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My Lords, it is important for credit unions to be able to grow on a solid base to deliver for their members. Whichever party or parties are in government after the general election, would the noble Lord agree that two of the most important areas for reform are reform of the 2 million cap on potential members—maybe change that to actual members—and removal of the legal barriers to enable credit unions to give other financial products to their members?
Yes, I agree with the noble Lord that those are both important issues. In the response to the call for evidence, the Government have committed to considering changes to the common bond legislation. The noble Lord will be aware that credit unions maintain their exemption from the consumer credit directive only if they have a restricted potential market. It is important that we do not expand the definition of the common bond in ways that could jeopardise that exemption.
In declaring my interest as chair of the Credit Union Expansion Project, I point out to my noble friend the Minister how much I welcome the measures that this Government have taken to reform credit union legislation and the recent commitment made to produce proposals for further reforms in the next Parliament. I join the noble Lord, Lord Kennedy of Southwark, in welcoming that. I hope that it will receive support from all sides of the House. Will the Minister agree that legislation is only part of the answer? Helping credit unions to co-operate and to become more competitive and attractive will be key to growing this sector sustainably.
Absolutely, my Lords, and I commend the noble Lord for his work in this area. Increased collaboration is vital if the sector is to become more competitive and grow. The Credit Union Expansion Project, to which the noble Lord referred and which the DWP is funding to the tune of £38 million, is aimed at doing exactly that—for example, by providing shared back-office services to cut costs. However, the sector would also be strengthened if it were able to speak with one voice, which requires a reduction in the number of trade associations currently operating in the sector.
My Lords, our ambitions for the growth of credit unions on a national scale have a long way to go. Given that banks and building societies have extensive networks and operational systems, is there now a case for the Government to consider establishing a community reinvestment Act, as in the United States, as a solution to the problem of providing affordable finance for all individuals?
My Lords, there is scope to look at a whole raft of new initiatives, to make sure that there is access to finance for people on more modest incomes. One development in recent weeks has been agreement with the banks on fee-free basic bank accounts, which will be a good improvement for many people who are currently denied even the most basic bank accounts.
My Lords, the Credit Union Expansion Project was designed to enable people on lower incomes to have access to modern banking methods. One of the problems for people in this category is that they have not been able to get cheaper electricity and gas bills because they have been unable to pay by direct debit. Can my noble friend say what progress has been made by both credit unions and the Post Office card account to enable people to access those cheaper bills through the direct debit mechanism?
As my noble friend says, this is a very important issue for people on low incomes. A number of the largest credit unions already offer current accounts that have a direct debit facility. However, they are still a small minority. This is an area where the Credit Union Expansion Project is very important, as it will allow more of them to offer such services.
More generally, the Government’s announcement in December about basic bank accounts means that people who open such accounts will have access to a range of normal personal current account facilities, including direct debits.
My Lords, I imagine many of us are concerned about the culture of debt that seems to be normative in many parts of our society. In the light of this, can the Minister tell us whether the Government have any plans, first, to encourage all schools to consider working closely with credit unions, as in the case of the credit union in St. Albans, where I come from and, secondly, to further roll out and encourage payroll savings schemes as part of a wider initiative to encourage saving and financial responsibility across society?
My Lords, the Government support both those concepts. The right reverend Prelate will be aware that the Government have been working with the Archbishop of Canterbury’s task force on affordable credit and savings to institute the LifeSavers project, under which primary schools are working with credit unions to encourage young children into good savings habits and raise awareness of credit unions.
My Lords, the House will have noticed just how vague the Government’s commitment is when they say that after the election—yet another commitment for “after the election”—they will introduce additional legislation. Does the Minister recognise that what the next Labour Government will do is to increase the levy on payday lenders in order to help the development of credit unions?
My Lords, the Government have legislated several times to modernise the law in respect of credit unions. The proposals of the Labour Party are based on an assumption that payday lenders represent a large stock of cash. The way in which the payday lending industry is going suggests that there simply will not be that amount of resource available from the sector.
My Lords, when this subject was discussed on a previous occasion, I asked the Minister if he would liaise with the Department for Education to see if some sort of campaign could be set up to get children at school learning about the benefits of credit unions. St Albans credit union, of which I am a member, has links with a number of schools. This helps children get into the habit of understanding the need to save before they borrow. Did any talks ever take place between the two departments, and if not, will they go ahead and do so now?
My Lords, as I have said, the Government are working with the Archbishop of Canterbury’s task force to get credit unions into schools, initially in Lewisham, Bradford and Nottingham, but with a view to rolling the project out in the near future to 100 schools and involving 30,000 children. Also, for the first time last autumn, we instituted financial literacy as a compulsory part of the national curriculum.