and the Financial Services and Markets Act 2000 would be required. The initial indications are that that can be achieved. The Committee’s report will be a key document in informing the Treasury review of the regulatory framework for credit unions and industrial and provident societies here, which was announced in the pre-Budget report.

The Committee recognises that to make the changes that are required is not merely a matter of handing over regulation and walking away. On the contrary, the Committee has recommended a full package of measures that need to be introduced to assist and enable credit unions here to make the change. Those measures include an FSA presence in Northern Ireland, at least for an agreed transitional period; a programme of training for credit union management and staff in the operation of the new structures and procedures; a package of financial support to assist credit unions to obtain the training, resources and equipment associated with the changeover; and an extension of the Government’s growth fund for credit unions in Great Britain, and any future such funding, to include Northern Ireland credit unions.

The Committee also recommends that credit union membership is opened up to allow people to open joint accounts and to allow groups and societies to open accounts where their aims are compatible with the ethos and values of credit unions.

The Committee recommends that credit unions are allowed to work with the FSA to consider how to reinvest a proportion of their assets in the communities they serve. Credit unions recognise that they need to work with Government Departments in that regard.

Kieran McCarthy (Alliance)

Given the FSA’s abysmal recent record in Great Britain and elsewhere, and given the current financial disaster, does the Member, or the Committee, recognise the preference of the Irish League of Credit Unions, in the report, for the entire operation to remain within DETI Companies Registry?

Mark Durkan (Social Democratic and Labour Party)

The Member is right; the Irish League of Credit Unions preferred the FSA to delegate its powers to DETI. However, the FSA made it clear that it does not want to delegate its powers to anybody, and that is the view of the Treasury also. Moreover, the Committee did not detect much enthusiasm in DETI for authority to be delegated. Therefore, if the Member’s criticism is that, fundamentally, the FSA should not be in charge of regulating credit unions, he must recognise that, in any event, the authority would remain as FSA authority: it would have been in charge of regulation, and it would have set the standards.

Regardless of any other issues involving the FSA’s performance in relation to banking and financial services, no concerns have been raised about its regulation of credit unions. The report that we were getting from credit unions in Britain was positive and encouraging in that respect. However, the Treasury — and we as a devolved region — will be able to recommend longer-term changes to the financial regulation of banking, and so on. Therefore, in the future, there could be an overall financial services authority with bespoke regulatory arms that deal with banking, insurance and, perhaps, credit unions and financial services. If that happens, there will be an opportunity to include a more regional aspect to the FSA.

The Committee is aware that questions about the FSA remain unanswered. However, if resolving all the issues that pertain to the FSA were a precondition for making progress on the needs of credit unions here, that would be adding to the delay that has already existed for many years. Late in 2004, I approached a direct rule Minister about the issue highlighted by the Irish League of Credit Unions. Indeed, it is an ongoing problem that was identified long before 2004. The Member’s point is well taken, but the Committee has considered all the options.

The adoption of the report’s recommendations will represent a considerable challenge and an enormous opportunity for credit unions, and will benefit individuals, families and communities. Therefore, I commend the report to the House and seek support for the motion.

Robin Newton (DUP)

I join the Chairperson in thanking the Committee staff and everyone who gave evidence.

We are discussing this report in the context of a major downturn in the economy during which unemployment is rising and closures of household-name companies are commonplace. The situation that has arisen with the Presbyterian Mutual Society, which is an unregulated organisation, will cause many investors to face extreme difficulties. Indeed, they might wish that the society had considered regulation as its approach became more ambitious. On a more positive note, the credit union movement wants to play an increasingly positive role through increased services to its members.

As a member of the Committee for Enterprise, Trade and Investment, I support the report and declare an interest as a member of a credit union. The report highlights credit unions’ importance to the local community and outlines their roles. The local credit union is the first port of call for many people who want to apply for a loan for a comfort item or — as is more likely — out of necessity. However, In Northern Ireland, credit union members are unable to receive the full benefits of membership enjoyed by those in GB or the Republic of Ireland. The Committee’s report attempts to address such issues while providing the safeguards that investors expect and need.

One of John Hume’s claims to fame is that he started the first credit union in Northern Ireland. Since then, we have witnessed amazing growth, with the development of approximately 170 credit unions in the Province.

That is coupled with the fact that the credit unions are supported by both sides of the community, with the Orange Order playing a major role, and the Roman Catholic Church playing a much more substantial role in promoting the benefits of credit unions throughout their communities. There is no exclusivity, however, as individuals cross what might be perceived as boundaries to join locally based credit unions. That is to be welcomed.

The importance of the credit union movement can be seen from the fact that some 26% of the population in Northern Ireland are members, compared to less than 1% of the population in England and Wales. That confirms the important role that credit unions play in our society. It also verifies the local community’s confidence in the credit union movement.

The report highlights a number of recommendations aimed at improving the services that credit unions may provide. It is clearly evident from those recommendations that the most significant change we could make to the role played by credit unions would be to create the circumstances that would allow them to expand the range and quality of services they may provide. Currently, credit unions can only provide a small number of services, including share accounts, loans and life assurance. Compare that to the number of services available in Great Britain and the Republic, and it is apparent that the people of Northern Ireland are unable to utilise the full benefits of membership.

I also welcome the recommendation that the FSA and DETI should work together to provide credit union staff with knowledge and skills to operate the new regulatory arrangements necessary for additional services.

The final recommendation that I wish to mention is that there should be appropriate reinvestment of assets by credit unions into community development and community enterprises. That would have the potential to bring about significant economic benefits to communities. I have reiterated the positive role that credit unions play in the community, and the reinvestment of a proportion of assets would be welcome.

In conclusion I will make two important points. The report acknowledges that many credit unions are content with current regulatory arrangements and have no desire to expand the range of services that they offer. If that is the level of their ambition then they can take advantage of the lighter touch to which the Chairperson referred, which will meet the needs of those unions. For those that think on a larger scale, changing from the current regulatory regime to the FSA regime will require management and staff to train in the operation of procedures. The report allows for those with vision and ambition, and for those who want to provide a valuable and important, yet limited, scope of activity.

I recommend the report, which was approved by the whole Committee, to the House.

Martina Anderson (Sinn Féin)

Go raibh maith agat, a LeasCheann Comhairle. I support the motion. I will begin by paying tribute to the work of the credit union movement, which continues to provide key services to communities right across the island of Ireland. The value of its work is more apparent than ever in the current economic climate, when affordable credit union and other financial services are almost impossible to access.

Over the past 40 years the credit union movement has assisted countless thousands of people, particularly those living in economically deprived communities and areas of social disadvantage. Known as the people’s bank, the credit union helped those people access the kind of financial services that, until then, were completely unattainable. It is open to all, regardless of their economic circumstances, and I know from my own experience the high regard with which the credit union movement is held in the north-west, in places like Derry — I have not said “stand up for Derry” for quite a while — Omagh and Strabane.

(Mr speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker [Mr McClarty] in the Chair)

The credit union movement should also be commended for the fact that it wants to increase the range of services that it offers to the people of our communities, and we should assist it in doing so. However, the recent inquiry carried out by the Committee for Enterprise, Trade and Investment exposed a number of barriers that prevent credit unions in the North from offering similar financial services to their counterparts in England and the South of Ireland. Those barriers should be removed, and credit unions given the freedom to get on with providing enhanced services to their members. However, in approving the Committee’s report, I would like to put on record Sinn Féin’s position that the most effective way of assisting the credit unions and assisting our people is through the transfer of fiscal powers to the Assembly.

Of course, that will take time to achieve, and the report’s alternative recommendation is that the credit unions here should come under the regulation of the Financial Services Authority, in order to allow them to offer expanded services. I stress that such an arrangement should be a strictly interim measure, pending the transfer of economic authority. The FSA presided over the collapse of the financial industry in Britain, and I doubt that many people here would have much faith in putting their financial future in the FSA’s hands. It is far better that those responsibilities be in the hands of local representatives who come from and care about their communities, and not a flawed FSA or unelected and unaccountable British Ministers.

The report also recognises the need to provide assistance to credit unions in order to implement the expansion of their services. I reiterate that position, and stress that the credit unions should be given the required financial backing to achieve that aim. Furthermore, any credit unions that feel that they do not yet have the capacity or resources to provide additional services should not be compelled to do so. Instead, those credit unions should be supported and assisted until they reach the point at which they feel ready to take that step. Ultimately, that should be their decision.

If Members will pardon the pun, I will reiterate that we owe a huge debt to the credit union movement in Ireland. It has provided an invaluable service to countless thousands of people over the past four decades. If anyone is going to owe a debt to any organisation, there is probably none better than a credit union to owe it to. I support the motion. Go raibh maith agat.

Leslie Cree (UUP)

It is difficult to follow the Chairperson of the Committee, because he usually covers all the points of the debate. Therefore, there was not much point in my sitting up until midnight last night to pen these few words.

Many people in the credit union movement in Northern Ireland have campaigned for a long time to have a range of services that are similar to those enjoyed by other groups in Great Britain and the Republic of Ireland. The Committee for Enterprise, Trade and Investment spent considerable time taking evidence and consulting all the important stakeholders. The impediments to the expansion of credit union services were identified and explained at some length. As the Chairperson said, four distinct options were developed, and all parties agreed that option 4 was preferred. That would enable the necessary outcomes to be achieved quickly and match the services provided elsewhere.

However, I recognise that assistance must be given to local credit unions for the necessary retraining that will allow them to move forward. Some of the smaller unions may wish to stay as they are, and offer limited services. Others want to expand and offer a wider range of services. We recommend that the Financial Services Authority open an office in Northern Ireland, staffed with people who have an understanding of the credit union movement and the necessary regulatory arrangements.

The credit union movement has grown over the past 50 years, and has a bright future in Northern Ireland. The only note of caution that I wish to express is on the reinvestment of assets into community enterprises, which will necessitate new skills and competences. Investments may be subject to more risk, but with proper training, I see no reason why credit unions should not develop those skills so that significant benefits can be brought to communities. I support the report and recommend it to the House.

Sean Neeson (Alliance)

First, along with other Members, I thank the Committee staff and all those who assisted us in developing our inquiry.

In April and May 2008, when we decided to carry out the inquiry, I believed that the Committee might have had greater priorities. However, events have overtaken us, and I now acknowledge that our timing could not have been better.

There are more than 180 credit unions in Northern Ireland, with around 408,000 members and assets totalling £820 million. Originally perceived as a largely nationalist movement, I am pleased to say that there are now many facilities in unionist and other areas as well.

The credit unions of Northern Ireland, in evidence to the Committee, said that they believed that their services were rather restricted when compared with those that their counterparts in the Republic of Ireland and in other areas of the UK provide. Larne Credit Union Ltd reflected that belief in a written submission to the Committee. It said:

“Credit unions do not come under the control of the FSA as in the case of England or IFSRA in the Republic of Ireland. This can cause difficulties for credit unions as the freedom of the Registrar in Northern Ireland to act is limited under the powers given to NI by Westminster. This means, for example, that credit unions in NI are unable to offer Repayment Protection Insurance to members, a service which is available to members in the Republic.”

During the inquiry, the Committee decided, rightly, to meet the administrator of the Presbyterian Mutual Society in private session to discuss the situation. Many of my constituents have been affected adversely by the problems of the society; therefore, it was right that the Committee did that.

One of our priorities was to determine the extent of regulation in Northern Ireland. One of the Committee’s recommendations is that the registration of Northern Ireland credit unions remains with DETI Companies Registry, but that regulation should move from DETI Companies Registry to the FSA to enable credit unions to deliver a wider range of services to their members. I acknowledge the recent controversy regarding the FSA, and although I have some reservations, I still believe that that is the best move to make so that services can be expanded.

Another recommendation is that DETI and the FSA work with the credit union movement to retain credit union staff, who will be operating under the new regulatory arrangements and using the new services.

The Committee also recommends that credit unions here should be able to provide the facilities for joint accounts and group membership — services that are not available in the UK. Contrary to my colleague Kieran McCarthy, I highlight the fact that the Ulster Federation of Credit Unions supports that option, but only as long as the FSA looks after credit unions as ably as DETI Companies Registry currently does.

The Committee believes that the appropriate reinvestment of assets by credit unions into community development and community enterprises can bring significant benefits to communities.

The inquiry has been very challenging, but we believe that the recommendations will bring about major changes for credit unions in Northern Ireland and provide greater opportunities, not only for the credit unions, but for their members. I support the recommendations and the report.

Jim Wells (DUP)

Mr speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker, I may have misled the House earlier with something that I said, so I want to get this confession out in the open. In a previous debate, I accused the Member for West Belfast Jennifer McCann of speaking for 14 minutes and 34 seconds. In fact, the clock was not reset when the Member started to speak and the time was 14.34. It may have seemed like she had spoken for 14 minutes and 34 seconds, but she had not; she finished speaking at 2.34 pm. I put right my remarks, because I noticed that a few Members were shocked by that scurrilous accusation, which I now withdraw. Members may want to frame this confession, because I do not think that it will happen again.

I was appointed to the Committee halfway through its deliberations, and I found the issue very interesting. I confess that I did not know an awful lot about the credit union movement before the inquiry started. I have to say that there is not a penny of Jim Wells’s benevolent fund invested in any credit union, the few pence that I have are lodged in the Progressive Building Society or the Northern Bank.

Like other Members, I was very impressed by the breadth of experience and expertise that was exhibited by the credit union movement throughout Northern Ireland. What I found to be even more impressive was that an awful lot of the service is provided on a voluntary basis. Committees work for the greater good of the community throughout Northern Ireland. I was also impressed by the fact that it now extends throughout all the community in Northern Ireland; credit unions operate in almost every part of society. The existence of the Irish League of Credit Unions and the Ulster Federation of Credit Unions means that it is a genuine cross-community movement.

The movement is very much a force for good. What I found particularly surprising was the sheer size of the amount of deposits that the various credit unions have — almost £800 million. That is an incredible bank balance for an organisation that has only been going for about 40 years. The credit unions have also demonstrated prudence in their lending over the past four decades. The financial markets have been through a period of unprecedented turmoil. Insurance companies, banks and stockbrokers have all gone to the wall. There have been all sorts of activities that, on closer examination, are not exactly to the credit of those who were involved. Even an organisation as august as the Presbyterian Mutual Society got itself into terribly difficult times.

Throughout that time, however, the credit union movement has remained untainted by any form of financial irregularity, which is very much to its credit. The 400,000 people in Northern Ireland who are members must have been reassured that while the storms were raging elsewhere, they could quietly and confidently expect that their savings in the credit unions were safe.

The movement has now grown to a stage, however, at which change is required to take account of the new economic realities and to provide a greater range of services and protection for the huge number of people who are members. My understanding is that the credit union movements — the two major federations and the separate group of 13 credit unions in Tyrone — are generally content with most of the report, but the issue of regulation has been highlighted.

That is a difficult issue. At the moment, it must be said that although the Department registers credit unions, it does not exercise the same regulatory role as the FSA. The Committee’s proposal is balanced. It was unanimously accepted that there would be a light touch. Paragraph 10 of the report is crucial. It states:

“the Committee acknowledges that many individual credit unions are content with current regulatory arrangements and have no desire to expand the range of services they offer. The Committee is reassured in this regard, by evidence from the Association of British Credit Unions Ltd (ABCUL)”.

That organisation complied with the FSA. The report states that a light touch will be applied to individual unions — they will be able to remain very much as they were. However, the larger unions that wish to offer a wider range of services will come under the umbrella of the FSA.

David McClarty (UUP)

The Member should draw his remarks to a close.

Jim Wells (DUP)

Recently, the FSA has, frankly, not provided a great amount of protection, but at least there is now reassurance for investors about the protection scheme.

Paul Butler (Sinn Féin)

Go raibh maith agat. I welcome today’s debate and the report into the credit union movement. I declare an interest as a member of my local credit union for the past 20 years. Today’s report and this debate follows on from a long-standing grievance that the credit union movement here has had over many years about the unfair way in which the range of services that it offers compares to its counterparts in Britain and the South of Ireland.

Deposit taking is allowed in credit unions in Britain and the South, but not here. The same is true of the transfer of securities and group society membership.

The task before us is to consider how credit unions might expand the range of services that they offer to include current accounts, deposits, mortgages, insurance, ATMs, and so forth.

As the Irish League of Credit Unions said, credit unions are not banks, and they are not seeking to become banks, but they wish to use current banking technology to offer the financial services that their members want.

Some Members spoke about the credit union movement, which has been in existence here for the past 50 years, during which time it has reached out, in particular, to people in disadvantaged communities who have been financially excluded and are not used to using the banking system. As Mark Durkan, the Chairperson of the Committee for Enterprise, Trade and Investment, said, credit unions have assets in the region of £800 million, and they have been able to provide loans at reasonable rates, ensuring that people in disadvantaged communities do not steer themselves towards doorstep moneylenders who charge exorbitant rates. Credit unions have reduced financial exclusion and have assisted families on low incomes, particularly in disadvantaged areas.

The Minister should take on board the range of services that the Committee believes credit unions could provide, including the growth fund, which the British Government established in order to reach out to people who are financially excluded and whom credit unions in Britain can access. We have the lowest uptake of the child trust fund; credit unions here argue that if people from disadvantaged areas were able to access the child trust fund, more of them would avail themselves of it. Furthermore, in 2010, the British Government will introduce the saving gateway scheme, whereby the Government will match every pound that people save, and that scheme could be included in the extended range of services that credit unions can offer.

Members of the Committee expressed concerns about the most appropriate regulatory regime. A dilemma arises under the present legislation, because regulatory powers must come from the FSA, which has cost implications for the credit union movement. Therefore, I hope that the Minister will consider that matter, because the FSA, for example, does not even have an office here. Furthermore, although some credit unions are run professionally, others are not, so training would be needed to bring standards up to the required level of competency.

David McClarty (UUP)

The Member should draw his remarks to a close.

Paul Butler (Sinn Féin)

I support the report, and I hope that the Minister takes on board its recommendations. Go raibh maith agat.

Simon Hamilton (DUP)

I am pleased to have been part of the Committee and to have my name associated with the report, which is one of the best reports — if not the best report — with which I have been involved since being elected to the Assembly. Furthermore, I wish to praise the Chairperson, who was the driving force behind the Committee’s investigation into this matter.

There are several reasons why I consider the report to be the best one with which I have been involved. Personally, the inquiry has been a great educational experience. Much like Mr Wells, my detailed knowledge of credit unions was limited. Indeed, if Members look at page 10 in the report, they will see that it is blank, so that page could have been indexed as the sum total of my detailed knowledge of the credit union movement at the beginning of the inquiry.

In addition, the report is good because there is a good prospect that its recommendations will be acted on. Sometimes, reports produced in the Assembly have little or no chance of being acted on, and this report’s recommendations might actually be taken up by the powers that be.

The Committee has been considering the subject for approximately 18 months, and if ever there were a need for the services that we are seeking, it has been highlighted by the economic downturn that has developed during that period. The credit union movement is important in helping people to get over some of the problems created by the downturn.

The importance of the credit union movement was drawn for me very starkly when the Irish League of Credit Unions gave evidence to the Committee that highlighted, as has been mentioned before, that the uptake of child trust funds in Northern Ireland is very poor in comparison with the rest of the UK. Even in my constituency, which Mr Wells repeatedly tells me is very affluent, the take-up was approximately 60%, meaning that 40% of those eligible did not take it up. That figure is worse in some areas — in parts of Belfast or in Londonderry, take-up is only about 50%. Therefore, there was bad take-up of that relatively simple benefit, and many of us believe that if credit unions could offer that service, more of those who could take up that benefit would do so.

The level of financial literacy in Northern Ireland is very poor also; again, it is among some of the worst in the UK. There is a very real need for — and benefit in — the credit union movement getting involved in providing more services that could address that problem.

We have heard about the market share that credit unions have in Northern Ireland, in comparison to GB. Give the critical mass that is required, there is a real possibility that if more services are offered to people in lower socio-economic demographic groups, that problem could be addressed in some way.

The key recommendation in the report is that registration remain with DETI and regulation be performed by the FSA. That recommendation was unanimously agreed by the Committee. Given the predicament that we are in, I can understand some of the hesitation that some people have when they hear the words “financial services authority” put together. However, in producing the report, the Committee considered absolutely every option. We considered some options that we thought would be good but were unworkable for one reason or another. When hardy came to hardy, that arrangement was the option that could, on the one hand, provide us with the services and let credit unions provide those services on the ground, and on the other hand, maintain the necessary level of regulation.

The Committee examined absolutely everything; therefore, I find it somewhat peculiar that Martina Anderson, on behalf of Sinn Féin, sought to criticise that for some reason. Her colleagues on the Committee wisely supported the report and did not object to it in any way. It may come as news to her — in seeking to have some sort of financial services authority for here or contemplating whether we should be covered by the Financial Regulator in the South — that many of the financial institutions in the Republic that have an Irish face and are Irish-owned are, actually, regulated by the FSA. Therefore, some of the points that were being made for, clearly, Brit-bashing reasons need to be examined in the cold, hard light of where we are, and in the context of the need for credit unions to get more services so that they can help their members.

As other Members have mentioned, I appreciate that there are smaller credit unions in Northern Ireland that may be somewhat scared by the recommendations in the report. That is why the recommendations outlined at the back of the report regarding a FSA presence in Belfast, some training and financial support, and the lighter touch that regulation should take, are all the more critical. Implementing that may take some time, it may be something that those credit unions need some support and help with; however, the report is very worthwhile and I am very pleased to be associated with it.

Alan McFarland (UUP)

I thank the Chairperson, my colleagues, and the staff of the Committee for Enterprise, Trade and Investment for their hard work on the report.

Credit unions provide a very useful service to society. However, in light of the financial developments that have occurred over the past few months, it is difficult to see how credit unions and industrial and provident societies will be able to continue unregulated and unprotected. It is fair to say that most credit unions welcome the opportunity to extend their services to the community. They welcome, in particular, the opportunity to help people to save, and as my colleagues have mentioned, it is very important that we encourage everyone to start saving, given the current economic climate.

However, there is a need for clearer rules and greater protection for savers. My Committee colleagues have covered most of the detail, but I want to particularly highlight several issues. The first is the change in Northern Ireland whereby groups will be able to join credit unions. That is important because groups such as the Scouts, football clubs and small groups that hitherto have not been able to save with the credit union will be able to do so, which will be beneficial to society generally. The ability of credit unions to help the local economy through supporting community enterprise is another useful development.

The proposals may be a challenge to the smaller credit unions, and some of them have made representations to the Committee. My colleague Sam Gardiner was giving me a hard time earlier about some people who had been in touch with him and who were worried about the FSA coming in with a heavy hand. However, we have had assurances on several fronts, and colleagues have mentioned that today. As is the case in GB, we are likely to see a lighter touch for those credit unions that do not want to expand too much, and a tighter regulatory system for those that want to become further involved in issues.

If the recommendations are accepted, there will be a need for equipment and training, and the possibility of financial support, for those credit unions that will come under the new regime. It is good for the FSA to come here, and it was suggested that we might be able to staff the FSA here with staff seconded from DETI, that is, the staff who currently deal with credit unions. Those staff are used to dealing with credit unions and the credit unions are used to dealing with them. Perhaps some system could be found so that if credit union staff telephoned to ask for advice, they would be talking to the friendly voice of someone they know.

If the proposals are handled sensitively, they will give credit unions a major opportunity to move on, change, expand and produce a much better service to the community. I commend the proposals to the House.

Alasdair McDonnell (Social Democratic and Labour Party)

I am grateful for the opportunity to take part in the debate on the Committee’s inquiry into the role and potential of credit unions. I thank everyone who contributed to the production of the report — the Chairperson, Committee colleagues and everyone who gave evidence. To my mind, their insight was invaluable in helping the Committee to produce the package of recommendations.

Credit unions in Northern Ireland are an integral part of the local communities that they serve. I am told that one in four of our population is a member of a credit union, which is an awful lot of people. It is a much higher figure than in Great Britain, and our credit unions are smaller, more local and community-based, and they connect with people. The norm in Britain is for credit unions to be large and somewhat anonymous. Unfortunately, despite that, Northern Ireland credit unions are much more restricted in the range of services that they can provide to their customers.

I never cease to be amazed at the substantial contribution that credit unions make, not just to financial stability, but to social stability and social justice, in the communities and neighbourhoods that they serve. They provide a vital financial lifeline, especially to the many people in areas of multiple deprivation who cannot get credit from the larger high-street banks or who cannot afford to pay the excessive and crippling bank charges that we are now forced to pay.

People without access to credit unions are frighteningly vulnerable to the circling loan sharks and others who could rip them off. Credit unions have done a fantastic job in combating poverty and empowering those on the edge of poverty. However, compared to the Republic of Ireland or Britain, credit unions here have been hampered, restricted and inhibited from providing the service that they could, and should, be allowed to provide to local communities because of the constraints of the regulatory system.

Eight of the recommendations contained in the report go a considerable way towards changing the regulatory arrangements, enabling credit unions to provide a much expanded and effective range of services, and at the very least, the same range of services provided by credit unions in Britain — if they wish to do so. We will not, and should not, force the smaller, weaker, or less-well-organised credit unions out of their depth. However, the strength of these recommendations is that they leave the choice of the range of services that credit unions might provide with the individual credit union, enshrining a degree of autonomy.

There is no need for me to go into the detail of each and every recommendation. That has been done thoroughly already by the Chairperson and by other colleagues who have spoken.

However, it is important to emphasise that we must do all that we can to implement the recommendations swiftly. In that way, those credit unions that are significantly restricted in the services that they can offer will be able to expand their services if they wish to do so, thereby delivering more effective outcomes for the local communities that badly need their efforts and energy. For far too long, credit unions here have been left to operate under unnecessary restrictions. For far too long, they have lagged behind their counterparts in the South and in Britain, and their ability to serve their communities has suffered.

The community-based, self-help ethos of credit unions is invaluable. It resonates with people, reaches out to them and mobilises them. It is estimated that more than 6% of households in Northern Ireland have no savings and do not even have a bank account. As neighbours and local social activists, credit union staff understand their customers and their neighbours’ needs. The credit union movement is a trusted community brand, and it is ideally placed to reach those who find themselves financially excluded and marginalised.

Not only do the credit unions offer fair and reasonable credit rates, but they promote sensible money manage­ment and help to nurture a culture of saving, investment and financial responsibility — a culture that very much needs to be nurtured in today’s economic climate. Our local communities, urban and rural, will significantly benefit from those recommendations if, and when, they are implemented. They will strengthen the role and the services that the credit unions can provide.

David McClarty (UUP)

I ask the Member to draw his remarks to a close.

Alasdair McDonnell (Social Democratic and Labour Party)

It is important to state that we would never suggest that our credit unions should simply develop into organisations that have parity with, or are similar to, high-street banks. The great strength of credit unions is their community ethos and their not-for-profit democratic operation. I support the motion.

Arlene Foster (DUP)

I, too, welcome the publication of the first report of the Committee for Enterprise, Trade and Investment following the completion of its inquiry into the role and potential of credit unions in Northern Ireland. I join other Members in thanking the Committee’s Chairperson, members and staff for the time and effort that they expended during the inquiry. I also thank the wide range of interested organisations that took the time to both write, of which there were many, and present evidence to the Committee. I will not respond in detail to the specifics of the report, but I will give it my detailed consideration and respond more fully to the Committee’s request for views on its recommendations by early April at the latest.

I have listened to, and am grateful for, Members’ contributions to the debate. There is clearly much cross-party and cross-community agreement on the important role of credit unions in society in Northern Ireland. The Department has long recognised that for many members of society, particularly those on low incomes, local credit unions continue to be prime sources of affordable credit. The long-established and widespread presence of the credit union movement in Northern Ireland has been crucial in helping to engender a strong culture of community self-help and to promote financial inclusion, including tackling problem areas such as loan sharking, to which the Chairperson referred.

The Department views credit unions as an integral part of the broader social-economy sector in Northern Ireland, and the movement’s contribution was assessed as part of the Department’s first survey of social-economy enterprises in 2007. There are some 180 credit unions in Northern Ireland, and the representative body for the social-economy sector — the Social Enterprise Network — continues to strengthen its links with the movement and has helped to give many credit unions the opportunity to publish their services to a wider audience of potential members.

Credit unions have held a special place in society in Northern Ireland for a long time — we heard that the first credit union was established in Londonderry in 1960. However, as the report makes clear, and as Members are only too aware, since 2002, our credit unions have differed in a major way from their counterparts in Great Britain, which were brought under the regulatory umbrella of the Financial Services Authority.

Historically, registration and regulatory responsibility for credit unions in Northern Ireland have been a devolved matter. Legislation was introduced in Northern Ireland in 1969 to enable credit unions to acquire corporate legal status and create the trusted brand image that the movement enjoys to this day. That brand image value is underpinned by the fact that over 90% of credit union members belong to a credit union that is affiliated to one of the two representative bodies — the Irish League of Credit Unions and the Ulster Federation of Credit Unions — which both operate their own membership funded savings-protection scheme.

That legislative framework worked well for the ensuing decades when the movement developed and spread across Northern Ireland. Most of that early development related to membership numbers; more recently, it has related to the scale of funds managed in the unions.

As the report acknowledges, my Department has been able to accommodate a large number of the credit union movement’s aspirations, including maximum permissible loan amounts, repayment periods, junior saver limits and the maximum number of shares that a member can hold. The Northern Ireland registrar has also played a pivotal role in the introduction of a new range of enhanced services for credit union members, from the direct paying in of benefits and pensions to the paying out of money and bills by debit card and PayPoint. However, as the report highlights, the Department does not have the statutory authority to approve the introduction and deployment of financial products and services, such as insurance and mortgage products, which are reserved and regulated by the Financial Services Authority, nor can it do anything to help to approve individual credit unions as providers of child trust fund accounts.

Some Members, including Mr Butler, made the point that Northern Ireland has a lack of uptake of child trust funds. However, it is important to remember that if parents do not take up the trust funds, the Government invest them directly on behalf of the child. Therefore, no funds are actually lost, but they may be placed in a building society in GB, for example. Nevertheless, the point was well made about the uptake in Northern Ireland.

The Committee’s report has confirmed that a widening gap exists between the range of products and services that can be delivered to members of credit unions in Northern Ireland and those that are available to members of credit unions in Great Britain. I accept the report’s conclusion that Northern Ireland’s credit unions are now lagging behind their counterparts in Great Britain in the range of financial products and services that they can offer, even though — and this point was well made by the Chairperson — the Northern Ireland movement has been longer established and has a population penetration of 50%, as opposed to 2% in Great Britain. That is a startling statistic, and it is a point that was well made. Upcoming changes —

Jim Shannon (DUP)

Part of the credit unions’ success story has been the ethos that they are run by the community, for the community. That has ensured their success across the whole community. The credit unions in Portaferry and Kircubbin are members of the Irish League of Credit Unions, and they are examples of that success story. There are also success stories in the Orange Halls in Newtownards, Comber and Greyabbey, which help to ensure that people can get access to credit unions and to funds.

The issue of social inclusion has not been mentioned. There must —

David McClarty (UUP)

Order. An intervention should be just that — an intervention. It should last for a short time. Will the Member come to a conclusion?

Jim Shannon (DUP)

I will come to a conclusion now. I thank the speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker for his guidance, and I appreciate it.

Does the Minister agree that social inclusion in relation to credit unions is very important? Does she also agree that credit unions provide an opportunity for social inclusion? Hopefully, the new legislation will do likewise.

Arlene Foster (DUP)

Yes. [Laughter.]

Credit unions offer much more to society than the sum of their parts. They provide a very worthwhile service to all sections of society. However, upcoming changes in Great Britain’s legislation on credit unions will further increase the gap unless we act now in relation to regulation.

The inquiry demonstrated that increasing the range of products and services offered in Northern Ireland’s credit unions is widely supported by a broad range of key stakeholders. My view is that credit unions that are willing to offer, and capable of offering, an enhanced range of financial services and products to their members should be enabled to do so. However, as the report makes clear, that can only happen if they are regulated by the Financial Services Authority. I heard the comments that were made in relation to the authority, but, as it stands, unless the credit unions are regulated by the FSA, they will not be able to offer that range of services. I know that the Irish League of Credit Unions has some difficulties with that, because it has built up a very good relationship with the officials in DETI.

I want to pay tribute to the officials in Companies Registry for establishing that close relationship with all the credit unions throughout Northern Ireland. That is something of which we should be proud.

I endorse the view that credit unions that do not want to go down the route of full regulation should be free to carry on providing their core savings-and-loan services to members. That is a sensible proposal from the Committee. The Financial Inclusion Taskforce in Great Britain recognised the significant role that credit unions can play in promoting financial well-being, and in Northern Ireland the credit union movement has the potential to make an equally, if not more, significant contribution, provided that current barriers can be overcome. Officials have worked closely with all sections of the movement in the past and, in so doing, have developed a professional working relationship with the sector. They will continue to work with and facilitate it as long as it is prudent, sound and acts in the best interests of individual members.

The report recognises that the option of doing nothing is not viable, given the breadth and depth of support for change and expansion of credit union services and the potential benefits that it can bring to communities and individuals. The four main options identified in the report are comprehensive: they are clearly explained and have been fully considered. My officials and I will give full and careful consideration to each of the options and the recommendations contained in the report.

There is also recognition that any change will require significant commitment from the stakeholders, not least, from the credit unions themselves. The report proposes that support will also be required with regard to financial assistance, advice and training to meet the transitional and development requirements necessary to ensure success. Those will need to be looked at carefully. It will be necessary to explore whether financial support can be made available to assist in that.

In his pre-Budget report to Parliament in November 2008, the chancellor of the exchequer is the government's chief financial..." class="glossary">Chancellor of the Exchequer announced that the Treasury would undertake a review of all mutual societies in Northern Ireland. As a part of its review, it will be looking at the regulation of Northern Ireland credit unions, taking account of the importance of mutual societies to the Northern Ireland financial sector and drawing on good practice in other regions and countries. I am sure that the Committee’s report will be particularly useful to the Treasury’s investigation into the way forward for the Northern Ireland credit union movement.

I thank the Committee Chairperson, members and staff, and all the witnesses and contributors for their invaluable input. My officials and I welcome the report and believe its recommendations are extremely timely. I am sorry that Mr Neeson had to leave; he indicated to me that he would have to do so. I am reminded of the politician who said that politics are about “Events, dear boy, events.” At the time, Mr Neeson said that he did not think it necessarily the most important issue to bring before the Committee: I have to say that the inquiry has been extremely important and most helpful.

I pay tribute to the credit union movement in Northern Ireland and to the vital role it plays in society in support of what the Executive seek to do, particularly in promoting financial inclusion by, for example, providing an alternative to expensive doorstep credit to which Members have referred and tackling loan sharking about which, unfortunately, we hear more and more during the economic downturn.

I conclude with Mr Shannon’s point that credit unions encourage greater community self-sufficiency and inclusion. I am very happy to receive the report.

Jennifer McCann (Sinn Féin)

Go raibh míle maith agat, a Cheann Comhairle. I want to restate the Committee’s appreciation to all who contributed to the inquiry. We are grateful to everyone who provided written evidence, including Assembly colleagues, community groups and individual credit unions, and particularly to St Matthew’s Primary School in the Short Strand. Its submission highlighted the school’s scheme to encourage people to become lifelong savers in their local credit union and to steer them away from high-interest doorstep lenders.

We also thank those who appeared before the Committee to give evidence, including both the Irish League of Credit Unions and the Ulster Federation of Credit Unions. They provided the Committee with a valuable insight into what the credit union movement needs from Government in order to forward its goal of providing the financial services that our communities need so much.

The written and oral submissions received have been invaluable in assisting the Committee to reach its conclusions and come up with the recommendations in the report.

In his opening remarks, the Chairperson, Mark Durkan, highlighted the importance of the credit union movement, its long history, its deep rooted involvement in our communities, and the reliance that so many people have on credit unions. He spoke of the credit unions’ inability to meet the needs of their members due to the legislative constraints placed upon them. Now, more than ever, in the current recession, those barriers must be removed in order to allow people access to the financial services that they need and to make financial exclusion a thing of the past.

The Chairperson also explained how the expansion of services to include the depositing of child trust funds would help to encourage a higher level of take-up of those funds, which, in some areas in the North, is only at the rate of 50%. He listed the options for change in the report, outlining option 4 as the preferred option.

Robin Newton also outlined the importance of credit unions and explained that people who cannot get credit from banks can go to credit unions. He also pointed out that lack of services prevented people from getting what they needed from credit unions, and he talked about how the appropriate reinvestment of assets into local communities could help to develop those local communities.

My colleague Martina Anderson said that, due to the economic climate, the credit union is more important than ever: she quite rightly called it the people’s bank. She also spoke about social inclusion. Simon Hamilton, in a reference to her comments, raised the issue of FSA regulation. Martina was outlining some of the concerns that other Members have outlined and, indeed, that the Irish League of Credit Unions has also outlined.

Leslie Cree said that although the Committee agreed with option 4, assistance would be needed by credit unions, and for the opening of an FSA office. He also warned that credit unions must be cautious about reinvestment opportunities.

Sean Neeson quoted Larne Credit Union Ltd, which stated that current regulation is standing in its way and is preventing it from providing certain services. He asked DETI to work with credit union staff to assist in the transfer to FSA regulation.

Jim Wells praised the voluntary aspect of credit unions, highlighting that people who work there do so on a voluntary basis. He credited the movement for its history and for the fact that it has never become involved in any economic crisis. He said that most people are generally content with the majority of the report; however, he pointed out that some people have concerns around regulation.

My colleague Paul Butler said that inequality exists and that there is a disparity in the range of services available from credit unions. He talked about the different services that could be made available, such as current accounts, ATM services, and the depositing of child trust funds. He demonstrated how credit unions have reached out to people in areas of disadvantage and need, and he talked about the development of some credit unions in England through the operation of a growth fund.

Simon Hamilton said that the key recommendation of the report was that registration should remain within DETI and that regulation should go to the FSA. Alan McFarland said that helping to build the local economy was a very welcome development but argued that there is a need for training, particularly around the staffing of an FSA office. He suggested that perhaps staff from DETI could be seconded.

Alasdair McDonnell pointed out that one in four people here are members of a credit union, and that the movement created social stability and social justice. People who cannot get loans from banks or other financial institutions can get loans from credit unions and, he argued, the expansion of the service would go a long way to help introduce people to a culture of saving.

Gerry McHugh said that bringing credit unions up to the same level of services that those in the South of Ireland and in Britain have would create an even playing field and would encourage people, particularly children and young people, to become more involved in the culture of saving.

I thank the Minister for her constructive and supportive comments; the Committee will welcome her commitment to ensuring that credit unions are able to develop and expand their services. I particularly welcome the fact that she said that she will come back by early April at the latest and that she mentioned financial inclusion. She also mentioned loan sharks, and that is an important point because, as a result of the economic climate, people have been exploited by loan sharks.

The Minister pointed out that registration and regulation has always been a reserved matter. The report highlights the fact that the Department does not have the authority to grant some of the expanded services that some credit unions were seeking, for instance the depositing of child trust funds. Jim Shannon, in his short intervention, — [Laughter.] — mentioned the benefits of social inclusion, and that is an important point.

The Minister said that the inquiry has demonstrated that credit unions that are willing to take up enhanced services can be regulated by only the FSA, but she went on to praise the working relationship that credit unions have had with DETI’s Companies Registry. That is an important point, because, in all the evidence that the Committee heard from the Irish League of Credit Unions and the Ulster Federation of Credit Unions, those bodies said that they enjoyed a good relationship with DETI’s Companies Registry. It is important that, if the change takes place, it does so in an atmosphere similar to the type of working relationship that exists.

The Minister said that she would give full and careful consideration to the options, and she mentioned that she would consider providing financial assistance. Another important point is that the credit unions can choose whether to go down the route of providing expanded services. The Minister said that, if the credit unions chose to do that, she hoped to be able to offer training and advice. She mentioned that all of the stakeholders, including the credit unions, will have challenges ahead.

The debate was helpful, and some good conclusions came out of it. The main issues are that significant moves towards combating financial exclusion here and towards expanding services are important. I commend the report to the House, and I ask Members to support the motion. Go raibh míle maith agat.

Question put and agreed to.

Resolved:

That this Assembly approves the report of the Committee for Enterprise, Trade and Investment (05/08/09) on its inquiry into the role and potential of credit unions in Northern Ireland.

(Mr speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker [Mr Molloy] in the Chair)

Motion made:

That the Assembly do now adjourn. — [Mr speaker is in charge of proceedings of the House of Commons in..." class="glossary">Deputy Speaker.]