There are always junctures in life that demand we pay close attention to our finances, such as paying the bills for the summer holidays, school uniforms, and trips away. Now, as autumn approaches, shops are already stocking up for Christmas and all the increased financial pressures that that brings.
These moments provide a useful prompt to encourage us to take control of our personal finances so that we are not paying high interest rates or worrying about how to pay for Christmas. There is pressure on everyone to spend more, but the sad truth is that it is the most vulnerable in our communities who turn to unaffordable credit. That is why it is so important that this Parliament and its members continue to support the important role that is played by credit unions in our communities as providers of ethical financial services.
On 17 January this year, the Parliament celebrated the role of credit unions in Scotland’s communities in a debate. As members know, credit unions are member-owned financial co-operatives, which means that they exist only for the benefit of the people who use their services. They are not-for-profit organisations, which means that the money that they make goes right back into providing competitive rates on savings and loans. They are based on the principles of individual responsibility and mutual assistance, which means that they improve people’s lives through encouraging the wise use of credit and teaching the importance of budgeting.
Many credit unions provide complementary services in addition to savings and lending, such as business loans and mortgages. Credit unions are diverse, ranging from small community models to large organisations handling millions of pounds. However, all are driven by a singular purpose—to serve their members rather than to make profits for a select few.
More than 410,000 people in Scotland are already members of a credit union, which shows modest growth from last year. However, credit unions should be much more mainstream than they are so that more people can benefit from their ethical services. Although they provide help and support to the most vulnerable, they are not and should not be defined by that. In fact, credit unions rely on customers from all walks of life to sustain their businesses and to grow.
Although that increase in membership is welcome, there is still much more to be done. During the debate in January, I heard about some of the key challenges facing credit unions, including the need to increase payroll deductions to encourage more employees to save, which remains a key area in which we need to make progress; to use technology so that credit unions become the place to save and to borrow; and to focus on the education of young people in primary and secondary schools to develop their financial skills and promote the use of their local credit union. That is why we welcome Pauline McNeill’s amendment to the motion and intend to support it.
In June, I met key members of the credit union movement to discuss the priorities for the sector, what support might be required to ensure that the credit union movement in Scotland continues to thrive, and possible sources of support for that growth. It was clear that although our efforts to date to support and grow credit unions have had a positive impact, more determination to grow the sector is required and we need to focus not on doing things to the sector but on working alongside it.
That is why I am pleased that in this year’s programme for government we have committed to co-producing with the sector a new credit union strategy, which will enable it to grow, develop and flourish further. It is worth emphasising the importance of ensuring that co-production is at the heart of developing the strategy—an appropriate acknowledgement of the credit union principles of individual responsibility and mutual assistance. It is also important and opportune to seek members’ views at this early stage in order to help to shape the strategy for Scotland.
The credit union strategy will naturally focus on the sustainability of individual credit unions and of the sector as a whole. Typical of the wider social enterprise sector, part of the key to sustainability is ensuring that the next generation of savers and borrowers use credit unions. It is right to focus on future savers, so the strategy will look to ensure that young people are engaged with their local credit union and to identify sustainable ways of doing that.
In creating the strategy, we will explore the success of the junior savers scheme, which has engaged parents, staff and pupil volunteers in promoting a saving culture; delivered school assembly presentations and classroom discussions; and incentivised young people to become junior savers through a range of promotional activity. We have an opportunity to learn from the junior savers scheme and to work out what went well and what can be improved to ensure that we can support young people to become members of credit unions.
Affordable credit is another area that requires further attention. We know that people who are unable to access mainstream financial services have limited choices on where to go to borrow money. Some may turn to friends and family members, who unfortunately may be on low incomes, too, while others may turn to high-cost lenders and will then be exposed to exploitative practices. There is simply no other place for those people to turn to.
The Scottish Government has a responsibility to help to provide an alternative option for people in those situations so that they, like members, have access to credit that they can afford. That is why we have invested £1 million in Carnegie UK Trust’s affordable credit fund. The resource will be used by lenders over a 10-year period to provide genuine alternatives to high-cost credit lenders for people on low incomes and to work to address the financial exclusion that people face. The essence of the affordable credit fund is to help more disadvantaged and vulnerable people. The fund will also help to grow the community lending sector in Scotland through support for not-for-profit organisations. Those lenders, which include credit unions and community development finance institutions, support increased financial inclusion by providing access to debt advice, savings opportunities and banking products and services.
Fair For You was the first lender to draw down a loan from the affordable credit fund in order to expand the services that it offers in Scotland. Capital from the fund is loaned to borrowers from Fair For You so that they can buy essential household items for their homes. Fair For You’s repayment rates are affordable and are tailored to the borrower’s income. The loans are flexible, in that borrowers can pay them off faster and pay less as a result, if they can afford to do so. Our support for that sector over the next decade will be key to supporting the growth of the affordable credit sector in Scotland. Our investment in the fund will help social lenders to work with people on low incomes in order to increase their financial inclusion and contribute to tackling the poverty premium.
I know, however, that more can always be done, and I am always open to hearing suggestions on the way in which our work in the area could be improved. In the debate on the issue in Parliament at the start of the year, it was suggested that the Scottish Government should use financial transactions to boost credit unions’ regulatory reserves. We have investigated that and found that it should accelerate growth in credit union membership and support the vital services that they offer. That is why our programme for government commits to launching a new £10 million credit union investment fund in spring next year. That will provide low-cost loans to support credit unions to grow memberships and improve their systems.
It is envisaged that the fund will lead to healthier balance sheets for credit unions and in turn will allow a greater level of affordable lending. I am keen to engage with interested members from across the chamber and from the sector on the final form that the fund will take. For instance, we know that support for information technology infrastructure is a key ask from the credit union sector, and the fund will help with developing those key facilities. Given the changing attitudes to banking, particularly among younger people, that will help to ensure that credit unions remain key institutions in our communities today and, importantly, in future.
I welcome the fund. Can the cabinet secretary give a commitment that the Government will look at the lower levels of engagement with credit unions in more rural and island areas, where the benefits are equally obvious but where take-up levels have historically been a bit lower?
Absolutely. We will take on board any views and opinions from across the chamber on what the strategy should include. We will engage with the more rural credit unions. I have met representatives of the Western Isles Credit Union, which I think covers some of the northern isles, who told me about some of the challenges that they face and about the credit union’s strengths and what it provides for the community. I am absolutely willing to ensure that rural and island communities are factored into the strategy as it takes shape.
It is important that we reflect the voices and views of the credit unions, part of whose strength is their diversity and the way in which they not only reflect but are embedded in the communities that they serve. We are keen to develop a coherent strategy that seeks to further strengthen and grow credit unions in Scotland, but we recognise that a one-size-fits-all approach is not required. That is why partnership, co-production and engagement with the sector in its widest sense are important.
I look forward to working with members across the chamber on what I think is a shared ambition, regardless of which political party we represent. By supporting credit unions, which unashamedly put people before profit, we have a real opportunity to support vulnerable people and communities. Our national performance framework seeks to create a Scotland based on the principles of kindness, respect and dignity, with a focus on wellbeing. Credit unions will help us in the pursuit of the fairer Scotland that we all want to create.
That the Parliament commends Scotland’s network of credit unions, which are at the heart of communities across the country and serve more than 410,000 people; welcomes that, through offering affordable loans and savings, credit unions can protect people from predatory lenders and unmanageable debt; notes the Scottish Government’s Programme for Government commitment to introduce a new £10 million Credit Union Investment Fund to help them grow their membership and increase the numbers of people saving and borrowing from credit unions, and further notes that the Scottish Government will co-produce, with the credit union sector, a national strategy to further grow and strengthen this important sector.
I point-blank refuse to think about Christmas while it is still September, but I agree with the
cabinet secretary that, for many families, Christmas is a difficult event that gets them into debt.
I hope that this will not just be a cuddly debate about how much we love credit unions—which we do—but that it will be about the principle of wider access to community and co-operative banking, as outlined by the cabinet secretary. There is an ethical side to saving and funding life that is central to the fabric of a modern and progressive Scotland, and there is a wider issue about teaching people how to look after their money.
Worldwide, there are more than 40,000 credit unions in 90 countries. Staggeringly, in Ireland, 70 per cent of the population belongs to a credit union. I like that figure—it is one that we should aim for. Credit unions can transform people’s approach to savings and alleviate exorbitant debt.
The Scottish Co-operative Party said in its briefing that we need to move away from the idea that credit unions are a financial institution for poor people, although that attitude might be changing. Credit unions are for all parts of the community, all age groups and all professions.
I agree that more needs to be done to promote credit unions among young people. I was impressed that my 13-year-old niece has a credit union account, which she got at primary school. We are beginning to make progress in schools. If we give school pupils access to a credit union, it helps them to learn about saving while promoting awareness of the existence of credit unions, hopefully for life. Last year, Labour announced that we would expand support for credit unions and give every first-year high-school pupil a £20 savings account with a local credit union. Credit unions are part of the very fabric of what our party believes in. The aim is to reduce the influence of payday lenders and promote savings. Hopefully, if given the chance, we will do that within a generation.
One in four children in Scotland lives in poverty. Many families feel that they have to turn to high-cost credit to pay for everyday household items and bills. StepChange Debt Charity Scotland estimates that 700,000 people in Scotland are in or at risk of problem debt. I have noticed report after report illustrating the levels of personal debt; problem debt affects what seems to be quite a wide group of people, which is deeply concerning.
One in three working families in the United Kingdom are only one pay cheque away from losing their home. Government figures show that 16.5 million working-age adults in the UK have no savings at all. We are facing Brexit and austerity, which is perhaps not the best environment in which to encourage saving, but we need to promote the idea of it. People are relying increasingly on borrowing through payday loans and credit cards because they do not see an alternative.
StepChange highlights the fact that many people are turning to high-cost credit. It reports that its clients have an average of £6,500 in credit card debt. With interest of 22 per cent or higher on high street credit cards, everyone will see why that is a concern.
As an aside, we believe that local councils should have the power to limit the number of fixed-odds betting terminals and betting shops on our high streets to tackle high levels of debt through gambling.
The cabinet secretary referred to the fact that credit unions have highlighted that payroll deduction schemes are a priority for the sector. That works if the person agrees to a deduction at the source—
I asked the Scottish Parliamentary Corporate Body whether it would consider extending the number of credit unions with which parliamentary staff, MSP staff and MSPs could have payroll deduction. Does Pauline McNeill agree that it would be good to give us and our staff the choice of local credit unions as well?
I agree 100 per cent with Ruth Maguire’s point. Not only can we set an example, but payroll deduction is a good thing and, where it is possible, it should be promoted in the Parliament.
Maintaining a savings buffer can be a crucial lifeline if people are hit by an unexpected expense. It is important to teach people what long-term savings can do for their lives.
I am a member of the Co-operative Party. It is fully committed to doubling the size of the co-operative economy and believes that that must include doubling the size of the credit union sector in Scotland.
The cabinet secretary outlined the £10 million credit union investment fund, which we whole-heartedly welcome. She answered some of the questions, but it would be helpful to have more detail on how much of the money will be allocated and over what period. Will it be recurring or is it a one-off investment fund?
The Labour Party believes that credit unions are the basis of saving in the community. That concept of banking has probably never been needed so much; it is important in forming the basis of a modern Scotland and we should encourage it in every way. Credit unions will make a huge difference to individuals and communities, and we support the Government’s approach to growing the membership and size of the credit union sector in Scotland.
I move amendment S5M-18884.1, to insert at end
“, and believes that this strategy should include the extension of payroll deduction schemes to more workplaces and better promotion of credit unions among young people.”
It is a pleasure to open the debate for my party.
The cabinet secretary is right to say that it is a shared vision. In our manifesto, we said that we would support the credit union movement in making financial services more accessible. Today, we will support the motion and the amendment. I suspect that most of us who speak today will repeat many of the same things.
In that vein, I welcome the announcement by the Scottish Government of the £10 million credit union investment fund to provide loans to support credit unions. I hope that that commitment by the Scottish Government will lead to the credit unions strengthening their presence in the market, both in a physical sense and on a digital platform. Their visibility is an issue for many people. I will come later to a point that Pauline McNeill made about how credit unions sit within the marketplace and how people view them.
When we had consensus on this before, we agreed that we needed to promote the uptake of services from credit unions. I note that, over the year that we have been debating it, there has been a small rise in uptake in Scotland. About 20,000 new members have come in this year. Scottish credit unions now provide about 24 per cent of the UK total of lending.
That makes us look at the worldwide position. Credit unions in the UK provide for just 1 per cent of the population. When we look around the world, we see that that does not compare well. In the US, 43 per cent of the population engages with credit unions. In Canada, the figure is 22 per cent and, in Australia, it is around 25 per cent. We can see that we have work to do. The cabinet secretary said that there are 40,000 credit unions in the world; I have a figure of 42,000. The number is not exact, but there are a lot of them and we are down at about 0.23 per cent of the world total. Therefore, there is scope for improvement.
We know that we can do better, but how do we achieve that? The cabinet secretary outlined a number of proposals that have been brought forward. We would support some of them. Northern Ireland has done some excellent work. It is forging ahead of us and is lending about 40 per cent of the UK total.
It has also shown us how credit unions should sit within our society. The belief has been that they belong only in poorer areas and are for people who are struggling, but the opposite is true; those of us who have more money should be investing in and supporting credit unions to allow them to flourish and to provide a fair interest rate and an equitable service. We know that credit unions come out extremely well in surveys when it comes to looking after the people they serve.
Credit unions play a key role in offering credit at reasonable rates of interest in a form that suits many low-income consumers, and in providing a valuable tool to encourage saving and responsible budgeting. I hope that everyone will join me in welcoming some of the steps that the UK Government has taken to make credit unions more accessible. It has increased the common bond from £2 million to £3 million, meaning that more people across the UK can access credit unions. That built on the success of the credit union expansion project that provided £38 million to the Association of British Credit Unions in 2013 in order to modernise and grow the credit unions.
However, we hear clearly from trade organisations that they are seeking reform of UK legislation, and, because of the peculiar situation in which the range of financial services that credit unions can legally supply is quite restricted, we in the Conservatives support that. Things that we consider quite normal within our financial institutions, such as credit cards or insurance, really need to be within the credit unions’ capacity to deliver.
The sustainability of credit unions is challenging, so the extra money is welcome. The Scottish League of Credit Unions said:
“The challenge for credit unions is that they operate in a restrictive legislative environment in which the interest rate that they charge on loans is capped by law.”
Credit unions therefore also have a narrow margin of profitability. We need to support the changes around that.
Overall, there are very positive movements, and we are more than happy to support the Scottish Government’s direction of travel. We will be supporting the motion and amendment tonight, and we look forward to a significant rise in uptake of credit union services over the next five years.
I thank the cabinet secretary for bringing this debate to the chamber.
Scottish Greens, too, were elected on a manifesto to champion not only credit unions but a wide range of other realistic alternatives to the traditional banking sector, including co-ops and mutuals.
The cabinet secretary has announced a new £10 million fund in the programme for government that will support the growth of credit unions across Scotland from financial transactions. I look forward to further details of that in due course. She may be able to say a bit more about how that will be handled when she winds up. She mentioned consultation with the sector.
The latest data that I have shows that Scottish credit unions have about £290 million out on loan. Another £10 million is about 3 per cent. It is critical that financial transactions do more than just conventional capitalisation of credit unions. I am interested in further details, either this afternoon or in due course.
As other members have said, there are about 90 credit unions in Scotland with a membership of over 432,000, which is extremely encouraging. That is a lot of people and it is the biggest mutual sector in the Scottish financial industry.
Although the credit union sector in Scotland is profitable and self-sustaining, there is a strong case for investment in order for the sector to grow in the way that it would like to. Therefore, I welcome the support for a new strategy. However, it is important that that strategy also has the support that it needs to be implemented.
The Scottish household survey in 2017, which is the latest one for which we have detailed statistics—the 2018 one will not be available until October—shows that 22 per cent of households had no savings and 14 per cent had less than £1,000. If that figure is broken down by housing tenure, it shows that there are real inequalities; 49 per cent of people in social rented accommodation had no savings at all and 18 per cent had less than £1,000. In comparison, in the owner-occupier sector, only 9 per cent of people had no savings and 71 per cent had savings of more than £1,000.
The ability to access finance and to save is critical, and that is massively influenced by such things as one’s housing tenure. Therefore, in relation to affordability, it is just as important to think about housing as it is to think about credit. Also significant is the big gender gap.
The credit union movement is a form of mutual co-operative membership association that is not uncommon across the world. In a series of reports since the financial crash, a number of respected institutions have called for greater democratisation of the financial sector. In 2016, Friends of the Earth Scotland, Common Weal and the New Economics Foundation published a report called “Banking for the Common Good”, which advocated the development of an “ecosystem” of institutions, including credit unions as well as people’s banks, which could be structurally designed to work for the common good.
In the debate that we had in January, I recall referring to the Sparkassen banking system in Germany, which is owned by local authorities. In Switzerland, 45 per cent of citizens are customers at one of the local banks that incorporate the cantonal network. Altogether, the network holds more than £256 billion of domestic finance, and one third of small and medium-sized enterprises conduct their business through it. We should be alert to the bigger picture and remember that it is about not just credit unions but the democratisation of the wider financial sector.
I welcome the debate. Scotland’s credit unions are a welcome part of our financial landscape. I thank the cabinet secretary for her commitments. I am happy to build on the consensus that exists, and I look forward to receiving further details of her proposals.
Like others, I welcome the debate, which is on a subject that the Parliament has a good track record on and returns to regularly. I confirm the Scottish Liberal Democrats’ strong support for the cabinet secretary’s proposals.
As I have done in previous debates, I declare an interest as a member of the HI-Scot Credit Union, which operates across the Highlands and Islands, and is almost certainly an enterprise with which the cabinet secretary has had discussions recently. My savings are not central to keeping HI-Scot afloat, but it is good to see that the credit union is making a positive contribution to communities across the region, progressing from its beginnings in the Western Isles. In my constituency, HI-Scot works closely with Orkney Housing Association and Voluntary Action Orkney, which epitomises the sort of partnership that is key to the success and sustainability of such operations in remote rural and island areas.
Although membership across Scotland is up to 430,000 or so, membership in the Highlands and Islands is a modest 3,200, which suggests that there is room for growth. I hope that the credit union investment fund and the Government’s developing strategy will allow specific attention to be given to ways in which the benefits of credit unions can be opened up to more individuals, households and communities across our rural and island areas. HI-Scot Credit Union shares that view.
Those benefits are not in question. As others have said, credit unions encourage a savings culture, provide affordable loans and, as the motion suggests, provide protection “from predatory lenders”. Credit unions are also based on the principle of a common bond—a shared connection within a community. They are about people helping people, whether it is the smaller volunteer-run unions with hundreds of members or the larger unions with paid staff and premises.
Perhaps contrary to the common perception, credit unions are not just for people who are in poverty. Michelle Ballantyne and Pauline McNeill were quite right to remind us that they are for all people in all communities. The investment fund can look at reinforcing that point.
Credit unions help to build resilience, improve financial capability and nurture cohesion within communities. Those are all desirable qualities at the best of times, but during a period of economic turmoil such as we have seen over the past decade, their importance increases many times over.
In Scotland, credit unions have proved more popular than almost anywhere else, so I welcome the proposals for an investment fund that were included in the programme for government. With about 100 credit unions in Scotland, more than 400,000 members, more than £0.5 billion in assets and loans approaching £300 million, there is real strength in the sector, as well as an appetite and capacity to grow.
One area for development—this issue was touched on in earlier debates and again today by Pauline McNeill, Ruth Maguire and others—is the scope for more action on payroll deduction. That is a great way of enabling people to save regularly and, where necessary, manage loan repayments effectively. There does not seem to be any good reason why that is not a standard workplace benefit.
To be fair, some employers do offer it, but they are very much in a minority. Even where it is available, it is often the case that little is done to promote take-up among staff. I would welcome details from the minister on the progress that is being made in that area, and the aspirations for it.
If nothing else, emphasising that it is a simple process for which, by and large, credit unions take on the administration has to be appealing to employers, who can be assured that there is no risk to them regarding loan repayments. Meanwhile, their staff can access credit and repay loans in affordable instalments.
As I said in the previous debate, there seems to be an obvious opportunity to link the work on promoting the living wage more closely to efforts encouraging employers to sign up to payroll deduction arrangements with credit unions and to identify individuals in those companies who can act as credit union champions to encourage take-up.
I welcome the debate and the progress that we are making in expanding the reach that credit unions have in Scotland. I hope that, by the time that we next debate the issue, their popularity, particularly in rural and island areas, and the use of payroll deductions will have increased. For now, I confirm that the Scottish Liberal Democrats will be supporting the motion and the amendment.
I welcome the Government’s commitment to seeing the credit union sector grow and thrive. I also welcome the cross-party support in Parliament for credit unions.
Owned and controlled by members, and with membership being based on a common bond, credit unions are underpinned by the co-operative ethos of people helping people. They are committed to maximising the quality of the services that are provided to members, not to maximising profit for shareholders.
As has been mentioned, membership of credit unions is based on a common bond—an area or a group of people. Everyone in Scotland has access to at least one credit union that they could join, from which to access an extensive range of services.
Credit unions have long played an important role in serving people in our communities who are typically excluded from, or underserved by, mainstream financial services. It is important that the sector has the strong ethos that people who do not have other credit options should not be charged a premium. My constituents are served well by 1st Alliance Credit Union Ltd, in Kilwinning. As well as supporting a diverse range of savers and borrowers, it has been involved in addressing the challenges that many people in our community face.
A survey of the Association of British Credit Unions Ltd’s members in 2018 showed that most credit unions, unlike commercial lenders, do not have a minimum sum that they would lend to a member, and that a large majority—86 per cent—would consider lending to a member whose only income is derived from benefits.
The credit union sector is responsible, profitable and self-sustaining. However, there is a strong case for investment: growth in the sector is of great social and economic benefit. The commitments in the programme for government to a £10 million credit union investment fund, and to developing a national strategy, are much welcomed. I am glad that the motion states that the strategy will be co-produced with the sector. It is important to recognise that credit unions all have in common the fact that they are owned and controlled by members, and that the emphasis is on providing the best service to those members rather than to maximising profit. As the cabinet secretary said, there is diversity in the sector, and it is important that all voices are heard.
At our latest meeting, the cross-party group on credit unions discussed technology: investment in technology has real potential to assist. We know that high-cost credit is easily obtained on digital and mobile platforms, and that consumers expect to do their banking on their tablets and phones, so credit unions being able to reach potential members on their mobiles and tablets would be hugely beneficial. However, it is important to recognise the risks and challenges that need to be addressed in order to deliver that.
It seems to me that, with support and investment from the Government, ethical and appropriate solutions for all sizes of credit union could be found that would open up the benefits of credit unions to even more Scots.
I started my speech by welcoming the Government and Parliament’s shared commitment to seeing the credit union sector grow and thrive. I look forward to working with all who want that.
I will start by saying to Pauline McNeill that Christmas has started, because my daughters are designing their Christmas cards at school today. I will make sure that she gets copies of them so that Christmas comes at least to her office, if not to her house.
There is consensus among most members in the chamber this afternoon. That is absolutely positive. Sometimes, we think of consensual debates as being not as exciting as other ones, but there needs to be cross-party support to move forward on credit unions, so I welcome the cabinet secretary’s recognition of that.
Others have mentioned the relevant statistics, so I will not repeat them. However, I say that we are doing well in Scotland, although there is still room for improvement.
The Scottish Government has a strategy, and the cabinet secretary has said that she will welcome the views from the sector and from political parties, so I will throw my three pennies’-worth in this afternoon.
First, as a number of members have said, we need to do some succession planning. There is a danger that credit unions are seen as being for a certain generation—perhaps Liam McArthur falls into that age group—so we need to think about getting people who are younger than that involved, such as the cabinet secretary. [
.] I am trying to win friends this afternoon, cabinet secretary.
Joking apart, I believe that we need to ensure that the news about credit unions gets into schools, universities and colleges. It is important that we plan for the future and that we ensure that there is expansion in membership among younger people.
Secondly, I want to pick up on a point that has been made by my colleague Michelle Ballantyne and others. There is a danger that credit unions are seen as being only for people of a certain type or a certain background. That perception still exists among many people. We need to see credit unions as being for everybody in society, regardless of whether people think of themselves as wealthy, middle class or less well-off. Credit unions will be able to grow and lend more money only if all types of individuals in our society get involved. There is work to be done on that by us all.
Finally, there are still people—particularly people who are disabled—who find it difficult to engage with credit unions. Work is being done on social media across party groups that could help in that regard, but we need to drill down to find out why so few disabled people are using credit unions.
I think that I have, in the past three minutes, been able to offend most people in the chamber. To those whom I have not offended, I apologise. [
I start by thanking the cabinet secretary. She will recall that on the previous occasion in the chamber on which we celebrated the contribution that credit unions make to a fairer Scotland, I asked the Scottish Government to consider emulating the Welsh Government by enabling credit unions to access financial transactions in order to boost regulatory reserves.
I also raised the issue directly with the Cabinet Secretary for Finance, Economy and Fair Work on three occasions during the budget process: I am happy to record that I was urged to do so by my constituents who are members of West Lothian Credit Union, of which I am also a member.
Given the welcome announcement in the programme for government that there will be a dedicated credit union investment fund of £10 million, and the further detail that has been outlined by Ms Campbell today, I can see that she has been persuasive in her engagement with Mr Mackay. I am sure that members will take careful note of that in relation to future requests.
The briefing that ABCUL has circulated gives detail of Scottish Government support over the past 10 years or so. The £10 million investment that has been announced is the biggest vote of confidence in what the credit union sector has achieved—and will achieve—for the communities that it seeks to serve. Information from the Lloyds Banking Group’s credit union development fund shows that, to date, the fund’s investment of £5 million in capital reserves has had a fivefold leverage effect.
The purpose of the £10 million credit union investment fund is to provide loans to enable credit unions to strengthen their balance sheets and increase their digital and physical presence. That might sound like the dry language of accountants, but it gets to the heart of how we might best support credit unions to help more borrowers and savers, and of how we might strengthen the movement’s capacity in the longer term.
We should not limit our ambition to there being more than 400,000 members of 90 credit unions in Scotland. We can and must do more. In particular, we must get the message across that credit unions are for everyone, irrespective of their income. As Ruth Maguire said, the ability to invest in technology enables provision of a better service to customers, and demonstrates that credit unions are not just ethical lenders with strong community roots, but are trusted, safe and professional organisations.
In our most recent debate on credit unions, at the start of the year, I reflected that at a time when life was dominated by all things Brexit it was uplifting to have the opportunity to consider the practical commitments and contributions of the credit union movement. Today, that stands truer than ever.
I will never forget that on the day after the European Union referendum, when I was thoroughly depressed, I attended an event that West Lothian Credit Union had organised to celebrate the significant milestone of lending out £10 million to the West Lothian community. In its history of more than 20 years, West Lothian Credit Union has lent £13.6 million to the West Lothian community. It should be congratulated on that and on everything else that it has achieved. Nancy MacGillivray is a stalwart of West Lothian Credit Union. She was my local hero at the opening of Parliament in 2007, and she is still a local hero, as is everyone else who is involved in West Lothian Credit Union and the 90 credit unions in Scotland.
I declare interests as a member of the Scottish Co-operative Party, as a Labour and Co-operative MSP and as a member of a credit union. The Scottish Labour Party and the Scottish Co-operative Party maintain a commitment to developing the role of credit unions and co-operatives, which they believe should be at the centre of community development and economic strategy.
As we have seen, it is easy to find warm words with which to support credit unions; we have all experienced their effectiveness in our communities. They are created and sustained by the vision and inspiration of volunteers, and their approach is in the sharpest contrast to the predatory practices of payday loan companies and shops that sell household goods at exorbitant prices—companies whose business model is actively to seek out the poorest and most vulnerable people in our communities. Credit unions have a powerful role in offering a different business model that works for everyone.
I recall that, when I was a Government minister a long time ago, a bit of research was done into credit union membership. It transpired, counterintuitively, that their members tended to be better-off people, with better incomes. Therefore, I ask the cabinet secretary to refresh the research, particularly in the light of what was has been said about the junior savers model. If the model is working, do we know whether it is working in the most vulnerable communities or is it working among families who perhaps are better informed about financial education?
We debated many of those issues in January this year; I would welcome an update, specifically on the practical things that the Scottish Government has done—as well as today’s announcement—to promote and support the ABCUL Scottish charter “A Credit Union Nation”. What has been done to address concerns of credit unions that I have highlighted about the impact of inappropriate use of protected trust deeds? They impact on credit union business, while making sure that the insolvency practitioner is paid.
We recognise the power of credit unions and I welcome the £10 million credit union investment fund. We now need the details about making the change that we seek. How will the money be allocated? What is the timescale for spending the money and repaying loans? Is it a one-off commitment or a recurring part of the Government’s budget?
Given the benefits that can be achieved by credit unions, which we all agree about, why is the funding in the form of a loan? I welcome what has been done, but were other models considered? We see the economic incentives that are given to the private sector to come into communities, so I wonder whether the Government would be prepared to consider the matter further. Will there be legislative or regulatory changes to support the investment? Will the Scottish Government consider means to exempt credit unions from business rates in order to ensure their greater visibility and to sustain town centres? Has the Government explored how credit unions might connect to Scottish welfare fund strategy? There could be a very good fit.
I emphasise that co-operative economic models offer huge opportunities for a stronger and fairer economy: I am sure that many members across the chamber agree. Such models are often not taught in our schools, colleges and universities, so it is important that we mainstream education about co-operative models for the economy in our education system, if the Scottish Government is willing to support that approach. The strength of the credit union and co-operative movements is that they bring together vision and the practical delivery of such ideas.
I thank the Scottish Government for what it is doing, and would be grateful if it could ensure that the practical ways in which its work is taken forward make the difference that we all seek for our communities.
I am grateful for the opportunity to take part in an excellent debate that is full of ideas from all sides of the chamber. I thank the Government for the debate and compliment the cabinet secretary on the open and engaged way in which she presented the Scottish Government’s motion.
The commitment to work with the credit union sector and to co-produce the strategy is incredibly important.
I am honoured to have two outstanding credit unions in my constituency. Johnstone Credit Union celebrates its 40th anniversary this year; it was founded in 1979 and was one of the last credit unions to be established before the Credit Union Act 1979. It has more than 5,000 members on a Renfrewshire-wide common bond, serving not just Johnstone but the whole Renfrewshire community. It is an award-winning credit union, having received the Scottish Enterprise millennium award for community development and, in 2004, the Queen’s award for voluntary service.
I also pay tribute to Pioneer Mutual Credit Union—formerly known as East Renfrewshire Credit Union—which was established in Barrhead in 1993. Its common bond enables access for 1.8 million people. I commend it for being a signatory to the women in finance charter, with a pledge
“to retain 50% of women in senior management positions”.
There have been many substantive speeches. As Pauline McNeill highlighted, this is not a “cuddly debate”, as consensual as it may be. At the credit union movement’s heart is an ethos that has never been more relevant to our society and the contemporary challenges that we face—an ethos of individual responsibility and mutual assistance.
We all understand that the prevalence of cheap, easy and accessible credit led to the financial catastrophe of 2008. My generation and subsequent generations are growing up in the wake of that catastrophe and are having to face its consequences, which have also manifested themselves in the political arena. Such challenges might seem insurmountable, but I believe that the way to approach them is to start at the granular level, in each and every one of our local communities. The ethos of a member-owned institution that is designed to put the interests of its members—and not profit—first is relevant not just to the financial sector but to many other sectors across the country.
Time is limited—I have only a few seconds left—but before I close I want to welcome the exciting commitment to the £10 million investment fund that the cabinet secretary announced. I noted that some of that fund will be available for spending on information technology. It is important that we do all that we can to support our credit unions to keep pace with the latest innovations. I will give an example in relation to which there might be potential. There is now growing use of rounding-up apps on mobile telephones as a means of saving. I am curious to know whether such a process could be applied to the credit union movement to enable people to save more efficiently and with greater ease.
Unfortunately, lack of time prevents me from going any further, so I will close there.
I am glad that there appears to be broad consensus on the benefits that credit unions can bring to people across the country in providing accessible finance at a much lower risk than using payday lenders. The additional £10 million that was announced in the programme for government is welcome, as are the plans for a new national strategy for the industry, and I look forward to seeing the implementation of the plans that the cabinet secretary has described today. Given that credit union membership has increased by 20,000 people in the past year alone, it is important that support for the sector is able to match the demand that is placed on it.
Exciting things are going on in the sector. Membership of credit unions in Scotland is steadily increasing and stands at more than 350,000 people. Unions hold assets of around £650 million and lend £362 million per annum, which is nearly a quarter of the total for the UK. Those are not just numbers on a page; they represent lifeline financial services for people who might not be able to get credit elsewhere.
However, we must not be complacent. Although there have been very welcome steps forward for credit unions, some areas require further attention to ensure that the industry can continue to improve. In a brief to members that it issued yesterday, the Association of British Credit Unions Ltd described how credit unions have to accumulate capital from their earnings, yet in order to increase those earnings they need to increase growth, which in turn requires increased amounts of capital. The point is that, without sufficient external investment, the industry could find itself in a downward spiral in which it would be unable to provide for its customers.
The association also stated that most loans go to people in the bottom 10 per cent in the Scottish index of multiple deprivation. If we were able to broaden the base of people who go to credit unions, that would in turn provide for further investment. I hope that the £10 million announced by the Scottish Government, along with the significant work that is being done by the UK Government, will be enough to achieve that, but I urge ministers to keep a close eye on the issue.
Across Scotland, in communities such as my own, people must be made aware of the financial options that are available to them and the services that credit unions offer, so credit unions must be brought into the mainstream. It was good to see the Scottish Government establish a public information campaign last year to raise awareness. I am not sure whether the campaign was intended to be for a limited time, but it seems to have fallen by the wayside in recent months. I hope that in her closing speech the cabinet secretary will address whether the Government is considering making further efforts to inform the public about the value of credit unions.
The intrinsic value of credit unions is such that we should seek to promote their widespread use whenever possible. For those who might not be able to get bank loans or other more accessible options, they represent a far better source of finance than payday lenders, which apply punitive interest rates that run well into the thousands.
I welcome the investment that was promised in the programme for government and I will scrutinise its effect, as well as the new national strategy, in due course. Further work needs to be done to ensure that credit unions continue to be sustainable in the future. However, I am confident that we have the means and the will to make that happen.
I am pleased to take part in this debate, as we can never highlight enough the importance of credit unions to our communities. More than 410,000 people are served by credit unions, but I am sure that the potential customer base is much higher than that. As others have said, it is really important that knowledge of the existence of credit unions is embedded in our schools and that saving is started in primary schools and continued in secondary schools.
In my research for the debate, I was interested to read that 6.9 per cent of the Scottish population are enrolled in a credit union compared with only 1.5 per cent in England and 2 per cent in Wales. I think that that is a testament to the backing and promotion that credit unions get from the Scottish Government. Like Pauline McNeill, I looked enviously at the level of participation in Ireland, which is 70 per cent. We have a bit of a way to go.
In my opinion, banks and credit unions should be seen not as operating in competition with each other but as co-operating to offer a better service to customers, especially those in our poorer communities. That is happening with Lloyds Banking Group’s credit union development fund. In 2014, Lloyds Banking Group launched a fund of £4 million over four years to help credit unions to strengthen their financial position and enable them to grow sustainably, build resilience and help many more people in the long term.
To date, the Lloyds Bank Foundation has supported credit unions with more than £6 million UK-wide. I am not sure how much of that support has come to Scotland but, as well as financial assistance, its support includes signposting customers to credit unions; sharing expertise, with a number of bank colleagues volunteering in credit unions; and the secondment of two full-time colleagues to work with the Department for Work and Pensions credit union expansion project.
In Scotland, the Scottish Government has match funded the Carnegie UK Trust’s investment of £1 million in the affordable credit fund to allow individuals with low incomes and poor credit ratings to access finance.
That is all good news, as credit unions tend to be much less scary than banks. Their offices are usually in our communities and they are often run by people whom their customers know. It is also important that credit unions are embedded in the networks of support and financial advice in our communities, with signposting to other financial and budgeting advice and crisis services such as food banks, if necessary.
When we talk about credit unions in the Parliament, we tend to focus on the saving part, but it is important that those who save also consider borrowing from their credit union. As well as savers, credit unions need borrowers, because that is what keeps them in business—I think that Johann Lamont mentioned that. One reason why the North East Scotland Credit Union—the credit union in which I saved for many years—folded last year was that not enough borrowers with good credit ratings were borrowing from it. It was asset rich, but there was not enough lending business to keep it going.
There is much unanimity on the subject in the chamber and much support for the work that the Scottish Government is doing in the realm of credit unions, so more power to the cabinet secretary’s elbow.
It has been a good and consensual debate. As a number of members have said, it is key that we take the central points from the debate that will help with the extension of credit unions.
I think that the cabinet secretary set the scene well when she described the benefits of credit unions and how important they are at a time when a lot of people feel financially vulnerable and could get pushed towards unsavoury products such as payday loans. Credit unions at the heart of communities are important as a stable alternative.
There has been a lot of discussion about participation and the fact that 410,000 people in Scotland are involved in credit unions, but what interested me was the point made by Maureen Watt, backed up by Pauline McNeill, that the participation level in credit unions in Ireland is 70 per cent. Clearly, that participation has built up historically and we cannot turn on the tap overnight. The recent improvement in participation in Scotland is welcome, but it shows that we have got so much more to do to improve our standing internationally. It is not about simply being at the same level as other countries, but about giving adequate protection to communities. Central to that idea is the need for a strategy, which, as Andy Wightman pointed out, needs action in order to move it forward. Other issues are also involved, including housing and, as Andy Wightman said, the use of a democratic financial model.
Along with ABCUL, the Co-operative Party has done a lot of excellent work to promote credit unions. More has to be done to promote not only credit unions, but co-op values, which should be central to a lot of the education in schools and colleges. Raising such awareness with young students and pupils could certainly do a lot to increase participation levels.
During the debate, some members have mooted the idea of giving school pupils accounts with a set-up amount. That has been done previously in Glasgow with £10 accounts—it is a good idea and one that would get people into the way of using credit union accounts. Aside from some of the comedy in his speech, Jeremy Balfour suggested that idea, which was one of the very good and serious points that he made.
A number of members pointed out that we need more support from employers, and that employers should use their resources to roll out the use of credit unions. Ruth Maguire and Pauline McNeill made some good points in that regard, and Ruth Maguire was right to point out that it is worth the SPCB taking up that initiative.
With regard to the Scottish Government’s £10 million fund, it would be useful to hear from the cabinet secretary specifically how it is going to be rolled out and used to set up loans.
Johann Lamont made an important point about supporting volunteers, who are crucial to the network that is behind many credit unions.
All the fine speeches were good, but the key point from the debate is that we need to take the nuts and bolts of credit unions and move them forward to increase participation levels, in order to give them more coverage in our communities.
As has been said, the debate has been very consensual, which is not always the case. We have heard from members across the chamber that a credit union is a not-for-profit, co-operative financial body that loans at low interest rates and offers saving services to people who would otherwise struggle to gain access to credit. The key elements are that it helps to build and improve credit ratings, that it provides financial education and that it helps to develop money management skills.
The words “ethical” and “affordable” were in a lot of members’ speeches, including those of Ruth Maguire and Pauline McNeill. We all recognise that we need access to credit—I am sure that most of us, at some point or other, have approached our bank and asked for financial help. It is something that we take for granted. If we asked people on the street where they would go if they needed financial help, they might say the bank, or they might talk about approaching family. They might even talk about payday lenders or selling goods to free up some cash. However, surprisingly few of them would suggest using a credit union, and everyone in the chamber agrees that that must change.
Credit unions support people who are struggling with financial management or experiencing short-term hardship. I was not particularly aware of credit unions until I visited my local credit union, earlier in my time in this place. That credit union has been invaluable in helping me to help my constituents who come through the door. Several of my constituents have benefited from the intervention of a credit union. I particularly want to mention a young lad who is still in his 20s. Because of trauma in his early life, he ended up with drug addiction and in jail. To his eternal credit, he is out there, trying to take control of and take responsibility for his life by trying to make a home where he can bring his children to visit. Part of his solution fell within the credit union. These small stories, which we all know, give us an idea of why it is so important that credit unions continue and flourish.
I welcome the Scottish Government’s announcement of £10 million in new funding for credit unions. However, as Andy Wightman said, it is not just about strengthening the balance sheets; it is about looking at the digital and fiscal offer, to promote credit unions more widely. In Scotland, we have a high uptake of credit unions compared to most places in the United Kingdom, but Northern Ireland is showing us the way forward.
At a time when more banking services are moving out of town centres and going online, credit unions have the potential to step in and fill some of the gaps. Visibility and awareness are key to making credit unions successful and viable. They need people who are willing to save and are looking for loans, and they require people to know what credit unions are, where they are and how to use them. As has been said several times, lack of knowledge can drive people towards more unethical sources of money such as high-cost credit services and payday loans, which take advantage of people’s need for support and can make them more sceptical of organisations such as credit unions because they assume that there has to be a catch. It is, therefore, imperative that we continue the development of credit unions.
Unsurprisingly, Johann Lamont spoke about the need for the Scottish Government to raise the profile of financial education in schools. Again, I welcome the Scottish Government’s provision of financial support for the development of the junior saver scheme.
We must also recognise that both Governments are working on this. The United Kingdom Government is toughening up regulations on payday lenders, looking for further reforms in the high-cost credit market and cracking down on unlawful lending and loan sharks. It is also piloting interest-free loans and prize-linked savings schemes, to help credit unions.
There has been a lot of consensus in the chamber today, but we must make sure that there continues to be action. Credit unions are a vital component of Scotland’s financial sector, and their continued expansion can bring real benefit across the country.
As members who have spoken in the debate have said, this has been a thorough and good debate. I agree with Pauline McNeill that it should not be a cuddly debate, though I was pleased that Jeremy Balfour recognised the significant age difference between me and Liam McArthur—I was quite happy about that.
There has been some good humour throughout the debate, but when parliamentarians agree fundamentally about the principles of something like credit unions and the good that they can do by promoting an ethical approach to finance, financial inclusion and saving in the community, it carves out a space in which we can all work together to capture thoughts, ideas, expertise and suggestions from parliamentarians from across the chamber about our future vision and ambition for credit unions in Scotland.
Furthermore, I agree that, although there is consensus, the debate has not been cuddly, because it has sought to tackle the extremely serious issues of financial inclusion, financial resilience and social inequality. Andy Wightman was correct to make a serious point about the democratisation of the financial landscape.
Through engagement with the credit union sector and from listening to what was said in the debate on credit unions that we had at the start of the year, I realised that there was a need to have a more coherent, sustained and strategic approach to growing credit unions. In their speeches, members identified significant themes that ought to form the basis of what should be examined in the strategy. Andy Wightman was right to point out that the strategy should not be developed in isolation but should display awareness of the bigger picture and that it will undoubtedly interact with other policy work.
With the economic impact of Brexit uppermost in our minds, ensuring people’s financial resilience is ever more important. Using the findings of the Scottish household survey about who is saving and the link across to housing tenure will be vital in our work as we reimagine the housing sector in Scotland up to 2040.
Michelle Ballantyne and Andy Wightman provided a useful international context, enabling us to explore why there is stronger support for credit unions in other countries, and they talked about other models and approaches in other parts of the world.
Members were right to point to the fact that credit unions should not be viewed simply as banks for poor folk. That is an absolute myth that needs to be debunked, and we sought to do that in the campaign that we supported last year. Growing membership, unashamedly promoting the ethos of putting people before profit and rooting ourselves in our communities will give us a strong platform to expand the impact of credit unions. Jeremy Balfour, Liam McArthur and Michelle Ballantyne all made points about that.
I agree with Angela Constance, who said that our ambition should not be limited to being a bit better than the rest of the UK and congratulating ourselves on the 400,000-plus members of credit unions. We need to promote what credit unions do, what they contribute and how they help us to make good on our fairer Scotland ambitions and our desire to rebalance our economy in a sensible and far more ethical way.
Johann Lamont made a good point about research. I will certainly look into that, because a strategy must be based on solid information rather than assumptions. I will get back to her on the issues that she raised.
It was also useful to hear about Maureen Watt’s experience of what happens when credit unions do not have enough members. A credit union in that position must pay the ultimate price and close.
I agree with the point that credit unions should be involved in the development of the strategy. The co-operative principles of credit unions must underpin the approach that we take. We must develop the strategy co-operatively and collaboratively alongside credit unions. When I met representatives of the sector in the summer, it was clear that they want to act together for the benefit of their sector. I reiterate what I said in my opening remarks and reflect the points that were made by Ruth Maguire and Tom McArthur—I am sorry; Tom Arthur and Liam McArthur—who, in speaking about credit unions in their areas, illustrated just how diverse the sector is and emphasised that we must not stymie or unintentionally quash that special element through having a national approach and a national strategy.
On the issue of payroll deduction, I do not think that anyone has mentioned the fact that the national health service has a credit union. I do not know whether other public services also have credit unions. Is the Government in a position to encourage credit unions in the public sector, where we have some influence?
I absolutely agree with the point that Pauline McNeill makes about encouraging credit unions in the public sector. The Scottish Government does that, and I know that the Parliament takes the matter seriously. The NHS Credit Union, which celebrated a significant anniversary last year, is important. There is lots of learning that we can do in this area, which is partly why I think we need a strategic approach. There are many good ideas, but they are scattered across different places. If we have a strategic focus, we will be able to make use of the wealth that is in our country for the betterment of credit unions. I will take on board Pauline McNeill’s point.
A number of members asked whether the corporate body could do more. With my SPCB hat on, I point out that many MSP staff and SPCB staff already pay into the capital credit unions that are advertised on payslips. However, if the Government or, indeed, members across the chamber think that we could do more to encourage the extension of that, I am happy to listen.
That is why our approach needs to be about more than just working with the credit unions. As Andy Wightman pointed out, we need that broader approach and we need to work out how we can influence others so that they understand what they stand to gain if they work alongside credit unions.
Many members asked about the £10 million fund. There is limited detail that I can give at the moment. However, I pledge that we will keep Parliament updated on that, because the fund will provide a significant boost to credit unions. It will continue to grow their membership and increase the wellbeing of our communities and our most vulnerable people in financial and health terms. Alongside breaking down the barriers to responsible lending by improving balance sheets, we need to make sure that the strategy does not end up just doing more of the same. It needs to be innovative, so that the £10 million has an impact on our communities.
There has been a real plea from credit unions for us to understand their need for more support in IT and digital development, and I think that that will be a prominent theme in the work on the strategy. I also recognise that we need to take action alongside theorising about the strategy. Lots of members have talked about many different ideas, including payroll deduction, fair work practices, working with young people and working with colleges. We can use those different ideas to work out what short, medium and longer-term actions we can take to grow the credit union movement in a much more sustainable way.
I am pleased that there is consensus and a lot of good ideas on the issue. I will continue to work with members, with the cross-party group that Ruth Maguire spoke about and with the sector, because we all agree on the importance of credit unions and we all want to make the strategy a success. That is a strong platform, and I will work on it with members and with the Parliament.