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Wednesday, 18 July, 2001, 12:16 GMT 13:16 UK
MPs push for more community banks
Pound notes
Credit unions give a banking alternative, says MPs
The government must do more to increase access to community banking systems, according to a Labour MP.

The tragedy in this country at the moment is that too few people have access to a credit union

Gareth Thomas MP
Gareth Thomas, MP for Harrow West, wants more credit unions - groups set up by communities or in the workplace to encourage saving and provide low interest loans.

Other MPs, Labour and Conservative, joined him in praising the groups during a Westminster Hall debate on the issue on Wednesday.

The government has said it hopes to begin consultations on relaxing restrictions on credit unions before the end of the summer.

Lower rates

Mr Thomas extolled the virtues of credit unions, saying everyone at some time needed a loan or a way to save money.

Credit unions can charge no more than 12.68% interest annually so loans can be offered at low rates, although those wanting a loan must save first.

Mr Thomas said: "The government has made a series of positive steps down the road in developing credit union coverage but I hope now the government will give it a further sharp push so that we can see ... a far greater coverage of credit unions throughout Britain."

Gareth Thomas
Thomas: Wants more help for credit unions
Mr Thomas called for the establishment of a Central Services Organisation (CSO) to provide national strategic support for credit unions.

He added: "The tragedy in this country at the moment is that too few people have access to a credit union."

Lagging behind Britain has more than 700 credit unions, with 300,000 members and assets of about 200m, according to government figures.

But Labour MP Adrian Bailey said Britain compared unfavourably with other countries.

A quarter of Americans were credit union members, he said, while the rate was 50% in Ireland where the rate and 70% in some Caribbean countries.

Mr Bailey insisted the credit union movement offered a "distinctive additional means of providing financial services to people who otherwise would not have access to them".

Tackling exclusion

That message was echoed by Andrew Love, Labour MP for Edmonton, who argued that the banking groups could be a way of tackling financial and social exclusion.

"But if they are to do that, they need the help and support of the government to achieve that aim," he said.

For the Conservatives, shadow Treasury spokesman Howard Flight backed the growth of credit unions.

He urged ministers to get on with the establishing the CSO first proposed four years ago.

But he warned against thinking that credit unions could solve the problem of financial exclusion.

"It's quite a mistake to think the way things are going that they are going to be the solution to what is needed in deprived areas," said Mr Flight.

"The way things are going, they are going to be predominantly middle class bodies," he said.

Government promise

Economic Secretary to the Treasury Ruth Kelly praised credit unions for tackling financial exclusion and encouraging the ethos of thrift.

She trailed government plans to consult on measures to relax restrictions on the unions.

And she promised to help talks between parties wanting to set up the CSO.

Ms Kelly added: "Credit unions do valuable work for their members.

"The government will continue to support a strong and flourishing credit union movement."

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