I am pleased that Claudia Beamish raised that point, because I am about to talk about the role that she and Ruth Maguire play in the Parliament. Claudia Beamish’s substantive point was about the geographical challenge of access for people in rural areas and support for online accessibility. Credit unions might also compete with banks. We absolutely need to look at that, support credit unions and work collaboratively on solutions to those challenges. I am acutely aware of them and I thank Claudia Beamish for raising them.
I recognise the work of Claudia Beamish and Ruth Maguire, who are, respectively, the deputy convener and the convener of the Parliament’s cross-party group on credit unions, which has worked hard to provide a useful platform for discussing issues that affect credit unions. It offers a place to showcase good practice and possibly to influence policy decisions.
I understand that, at the CPG’s most recent meeting, delegates heard from representatives of 1st Alliance Ayrshire Credit Union, who spoke about their work with their local council and other partners to collectively improve money management by offering a holistic advice service that covers, for example, energy advice, housing advocacy and white goods provision. That has helped hundreds of people to get the advice and support that they need. A representative from East Kilbride Credit Union who was at the meeting spoke about a scheme that it launched last year that aims to assist first-time buyers on to the property ladder by working in partnership with an independent financial adviser and encouraging all participants to save for a set time before they are provided with a loan for a deposit.
Those are examples of the extension of the people helping people philosophy that underpins the credit union movement. That shows the breadth of the work and the scope of credit unions, and the imagination and innovation that they employ. Credit unions across Scotland are using their services in such creative ways to address a raft of social problems—from loans that alleviate funeral poverty to savings accounts that help people to stop smoking.
Credit unions frequently adapt their services to address specific problems that face the communities that they serve. As well as developing financial capability in the heart of our communities and workplaces, credit unions are important providers of financial education—they run programmes in local schools to improve financial literacy and encourage our young people to start good habits of saving.
Since 2016, we have invested £274,000 in credit unions to develop new junior savers schemes in schools across Scotland—from Dumfries and Galloway to Morayshire. I am pleased that there are now more than 58,000 junior savers in our credit unions.
We want to build on that good work, so I am delighted to announce that a further £85,000 will be provided, to extend the junior savers programme until the end of September 2019. That will enable even more children to engage with a credit union and learn about the importance of saving and managing money. We are currently evaluating the junior savers programme and drawing out the key learning, as we identify longer-term steps in relation to this important work. I hope that that goes some way towards addressing the issues that Alex Rowley set out in his amendment, which we are delighted to support.
The Scottish Government seeks to support the sector in other ways, notably by supporting credit unions to partner with employers to offer payroll deduction schemes, to encourage saving and provide access to funds at a time when credit is needed.
Every workforce should have access to safe, ethical and affordable finance. There are clear links between financial health and levels of wellbeing and productivity. Research shows that one in four workers reports having lost sleep over money worries and that almost 60 per cent of workers say that financial worries negatively impact on their performance at work. There is a wider cost to society; it is estimated that financial stress costs the United Kingdom economy £121 billion each year.
That is why we encourage employers from the private and public sectors to ensure that staff have access to regular saving and ethical loans by partnering with a credit union. Unlike financial institutions that are driven by the profit motive, credit unions are keen to help members to understand what they can afford to save, and they encourage their members to save regularly.
For example, many credit unions use a save-as-you-borrow model, encouraging members to put an amount into a savings account as part of making a loan repayment. Research by the Fairbanking Foundation found that the approach converted 71 per cent of the credit union borrowers who were surveyed into regular savers, with almost three-quarters of those borrowers having never or only occasionally saved before.
The emphasis on encouraging a saving ethos, purely for the financial wellbeing of members, is typical of this unique sector. The Scottish Government is trying to lead by example. We encourage staff to take up credit union membership. I know that the Parliament encourages its staff to do so, too. By making it easier for people to build up a savings buffer, we can help to keep more people out of the hands of high-interest, predatory lenders.
Being in poverty or on a low or insecure income is, of course, a particular barrier for people who seek to access credit. There are many people for whom access to mainstream or high-street lending is not an option, perhaps because of credit rating issues or because they do not have a bank account. We know that people in such situations can be vulnerable to exploitative lenders who prey on communities in which poverty reduces choice for many people.
That is why there is a need for a more developed and sustainable, affordable credit market, to ensure that people have choices over how and when to access the credit that they need, and to ensure that people have better access to financial services, including basic bank accounts. It is therefore important to support our credit unions and encourage people to save and borrow with their local credit union.
Support for credit unions dovetails with our wider work to increase the availability of affordable credit. Last year, we invested £1 million in the Carnegie UK Trust’s affordable credit loan fund, which will help to grow the community lending sector and support not-for-profit organisations such as credit unions and community development finance institutions, which are vital to ensuring that fair, dignified and affordable lending is available to all. The resource will be used by the sector to provide genuine alternatives to high-cost credit lenders for people on low incomes, in a variety of ways, including access to financial capability support, debt advice, savings opportunities and banking products and services.
I am delighted that, last October, Fair for You Enterprise CIC became the first lender to draw down a loan from the affordable credit loan fund. Our support for the sector over the next decade will help social lenders to work with people on low incomes to increase their financial inclusion.
This Government understands the important role that good financial advice plays in helping to lift people out of poverty. In November, I launched our financial health check service, which will be delivered by Citizens Advice Scotland and the nationwide network of citizens advice bureaux, backed by more than £3.3 million of Government funding over the next two years.
People who contact the service will have the option of receiving tailored advice, either via the freephone number or face to face in a local CAB. The financial health check aims to ensure that low-income families with children—and other people—can maximise their income. It aims to reduce the poverty premium, whereby the poorest pay more for basic services because their choice is limited. We want people to make the most of their money by accessing good-quality financial advice, including on benefit uptake and switching to lower-cost utilities.
The financial health check is made up of a number of elements, including access to free school meals, school clothing grants, council tax reduction uptake and cheaper deals on energy and other utilities to reduce household costs. This new service, which will benefit at least 15,000 households a year, is yet another example of the action that this Government is taking to increase the financial wellbeing of people across the country.
In conclusion, I want to reaffirm the Scottish Government’s commitment to continuing to work collaboratively with the credit union movement to ensure that it continues to thrive, develop and be as innovative as it can be. I certainly look forward to working with members across the chamber on that shared ambition, and I no doubt will hear their views and opinions about what more can be done to support the movement. I am also sure that many members will want to highlight the excellent work of credit unions in their constituencies, and I look forward to hearing about such examples in the course of this afternoon’s debate.
I move,
That the Parliament celebrates the vital role of credit unions in reducing inequality in Scotland by offering affordable loans and savings in the heart of communities, thereby protecting people from predatory lenders and unmanageable debt; recognises that these not-for-profit financial cooperatives provide ethical financial services to a combined membership of over 400,000 people living in Scotland; supports action to further raise the profile of this important sector, building on the Scottish Government’s recent national campaign, Credit Unions: People, Not Profit, and welcomes the continued collaboration between the Scottish Government and the sector to ensure that credit unions continue to thrive for the benefit of Scotland’s communities.
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