I absolutely agree. Credit unions could be part of this new mixed economy in banking and financial services. I mentioned Germany; the third element in the German tripartite banking system is the co-operative movement—the Volksbanken—which is its equivalent of the credit unions. We need to build up the credit unions, and they might form partnerships with municipal banks. Municipal banks can legally take deposits, but they cannot offer loans. If membership of a credit union were linked in with holding a retail deposit in a municipal bank, one could have a complete array of financial services, and with local authority mortgages as well. These are exciting possibilities, and it would be relatively simple for the new savings banks to link up with the plumbing of the wider banking industry through the SWIFT system. They could provide other financial products from other institutions. This could be done on a low-cost basis and relatively quickly.
As hon. Members will know from their own experiences, there is a gap in terms of business banking. Finance Wales provided just 110 loans in 2008. There is an issue to do with European law, in that it has to offer those loans at between 4 and 10 per cent. above the European reference rate, so they can be relatively expensive. Finance Wales is, essentially, a quasi-investment bank or kind of venture capital organisation, in that it looks at a small number of high-growth-potential firms, which leaves a gap in the market in terms of ordinary business banking for the vast majority of enterprises. Birmingham and Essex in England are looking at using local authorities' ability to offer loans on an unregulated basis. Birmingham is talking of offering £200 million in loans to local businesses. That could address some of the problems in the short term, but we need to create something similar to the Landesbanken—locally owned savings banks in conjunction with local authorities, and then an umbrella national institution that aggregates that and is able to provide a higher level of loans, pooling risk and providing expertise.
We could also pool some of the reserves held in the public sector, both in the Welsh Assembly Government and local authorities. Instead of putting that in Icelandic banks, and suffering as a result, why not keep it and invest it in a Welsh-owned institution that could then offer loans to Welsh businesses and that could also take deposits from retail customers? Too often in the past, what has happened is that retail deposits given by Welsh customers have not been reinvested in the Welsh economy, but have been used by financial institutions based elsewhere, and we have seen very little benefit.
Finally, if we did create this new architecture of Welsh financial institutions, it would greatly help if the Welsh Assembly had borrowing powers. I understand that the Labour party in Scotland has now made a submission to the Calman commission making the case for borrowing powers for the Scottish Government, and the Northern Ireland Executive already has them. It would be positive if the Labour party in Wales were also to back having borrowing powers, perhaps in its submission to the Holtham commission, because that could underpin any new financial institution we were able to create.
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