Select Committee on Treasury Minutes of Evidence


Examination of Witnesses (Questions 176-179)

MR MARK LYONETTE AND MS AMANDA WINKWORTH

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 sector—it 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 it—three parts really, but two are bigger than the other—that 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 cetera—we 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 products?

  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.



 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 9 October 2007