Co-operative and Community Benefit Societies and Credit Unions Bill [HL]

My Lords, I am very happy to reiterate the words of the noble Lord, Lord Kirkwood, in congratulating the noble Lord, Lord Tomlinson, on introducing this Bill for the second time in five months, in addition to initiating a debate some two months ago on this very subject. These efforts crown his apparently many decades of distinguished and conscientious service to the principle of mutuality and co-operation. I have no doubt that this Bill will have impact and considerable importance in a wide area, both socially and financially. I will confine my remarks this morning to credit unions, which in one respect are the most classical form of mutuality possible. They were once described as people’s efforts on behalf of people. That is as good a definition of mutuality as one can ever have. I have no doubt that Clause 5 will greatly strengthen the legal and commercial position of credit unions. I appreciate also that the Treasury will make use of delegative framework powers, which are contemplated if they have not already been used, in this connection. Credit unions have functioned now for well over 100 years. I understand that they started in Germany among agricultural workers, and spread to France, and throughout Europe, and to North America and the wider world. The effect is that in many countries they are massive institutions. The noble Lord, Lord Kirkwood, made the point that they should be something more than poor people’s institutions. In the Republic of Ireland 50 per cent of people belong to a credit union; in the USA and Canada the figure is over 30 per cent and in Australia it is over 20 per cent. That is the tragedy, if I may so describe it, of the situation in the United Kingdom. I have calculated that at most about 1.2 per cent of our population belong to credit unions. Despite that, there are 450 to 500 credit unions in the United Kingdom. They have a membership of not far from 700,000, they have assets of about £500 million and last year their income was in excess of £30 million. That is not insignificant, but it is not in the same league as what has been achieved in so many other parts of the world. The point that is obvious to us all is that there never was a situation more propitious for credit unions to flourish than exists at present. Infinitely more importantly, there was never a greater need for them. We were reminded in the debate a couple of months ago by the noble Baroness, Lady Noakes, that in Britain the average household debt is some £70,000 per family, of which about £9,000 is unsecured. She also reminded the House that one-third of the adults of this country have no savings whatever, and that among single parents the figure is in the order of two-thirds. These are chilling figures but they form the background to the real relevance of credit unions in this situation. In this situation where the financial crisis is something that is very near to millions of families, all that is needed is one small factor to operate and people find themselves desperately in need of money—not huge sums very often, perhaps even as small as a few hundred pounds, but they face a critical situation unless that money can be found swiftly. Where can they turn to? Apart from credit unions, in theory they can turn to the high street banks, but those banks do not want to know them. These are small, finicky transactions, and the banks do not regard them as a seam of prosperity. Then there are the sub-prime lenders. Some such lenders are fairly decent but many charge monumental rates of interest, have punitive conditions in respect of default and act unconscionably when it comes to restructuring loans. Lastly, there are the loan sharks. Their rates of interest are even higher. Someone once asked what the difference was between the worst of the sub-prime lenders and the loan sharks. The real difference is that the sub-prime lenders go to court and manage, usually by a default order, to have a judgment in their favour. The loan sharks use the heavy mob, Alsatian dogs, iron bars and all the other impedimenta of unlawfulness. Some of the cases that have appeared before the courts in the past few months have been utterly shocking. Thousands of people must be held in thrall by these thuggish and inhuman tactics. That leaves credit unions. What can one do to strengthen the position? I have no doubt that Clause 5 will achieve that, and I have no doubt that the framework powers that I have referred to will bolster it as well. Over the past three years the Government have allocated about £100 million to credit unions, and apparently that has assisted above 160,000 people. I argue that with a stronger legal and commercial base, which this legislation will bring about, the Government should look to much more substantial assistance than that. Few people will have suffered the economic circumstances of the past few years as badly as these people now who are in need of that very assistance with regard to credit unions. Of course one can argue that these are difficult times and that the Government must look to every penny, but in view of the massive assistance that has been given to the banks—I do not cavil at that, because all the other alternatives would have been far worse—then it is only right and proper that a much more substantial subvention should be considered. Local authorities have their parts to play, and often do so, in providing rent-free premises and giving advice and assistance to credit unions, as has the Assembly of Wales, which has shown a great pioneering spirit in this connection. It may be, though, that in practice the most relevant thing that could be considered at the moment is a partnership, though not a marriage, between the Post Office and credit unions. Credit unions have an important product—cheap and available credit for those who need it—but they have no distribution system. They are small, localised micro-units. The Post Office does not have a product but it has a distribution system. Put the two together and you have the possibility of considerable success. I wish the Bill godspeed in the limited road space that it has between now and the end of this Parliament.