Examination of Witnesses (Questions 176-179)|
6 JUNE 2007
Q176 Chairman: Welcome to this second
session of the Committee. Could you introduce yourselves for the
shorthand writer, please?
Mr Lyonette: Mark Lyonette, Chief
Executive of ABCUL, Association of British Credit Unions.
Ms Winkworth: Amanda Winkworth,
Manager of Portsmouth Savers Credit Union Limited.
Q177 Chairman: As you know, this
Committee has produced a number of financial inclusion reports
and in its response to our reports the government said that it
would start a consultation on a new Credit Unions Act in April
2007. What stage has that consultation reached and have you and
individual credit unions been involved in it?
Mr Lyonette: It is very timely
you should ask that, Chair. We have been engaged with the civil
servants and Treasury for probably six months or so since the
Economic Secretary announced the review. We think that they have
understood how fundamentally important this is to the growth of
the sectorit is not just tweaking little bits here and
there. I would say that we were at a seminar with the wider cooperative
sector yesterday where we expressed a polite irritation, that
despite being a promised a consultation paper in March, which
was due to be launched at our AGM we still have not seen one,
and of course your colleagues will understand better than us that
some of the political changes and ministerial musical chairs that
might happen in a few weeks' time we are rightly concerned, I
think, that if the paper does not come out very soon it may well
be delayed inevitably.
Q178 Chairman: We will pass that
one down, Mark. In what ways do you think that the legislative
framework needs to change if credit unions are to play a greater
role in promoting savings?
Mr Lyonette: I think there are
a number of issues in what we are proposing. We are fundamentally
asking for credit union legislation on a par with the best practice
around the world and we have been described as having the most
restrictive legislation in the world. There are two very important
parts of itthree parts really, but two are bigger than
the otherthat will have an impact on savings. One is a
revision of this understanding of the concept of a common bond.
At the present time we are denied access to most employers in
practice; many housing associations come to us and say, "We
would love all our tenants to be involved in credit unions but
we do not have usually too many easy ways to do that for them
in the way they want." So employers, housing associations
and indeed some of the really big opportunities on the horizon,
potential partnership working with the Post Office, with which
we have been engaged with them for five or six months, really
needs the legislation to change around common bonds to be able
to do something very significant there. So common bond is key.
Secondly, organisational membership; at the moment only individual
people can belong to credit unions. Elsewhere in the world credit
unions can have companies, small community organisations, organisations
can join them. That will help more fundamentally around credibility
but also options for capitalising the sector, for investment in
the sector. Housing associations, for example, could deposit with
us whereas at the moment their option is to lend to us. There
is a very different risk return there and we think that if they
could deposit with us there are real possibilities that foregoing
a few basis points on the interest they would earn on the overnight
money market they would see the value of what that money would
do in the community, and we think that would be a much more attractive
proposition. Fundamentally around the savings products themselves
we are limited at the moment and we can only offer a dividend
retrospectively on savings, so we cannot promise anybody, whatever
kind of background, that they can save and we will give you 4%,
we will give you 5%, et ceterawe can only pay a retrospective
dividend. So we are looking for the ability to be able to pay
interest, not just the dividend on savings, where that is appropriate,
and obviously with appropriate regulation from the FSA.
Chairman: These are themes that have
been coming since our report and in fact a housing association
has written to me asking to meet us on this issue, and when we
visited Northern Ireland the very same points were made, that
they wanted to expand credit unions, so I think there is a body
of support there for that. Brooks Newmark.
Q179 Mr Newmark: What success have
credit unions had in attracting customers to their Christmas savings
Mr Lyonette: The short answer
is that we do not have any comprehensive information on this.
We are not a very large sector; we do not have state funding ourselves
as a trade body, so we do not have a machine to churn out stats.
However, what we do know is that a number of credit unions are
already running savings accounts and Mandy can talk about Christmas
savings accounts in particular, and a lot more started to do that
in January of this year or started to set it up in December, precisely
because of the tragedy of Farepak really.