Asked by: Rachael Maskell (Labour (Co-op) - York Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of cooperatives and mutuals contribution to the economy.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
In my role as Economic Secretary, I have been a champion of the mutuals sector. It is clear to me that mutuals bring something different to other forms of running a business, with their clear focus on delivering the services their members and communities need.
The Government has sought to improve the business environment for co-operatives and mutuals. The Co-operative and Community Benefit Societies Act 2014 helped cut through the legal complexity involved in running a co-operative, improving their competitiveness. The ability of co-operatives to raise £100,000 of withdrawable share capital per member, increased from £20,000 in 2014, has also ensured that co-operatives have the necessary flexibility to raise funding and compete more effectively with companies.
Furthermore, following the interest rate cap rise from 2% to 3% in 2014, credit unions have been able to expand into higher-risk markets and provide an important alternative to high-cost lenders. The prize-linked savings scheme, which was offered through credit unions, has also helped increase individuals’ financial resilience and raise awareness of credit unions. Building societies and credit unions have also played a key role in supporting consumers through the COVID-19 pandemic by keeping their branches open, which I thanked them for in a letter in April 2020.
Mutuals have benefitted from financial support provided by the Government to businesses during the pandemic, including the Coronavirus Job Retention Scheme. Mutuals also benefitted from the Corporate Insolvency and Governance Act 2020, which provided significant flexibility for mutuals in holding their annual general meetings, as well as improved the insolvency regime for co-operatives. Credit unions have also benefited from the distribution of dormant asset funding by Fair4All Finance, including their £5m COVID resilience fund.
As we build back better from the pandemic, the Government is looking to support the growth of the mutuals sector. The Chancellor announced at Budget 2020 that the Government intends to bring forward changes to the Credit Unions Act to allow credit unions to offer a wider range of products and services. Officials have been engaging with credit unions to ensure changes meet the needs of members and credit unions. This measure will be brought forward when parliamentary time allows.
At Budget 2021, the Government also announced the £150m Community Ownership Fund. This will allow community groups to bid for up to £250,000 matched-funding to help them buy or take over local community assets at risk of being lost and run them as community-owned businesses, supporting co-operative entrepreneurship. First round bids are currently being assessed and funding decisions will be announced in due course.
I meet with the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) on a regular basis to discuss various matters. Officials also engage regularly with the FCA and PRA to discuss how best to support the growth and stability of the mutuals sector. However, the regulators are independent of Government and the Government cannot direct them to consider specific issues.
Asked by: Rachael Maskell (Labour (Co-op) - York Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what steps he is taking to engage with the (a) Financial Conduct Authority and (b) Prudential Regulation Authority to protect mutuals and co-operatives.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
In my role as Economic Secretary, I have been a champion of the mutuals sector. It is clear to me that mutuals bring something different to other forms of running a business, with their clear focus on delivering the services their members and communities need.
The Government has sought to improve the business environment for co-operatives and mutuals. The Co-operative and Community Benefit Societies Act 2014 helped cut through the legal complexity involved in running a co-operative, improving their competitiveness. The ability of co-operatives to raise £100,000 of withdrawable share capital per member, increased from £20,000 in 2014, has also ensured that co-operatives have the necessary flexibility to raise funding and compete more effectively with companies.
Furthermore, following the interest rate cap rise from 2% to 3% in 2014, credit unions have been able to expand into higher-risk markets and provide an important alternative to high-cost lenders. The prize-linked savings scheme, which was offered through credit unions, has also helped increase individuals’ financial resilience and raise awareness of credit unions. Building societies and credit unions have also played a key role in supporting consumers through the COVID-19 pandemic by keeping their branches open, which I thanked them for in a letter in April 2020.
Mutuals have benefitted from financial support provided by the Government to businesses during the pandemic, including the Coronavirus Job Retention Scheme. Mutuals also benefitted from the Corporate Insolvency and Governance Act 2020, which provided significant flexibility for mutuals in holding their annual general meetings, as well as improved the insolvency regime for co-operatives. Credit unions have also benefited from the distribution of dormant asset funding by Fair4All Finance, including their £5m COVID resilience fund.
As we build back better from the pandemic, the Government is looking to support the growth of the mutuals sector. The Chancellor announced at Budget 2020 that the Government intends to bring forward changes to the Credit Unions Act to allow credit unions to offer a wider range of products and services. Officials have been engaging with credit unions to ensure changes meet the needs of members and credit unions. This measure will be brought forward when parliamentary time allows.
At Budget 2021, the Government also announced the £150m Community Ownership Fund. This will allow community groups to bid for up to £250,000 matched-funding to help them buy or take over local community assets at risk of being lost and run them as community-owned businesses, supporting co-operative entrepreneurship. First round bids are currently being assessed and funding decisions will be announced in due course.
I meet with the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) on a regular basis to discuss various matters. Officials also engage regularly with the FCA and PRA to discuss how best to support the growth and stability of the mutuals sector. However, the regulators are independent of Government and the Government cannot direct them to consider specific issues.
Asked by: Rachael Maskell (Labour (Co-op) - York Central)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the levels of (a) resilience and (b) competition that mutuals and co-operatives bring to the economy.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
In my role as Economic Secretary, I have been a champion of the mutuals sector. It is clear to me that mutuals bring something different to other forms of running a business, with their clear focus on delivering the services their members and communities need.
The Government has sought to improve the business environment for co-operatives and mutuals. The Co-operative and Community Benefit Societies Act 2014 helped cut through the legal complexity involved in running a co-operative, improving their competitiveness. The ability of co-operatives to raise £100,000 of withdrawable share capital per member, increased from £20,000 in 2014, has also ensured that co-operatives have the necessary flexibility to raise funding and compete more effectively with companies.
Furthermore, following the interest rate cap rise from 2% to 3% in 2014, credit unions have been able to expand into higher-risk markets and provide an important alternative to high-cost lenders. The prize-linked savings scheme, which was offered through credit unions, has also helped increase individuals’ financial resilience and raise awareness of credit unions. Building societies and credit unions have also played a key role in supporting consumers through the COVID-19 pandemic by keeping their branches open, which I thanked them for in a letter in April 2020.
Mutuals have benefitted from financial support provided by the Government to businesses during the pandemic, including the Coronavirus Job Retention Scheme. Mutuals also benefitted from the Corporate Insolvency and Governance Act 2020, which provided significant flexibility for mutuals in holding their annual general meetings, as well as improved the insolvency regime for co-operatives. Credit unions have also benefited from the distribution of dormant asset funding by Fair4All Finance, including their £5m COVID resilience fund.
As we build back better from the pandemic, the Government is looking to support the growth of the mutuals sector. The Chancellor announced at Budget 2020 that the Government intends to bring forward changes to the Credit Unions Act to allow credit unions to offer a wider range of products and services. Officials have been engaging with credit unions to ensure changes meet the needs of members and credit unions. This measure will be brought forward when parliamentary time allows.
At Budget 2021, the Government also announced the £150m Community Ownership Fund. This will allow community groups to bid for up to £250,000 matched-funding to help them buy or take over local community assets at risk of being lost and run them as community-owned businesses, supporting co-operative entrepreneurship. First round bids are currently being assessed and funding decisions will be announced in due course.
I meet with the Financial Conduct Authority (FCA) and the Prudential Regulatory Authority (PRA) on a regular basis to discuss various matters. Officials also engage regularly with the FCA and PRA to discuss how best to support the growth and stability of the mutuals sector. However, the regulators are independent of Government and the Government cannot direct them to consider specific issues.
Asked by: Steve Reed (Labour (Co-op) - Croydon North)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the levels of local authority support for credit unions.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
The Government recognises the vital role of credit unions in the financial wellbeing of their communities, providing an ethical home for their members’ savings and affordable loans to those who may otherwise have to resort to high-cost lenders.
Local authorities have significant freedoms to choose what investments they make and how to finance them. The Government funded £617m for the Local Authority Discretionary Grants Fund, as well as further funding for the Small Business Grant Fund. Both funds closed in August 2020. The Government has also provided £2 billion of discretionary grant funding for local authorities in England through the Additional Restrictions Grant, to support businesses in the local area, which credit unions may have benefited from. Local authorities determine how much funding to provide to businesses and exactly which businesses to target.
Separately, the Government has provided significant support for credit unions. In total, £96 million of dormant asset funding has been released to Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion. Fair4All Finance has so far provided over £15m in financial support to the community finance sector, including credit unions, as part of their COVID-19 response. This includes £12m of equity investments in community finance providers and £3.6m in COVID-19 grants, including funding from their £5m COVID resilience fund. It also includes an expanded Affordable Credit Scale-up Programme, which aims to improve the access and availability of affordable credit, and which I expect to be of benefit to credit unions.
Asked by: Lord Kennedy of Southwark (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what plans they have to reform the law in respect of credit unions in the UK.
Answered by Lord Agnew of Oulton
The Government recognises the vital role of credit unions in the financial wellbeing of their communities, providing an ethical home for their members’ savings, and affordable loans to those who may otherwise have to resort to high-cost lenders.
That is why at Autumn Budget 2018, the Chancellor announced a pilot of a new prize-linked savings scheme offered through credit unions. This operated with 15 credit unions and has helped support the sector through increased membership, awareness and deposits. The Chancellor also announced a new £2 million challenge fund to promote innovative solutions from the UK’s Fintech sector to address challenges faced by social and community lenders, including credit unions. The winners of the challenge, which included Capital Credit Union and Serve and Protect Credit Union, were announced at Budget 2020.
The Government has also regularly engaged with the credit union sector, the Financial Conduct Authority and the Prudential Regulation Authority to assess the impact of the COVID-19 pandemic. Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion, has set up a £5 million resilience fund to support credit unions and community development finance institutions in England during the COVID-19 pandemic.
The Chancellor announced at Budget 2020 that the Government intends to bring forward changes to the Credit Unions Act to allow credit unions to offer a wider range of products and services. This will allow credit unions to continue to grow sustainably for the future and support them in the vital role they play in financial inclusion. The Economic Secretary recently spoke at the Association of British Credit Unions Limited and National Credit Union Forum annual conferences to reaffirm the Government’s commitment to legislative change and ongoing support for the sector.
The Government is engaging with the credit union sector and carefully assessing options before bringing forward legislation to ensure that we are delivering reforms which meet members’ needs and support the development of the credit union sector.
Asked by: Lord Kennedy of Southwark (Labour - Life peer)
Question to the HM Treasury:
To ask Her Majesty's Government what assessment they have made of the credit union sector in the UK.
Answered by Lord Agnew of Oulton
The Government recognises the vital role of credit unions in the financial wellbeing of their communities, providing an ethical home for their members’ savings, and affordable loans to those who may otherwise have to resort to high-cost lenders.
That is why at Autumn Budget 2018, the Chancellor announced a pilot of a new prize-linked savings scheme offered through credit unions. This operated with 15 credit unions and has helped support the sector through increased membership, awareness and deposits. The Chancellor also announced a new £2 million challenge fund to promote innovative solutions from the UK’s Fintech sector to address challenges faced by social and community lenders, including credit unions. The winners of the challenge, which included Capital Credit Union and Serve and Protect Credit Union, were announced at Budget 2020.
The Government has also regularly engaged with the credit union sector, the Financial Conduct Authority and the Prudential Regulation Authority to assess the impact of the COVID-19 pandemic. Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion, has set up a £5 million resilience fund to support credit unions and community development finance institutions in England during the COVID-19 pandemic.
The Chancellor announced at Budget 2020 that the Government intends to bring forward changes to the Credit Unions Act to allow credit unions to offer a wider range of products and services. This will allow credit unions to continue to grow sustainably for the future and support them in the vital role they play in financial inclusion. The Economic Secretary recently spoke at the Association of British Credit Unions Limited and National Credit Union Forum annual conferences to reaffirm the Government’s commitment to legislative change and ongoing support for the sector.
The Government is engaging with the credit union sector and carefully assessing options before bringing forward legislation to ensure that we are delivering reforms which meet members’ needs and support the development of the credit union sector.
Asked by: Chris Stephens (Scottish National Party - Glasgow South West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what discussions he has had with credit unions on support during the covid-19 outbreak; and if he will make a statement.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
HM Treasury officials have regularly engaged with the Financial Conduct Authority and Prudential Regulation Authority to understand the impact of the COVID-19 pandemic on the credit union sector. I have also engaged with representatives from the credit union sector through the Consumer Finance Forum and Financial Inclusion Policy Forum, which are bringing financial services and consumer group representatives together to discuss how to best support people through this period.
Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion, has set up a £5 million resilience fund to support credit unions and community development finance institutions in England during the COVID-19 pandemic. On 20 May 2020, the Government announced that additional funding through the dormant assets scheme would be released immediately to Fair4All Finance. This included an expanded Affordable Credit Scale-up Programme, which aims to improve the access and availability of affordable credit. I am also aware that credit unions have had access to wider COVID-19 support schemes, including the Coronavirus Job Retention Scheme, and grant funding from local authorities.
Capital requirements for credit unions are a matter for the Prudential Regulation Authority (PRA). In March 2020, the PRA concluded its consultation into simplifying the capital regime for credit unions. This reduced complexity by removing the link between a credit union’s activities and membership with capital requirements, removed the old 2% capital buffer, and introduced a graduated rate approach to capital requirements. These proposals were broadly supported by the credit union sector.
Asked by: Chris Stephens (Scottish National Party - Glasgow South West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what plans he has to change credit union capital requirements to support credit unions to grow assets beyond £10 million; and if he will make a statement.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
HM Treasury officials have regularly engaged with the Financial Conduct Authority and Prudential Regulation Authority to understand the impact of the COVID-19 pandemic on the credit union sector. I have also engaged with representatives from the credit union sector through the Consumer Finance Forum and Financial Inclusion Policy Forum, which are bringing financial services and consumer group representatives together to discuss how to best support people through this period.
Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion, has set up a £5 million resilience fund to support credit unions and community development finance institutions in England during the COVID-19 pandemic. On 20 May 2020, the Government announced that additional funding through the dormant assets scheme would be released immediately to Fair4All Finance. This included an expanded Affordable Credit Scale-up Programme, which aims to improve the access and availability of affordable credit. I am also aware that credit unions have had access to wider COVID-19 support schemes, including the Coronavirus Job Retention Scheme, and grant funding from local authorities.
Capital requirements for credit unions are a matter for the Prudential Regulation Authority (PRA). In March 2020, the PRA concluded its consultation into simplifying the capital regime for credit unions. This reduced complexity by removing the link between a credit union’s activities and membership with capital requirements, removed the old 2% capital buffer, and introduced a graduated rate approach to capital requirements. These proposals were broadly supported by the credit union sector.
Asked by: Chris Stephens (Scottish National Party - Glasgow South West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what representations he has received on changing credit union capital requirements; and if he will make a statement.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
HM Treasury officials have regularly engaged with the Financial Conduct Authority and Prudential Regulation Authority to understand the impact of the COVID-19 pandemic on the credit union sector. I have also engaged with representatives from the credit union sector through the Consumer Finance Forum and Financial Inclusion Policy Forum, which are bringing financial services and consumer group representatives together to discuss how to best support people through this period.
Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion, has set up a £5 million resilience fund to support credit unions and community development finance institutions in England during the COVID-19 pandemic. On 20 May 2020, the Government announced that additional funding through the dormant assets scheme would be released immediately to Fair4All Finance. This included an expanded Affordable Credit Scale-up Programme, which aims to improve the access and availability of affordable credit. I am also aware that credit unions have had access to wider COVID-19 support schemes, including the Coronavirus Job Retention Scheme, and grant funding from local authorities.
Capital requirements for credit unions are a matter for the Prudential Regulation Authority (PRA). In March 2020, the PRA concluded its consultation into simplifying the capital regime for credit unions. This reduced complexity by removing the link between a credit union’s activities and membership with capital requirements, removed the old 2% capital buffer, and introduced a graduated rate approach to capital requirements. These proposals were broadly supported by the credit union sector.
Asked by: Chris Stephens (Scottish National Party - Glasgow South West)
Question to the HM Treasury:
To ask the Chancellor of the Exchequer, what assessment he has made of the effect of discontinuities in credit union capital requirements on credit unions' capacity to grow assets beyond £10 million; and if he will make a statement.
Answered by John Glen - Paymaster General and Minister for the Cabinet Office
HM Treasury officials have regularly engaged with the Financial Conduct Authority and Prudential Regulation Authority to understand the impact of the COVID-19 pandemic on the credit union sector. I have also engaged with representatives from the credit union sector through the Consumer Finance Forum and Financial Inclusion Policy Forum, which are bringing financial services and consumer group representatives together to discuss how to best support people through this period.
Fair4All Finance, the independent body set up by Government to distribute dormant assets funding to support financial inclusion, has set up a £5 million resilience fund to support credit unions and community development finance institutions in England during the COVID-19 pandemic. On 20 May 2020, the Government announced that additional funding through the dormant assets scheme would be released immediately to Fair4All Finance. This included an expanded Affordable Credit Scale-up Programme, which aims to improve the access and availability of affordable credit. I am also aware that credit unions have had access to wider COVID-19 support schemes, including the Coronavirus Job Retention Scheme, and grant funding from local authorities.
Capital requirements for credit unions are a matter for the Prudential Regulation Authority (PRA). In March 2020, the PRA concluded its consultation into simplifying the capital regime for credit unions. This reduced complexity by removing the link between a credit union’s activities and membership with capital requirements, removed the old 2% capital buffer, and introduced a graduated rate approach to capital requirements. These proposals were broadly supported by the credit union sector.