Examination of Witnesses (Questions 280-289)
MR MARK
LYONETTE, MS
SUSAN DAVENPORT
AND MR
LAKSHMAN CHANDRASEKERA
28 FEBRUARY 2006
Q280 Peter Viggers: Following that
point through, the Government gave Child Trust Fund products.
What are you doing to encourage customers to take advantage of
those?
Ms Davenport: We have had things
in the newspaper. We are working actually with the health visitors
across Leeds, and they are giving information about the credit
unions' Child Trust Funds to new mothers. We are working with
the primary care trusts as well to try to encourage people to
use us.
Q281 Peter Viggers: Are you looking
at stakeholder pension products?
Ms Davenport: No. We have not
been there yet.
Q282 Peter Viggers: What about basic
advice regime?
Ms Davenport: No.
Chairman: Sue, could you send us a note
on the Child Trust Fund and what you do, which would be helpful,
because we have had different views on it. You seem to give a
positive view, so that would be helpful.[1]
16
Q283 Mr Todd: Do you think the Financial
Inclusion Taskforce, which has the brief of monitoring how financial
inclusion is being addressed, is achieving anything to date? It
has been in existence for about a year or so.
Mr Lyonette: Obviously, as a member
of the Taskforce, I would have a view. I ought to have a view!
Inevitably, initially, with a very disparate group of people,
a lot of the early work has been around creating the monitoring
framework, even to get over what to me, as an outsider, seem very
bizarre things. The Government did not have any accurate information
that could separate basic bank accounts from the post office card
accounts, and it takes time to change the way that information
is collected, so that has been its primary focus. We are into
a new year now, the second year of its existence, and there are
some fairly big questions for the Taskforce to address. I know
you had evidence from the consumer groups early in January. I
think the extent to which we can expect the banks to ever provide
a market-based solution to basic banking within the present market
constraints that current accounts, transaction banking, operates
within the UK is an unanswered question, and, as you might expect,
there is a range of views on the Taskforce as to the extent to
which that will ever be the case. There are some very big discussions
to be had in the coming months, really.
Q284 Mr Todd: What about the monitoring
process itself? Has there been any evidence that the Taskforce
will produce data that will demonstrate progress towards the objective
set out?
Mr Lyonette: Remember, the objective
set around banking is solely about halving the number of accounts,
and we have been critical, I suppose, that that in itself is not
going to tell us very much. It is really about whether people
use the account and whether they do the job for them. Actually,
simply owning an account is not going to tell us very much about
the future of people's usage of electronic transactions.
Q285 Mr Todd: What about the Financial
Inclusion Fund? We have had criticism that it is disparate, time-limited,
and there are a number of different agencies managing different
parts of it. What is your view?
Mr Lyonette: All of that is true.
As I mentioned before, we have been working for the last year
with Citizens' Advice, and it has been incredibly hard to connect
anything happening through the growth fund of DWP and the money
advice fund of DTI. You know yourselves that the mechanisms of
government can often just get in the way of trying to join things
up.
Q286 Mr Todd: How should it be focused
better?
Mr Lyonette: It might have been
sensible, in hindsight—whether it was possible I do not
know—to have had one body overseeing that. I do not know
whether that was even feasible from a legal perspective in terms
of the powers that money is given under. I think that is part
of the crux of it. We would agree with the criticisms about the
short-term nature of the funds. For the growth fund, in reality
some of the money will not be given out till September of this
year, and you are talking about an 18-month period. Similarly,
with the money advice funds, you are creating a huge number of
new money advisers. Where are they going to come from? You give
them a two-year job and then all of a sudden there is nothing
to sustain it. We would not be asking the Government to commit
further monies until performance has been shown, but we do think
that if performance has been demonstrated with the growth fund
and we can do a good job, it would be madness to make it a one-off
initiative.
Q287 Mr Todd: Finally, other than
the difference in governance model, do you think there is a difference
in goal and potential achievement between credit unions and CDFIs?
Mr Lyonette: Yes. Obviously, credit
unions are deposit takers and CDFIs are investment models, so
there is a structural difference there in terms of what drives
the business. It is fair to say also that the vision of credit
unions the world over is not to turn bad customers into good customers
for the banking sector. The credit union sector across the world,
with 136 million people, is in many parts of the world part of
the mainstream financial services sector, so there may be some
difference in purpose there as well, and that may have some impact
on the extent to which different banks feel they want to support
the credit union sector versus the CDFI sector.
Q288 Angela Eagle: You are the only
sector that actually works under an interest rate cap and there
might be an argument for having interest rate caps in other bits
of the sector. Are you in favour of retaining the interest rate
cap for credit unions?
Mr Lyonette: Yes. It is bizarre
that we are the only part of the financial services sector that
has a cap at all. In other parts of the world credit unions are
not subject to certainly the level of cap we have. Sometimes it
is 18, 25%. We think we need that greater flexibility, obviously,
in terms of all of the things that that will enable us to do,
in terms of making loans to people who are financially excluded,
but also, in reality, who knows, in time to come, it might be
important from the wider economic environment we are working in.
If you were paying dividends up at 8 or 9% because that was the
market you were in and you could not lend above 12%, then credit
unions would have their margins ridiculously squeezed. We would
die in that kind of environment. So it is about common sense really.
I think.
Q289 Susan Kramer: There has been
quite a movement to suggest that credit unions, banks, money advice,
etc, should all be pulled together into shared facilities. Is
that a programme that would attract you and help resolve some
of the problems in finding locations? How would you react to that?
Mr Lyonette: On a case by case
basis, lots of credit unions work in partnership with all manner
of organisations. CAB was mentioned, local authorities, housing
associations. What we are not in favour of is creating new legal
entities which the money is filtered through so that the money
advice agencies or the credit unions do not themselves receive
any funds in this regard. That smacks very much to us of our first
20 years, where the money went to local authority-run development
agencies and was not put into the credit union itself, and we
do not want to repeat that experience. Partnerships, yes, joint
working, perhaps joint sharing of buildings, as you say, all good
things, but we do not need to create new legal entities that will
syphon off all the funds.
Chairman: Thank you for your evidence.
Have a good day on Friday with Mr Mudie. Do not be too hard on
him. He is a very gentle soul!
1 16 Not printed. Back
| 
