Credit Unions
The final item of business is a members' business debate on motion S2M-4052, in the name of Christine May, on new powers for credit unions. The debate will be concluded without any question being put.
Motion debated,
That the Parliament welcomes the extended facilities available to credit unions from April 2006 which will allow them to offer a wider range of services to their members; notes that these facilities will include insurance products, budgeting and savings accounts and flexible low-cost loans based on ability to pay; recognises the importance of the role played by credit unions in helping to alleviate poverty, prevent debt and its devastating consequences for many low income families, encourage saving and prudent borrowing and support regeneration in many communities across Scotland, such as Glenrothes and Levenmouth in Fife; further welcomes the additional support provided for approved credit unions to establish and administer these services; acknowledges that the credit union movement embodies and promotes the principles of mutualism and co-operation, and believes that the expansion of the credit union network in Scotland will play a vital part in enabling regeneration of many more communities.
Members will be aware that I am proud to be one of the seven Labour and Co-operative Party members of the Scottish Parliament. The credit union movement is part of the co-operative family, which has done a great deal to sustain our Scottish communities through some hard times and has brought many of them out of the far side.
I am pleased to welcome to the public gallery representatives of the Scottish credit union movement and of the co-operative movement. I have had some interesting information from them in their capacity as representatives of individual co-operatives and as members of the Association of British Credit Unions Ltd in Scotland.
Most members will want to speak about the credit union movement in their areas and—surprise, surprise—so will I. However, I am pleased that, unlike when I spoke this morning, I am not immediately preceding the Singing Kettle. Most people who heard me speak this morning could not wait for me to get off the stage so that the Singing Kettle could get on.
Others, among them my colleague Jackie Baillie, will want to highlight some of the concerns that the credit union movement in Scotland has with some aspects of the Bankruptcy and Diligence etc (Scotland) Bill, stage 1 of which has just been completed by the Enterprise and Culture Committee.
However, tonight's debate is primarily about the extended powers that have been given to credit unions by the Deputy Minister for Communities, Johann Lamont. Those powers relate to areas such as insurance products, budgeting and savings accounts and flexible, low-cost loans that are based on ability to pay. All those powers were requested by the Association of British Credit Unions Ltd in January this year, when it gave evidence to the Treasury Select Committee. Such an approach would provide incalculable help in building a savings ethos and reducing the pernicious influence of people who peddle loans with interest rates that are almost always exorbitant. Moreover, it would do what the credit union movement has long been very good at doing, which is to instil a savings ethos in people who perhaps never thought that they could have the discipline to save even a small amount or to build something that they could borrow against.
At the end of 2004, the credit union movement in Scotland had £130 million on loan to members. As the credit unions' average annual percentage rate is 12.7 per cent—which is, in fact, the maximum that unions can charge and is minuscule in comparison with the 900 per cent APR that some unscrupulous lenders have set—members and, indeed, communities can see that such a system is fairer and allows people to repay their borrowings. Much of the evidence that we have taken on the Bankruptcy and Diligence etc (Scotland) Bill has highlighted the fact that, although people are willing to pay back loans, they are unable to do so because of the structure of those loans and the attitude of lenders.
We have discovered that it is very difficult for people to get advice. When people are faced with crippling and mounting debts, they ignore the problem by not opening letters and so on. However, because credit unions are rooted in communities and because their volunteers are very often well known to those who borrow money, advice is easier to give and can be provided in a less threatening, less confrontational manner. For example, I do not know of a single credit union that has been guilty of phoning someone's mobile at 6 o'clock in the morning to demand payment.
Early credit unions developed in the United States, Canada and Jamaica. In Ireland, the first credit union was formed in 1958 by Nora Herlihy and her colleagues in the Dublin Centre Co-operative Society. The credit union movement was established in the United Kingdom by the Credit Unions Act 1979, which, when it was passed in the April of that year, was one of the last pieces of legislation to be passed by the outgoing Labour Government at Westminster.
The pervading aspect of credit unions is the fact that they are part of our communities' social fabric. Quite often, but not always, operating at a small, local level, they offer a real alternative to doorstep moneylenders. Fife, for example, has a very well-developed credit union network; indeed, in 18 months, the Glenrothes and Levenmouth Credit Union has achieved a membership of more than 400 people, saved £100,000 and made £90,000 of loans. It has received Executive support for premises, and is seeking to expand to the whole of central Fife. Moreover, it is working with one primary school and hopes to work with another.
I would like the minister to consider two final points in her response. First, will she discuss with her colleague the Deputy Minister for Enterprise and Lifelong Learning, Allan Wilson, the credit unions' concerns about the Bankruptcy and Diligence etc (Scotland) Bill to see whether there is a way forward in that respect? Secondly, the credit union movement has pointed out that some small unions that would like to offer the extended facilities are struggling with paperwork because they have no experience in business planning. Will the minister agree to have discussions on the matter and find out whether any assistance can be offered?
I commend the motion to the chamber. I thank everyone who has stayed to contribute to the debate and I look forward to the rest of the speeches.
If I did not know any better, Presiding Officer, I would have thought that your decision to call me to speak immediately after Christine May was a provocation to encourage me to assume the role of the Singing Kettle. My young children watched the Singing Kettle over many years and I feel I would be proficient in the role, but I will save the chamber that horror for the sake of this evening's debate.
I congratulate Christine May on securing the debate and on her speech on this important subject. I would like to discuss the practicalities of establishing credit unions where they do not exist. On behalf of constituents in Angus, I have raised the issue with ministers in correspondence. Those constituents are very enthusiastic about establishing a credit union but are finding that—although the Scottish Executive offers assistance to sustain and develop credit unions—the mechanisms to establish a credit union in the first place are left very much to local organisations. That can be justifiable, because it is important to prove that a credit union will have local support and participation. However, more could be done to ensure that more credit unions can be established. They can then go on to provide the support, service and facilities that Christine May mentioned.
In small, rural communities that I represent, whose populations are thinly spread and whose geography is always a problem in any initiatives, I would like more effective support to be put in place to encourage new credit unions to start up, and more practical support to be offered during the start-up phase. Over the years, as I have supported constituents, I have been struck by the way in which credit unions can provide stability and order in people's financial arrangements. Those arrangements can get out of hand and become a great burden as people wrestle with their difficulties.
I hope that the debate will give further impetus to the support that the Government gives to the credit union movement. I am convinced that the credit union structure gives practical support to vulnerable individuals in our communities. I encourage the Government to find ways of giving greater assistance to the start-up process for new credit unions—perhaps in a partnership fashion—while trying to identify the level of local support to establish what would be a very beneficial measure to support people in our communities.
I am very happy to speak in this evening's debate and I congratulate Christine May on bringing this most worthwhile and relevant subject to the chamber.
Credit unions and financial co-operatives offer a vital and—more important—accessible service for communities and individual members of society who experience difficulty in accessing alternative financial services. In this age of right to buy, low-interest mortgages and easily accessible credit, a significant number of less fortunate people experience, for a variety of reasons, serious difficulties in making ends meet because they do not have ready access to financial security. For that reason, it is important and appropriate that the valuable service that is offered by credit unions be acknowledged by members of this Parliament.
The ending of financial and social exclusion is a constant aim of our work, and credit unions have a significant role to play in that. The growing uptake of their services over the past three years signifies the importance of that role and the increased awareness among Scots of the value of those services.
Around 179,000 adults are now members of the 131 credit unions, which have assets of £185 million. The local and ethical nature of credit unions is obviously a factor both for their members and for the people who access their services. We live in global times and are fully aware of the increasing competitiveness, and the ever-increasing anonymity, of financial service providers. The friendliness of credit unions can often make it easier for people to understand and accept the advice and warnings that they may give out. The benefits of being a member of a credit union and of utilising its services are important, so it is right that credit unions are encouraged.
Christine May's motion refers to the wider range of services that will now be offered by credit unions and to their overriding aims of helping to alleviate poverty and support regeneration in our communities. Given that poverty undoubtedly continues to blight the lives of far too many Scots, such financial commitment to regeneration is vital. The well-known research by the Joseph Rowntree Foundation vividly demonstrates the problems that we face. The number of working-age adults who have no dependent children and who are in income poverty has increased from around 300,000 in the mid-1990s to almost 400,000 in recent years, while the gap between the richest and the poorest in society is increasing.
Business rates, infrastructure and the cost of business start-ups in Scotland are examples of fundamental issues that must be tackled and which the Executive is addressing. I support any strategy that will contribute to such vital regeneration and help to combat material poverty. Accordingly, I support the development of credit unions and the introduction of the credit union assistance fund, which will be able to target and empower the low-income adults to whom I have referred.
I return to my opening paragraph and stress that the accessibility of credit unions is a vital component of their operation. It has been stated that the most effective way of breaking out of the poverty cycle is through education. The acquisition of financial literacy and knowledge can be the first step to overcoming financial strain and if investment in the growth of credit unions will bring about an increase in the number of people who have the knowledge and ability to take control confidently of their finances, it must be endorsed. I support the motion.
For the record, I state my membership of the Co-operative Party and I congratulate my fellow co-operator, Christine May, on securing this important members' business debate.
There are several thriving credit unions in my constituency of Glasgow Anniesland. Just over two years ago, I was privileged to be asked to open the new premises of Yoker Credit Union in Dumbarton Road. It is an impressive and growing operation that illustrates the need for and the positive impact of quality credit unions. Similarly, the commitment and enthusiasm of the staff and board of volunteers at Knightscliffe and Temple Community Credit Union, which is located at Knightswood Cross, was obvious and inspiring when I had the honour of opening its extended premises in 2001.
I take the opportunity to put on the parliamentary record the fact that, last year, the Minister for Communities, Malcolm Chisholm, was good enough to attend the 35th anniversary celebration of Drumchapel Community Credit Union. As some members will know, it holds a special place in the history of the movement in Scotland, as it is widely acknowledged to have been the first credit union in the country. Its founding member and driving force was the late Bert Mullen, who was instrumental in the establishing the Western Credit Union, which was based in the Drumchapel area and was the forerunner of Drumchapel Community Credit Union.
Bert Mullen was typical of the volunteers who can be found in credit unions up and down the country. Their dedication and commitment has enabled the growth in the services and facilities that are available to credit union members. I am proud to represent a constituency in which the credit union movement has achieved such growth and within the boundary of which the movement in Scotland was born. I should also state that Bert Mullen's special place in credit union history, as the first Scottish director of the Credit Union League of Great Britain, was marked on international credit union day on 20 October 2005, when the Nobel peace prize winner John Hume gave the inaugural Bert Mullen lecture.
As Christine May said, credit unions—which provide affordable credit to around 500,000 adults in Britain—are a vital part of the social fabric of many communities throughout Scotland. However, a tough challenge remains: it is estimated that about 7.8 million adults in the United Kingdom who do not have access to affordable credit turn to high-cost lenders—or sharks—for their credit needs. I am sure that the credit union movement will rise to that challenge.
Members will be aware that in some quarters there is an arrogant misconception that credit unions are the poor relation of the financial services industry and that their volunteer base, common bond and strictly not-for-profit structure detract from their ability to innovate and provide up-to-date services for their membership. That fallacy must always be challenged.
I am glad that provision has been made under the credit union assistance fund to develop the marketing of the unique message of the credit unions. Scottish credit unions are coming up with highly imaginative services that are of benefit to their memberships. For example, the Scottish Transport Credit Union recently launched a new website to provide its members with impartial and unbiased information on pension plans.
I warmly welcome the fact that credit unions are going into schools across the country to encourage young people to save with them. It is important that our young people are aware that there is an alternative to high street banking. They should know that there are places where they can save their money and benefit their local communities at the same time. In seeking to encourage their next generation of members, credit unions are showing the forward-thinking nature of the movement.
I reiterate my support for the motion and for the work of the Scottish Executive in this area. As I said, the three credit unions in my constituency are at the forefront of the regeneration of the communities they serve. I hope that the new services of general economic interest—SGEI— package will help them to continue their work and that it will move the Scottish credit union movement on to the next level.
A few years ago, I decided to put my money modestly where my mouth was by joining the Capital Credit Union. I am still a member, or whatever the correct term is. The whole concept of the credit union appeals to me greatly. In fact, I would be happy to be a member of the Co-operative Party, although it might cause slight problems if I were, as the party is somewhat closely linked to the Labour Party. With politics as it is nowadays, my joining up might cause a bit of a schmozzle. I am 100 per cent for the credit union concept. It is good that we are debating the issue. The speeches that have been made thus far have been good.
I approach the subject from the point of view of community regeneration. Although there are other ways of regenerating communities, credit unions are an important tool in that regard. Instead of well-meant, top-down regeneration, credit unions can deliver regeneration from the grass roots up. Helping communities to get a grip on their local affairs and lending money to people who are starting small businesses—as well as lending money to people to help them with their personal affairs—are important aspects of the work of credit unions.
Credit unions are the acceptable face of capitalism. It is to be regretted that not only the loan sharks but the big banks are part of the unacceptable face of capitalism. The big banks pump out material that serves only to get people further and further into debt and in a manner that I consider to be wicked. I have written and told them that, but they say, "It wisnae me." Whereas the entire banking industry and other business interests push the idea of borrowing money at people—borrowing that they cannot properly sustain or repay—credit unions give people the opportunity to borrow in a sensible manner. They allow capitalism to work in people's favour.
We want to attract good people to run credit unions. The Office of the Scottish Charity Regulator was recently quoted as saying that charitable organisations should not take out insurance policies to protect their directors or board members from claims against them. I am afraid that that could discourage people from taking part in the good work of charities. I do not know whether credit unions are affected by the technicalities of what OSCR said, but we should give the people who run them every possible support and advice, including the start-up assistance to which John Swinney referred.
Credit unions make a huge contribution to our communities. There are many ways in which we can help them—indeed, we could do with more of them scattered about the place. I hope that the minister will carry on the good work that she has obviously done already in widening the scope for credit unions. I hope that, in future, credit unions will be used as a major engine of community regeneration.
Like other members, I congratulate Christine May on bringing the issue of credit unions to the debating chamber.
My interest in credit unions is part of a long-standing commitment to social enterprises. Successful businesses can be about more than money; they can be about people. Indeed, enterprises that have social objectives at their hearts are often the most economically successful businesses. In that context, credit unions have a major role in providing financial services that are driven by the needs of communities. Unlike the high street banks, credit unions work from the bottom up, in a financially sustainable way that is appropriate to local needs.
Many credit unions are active in Scotland, as we have heard. I will take up Christine May's offer and mention a success story in my area. Capital Credit Union, which Donald Gorrie mentioned, was founded in 1989 for local authority employees, but it now offers full banking services to anyone who lives in Lothian and the Borders, irrespective of their financial circumstances. Not just adults but children can benefit from Capital Credit Union's services. I am a new father, so I was pleased to learn that the credit union recently launched the capital kids savings scheme and that it is working with local primary schools to offer an ethical financial choice to kids, which I hope will be the start of their long engagement with ethical financial services and prudent money management.
Members have acknowledged that credit unions are much more than banks of last resort for the poor. The big banks fail to provide the basic bank accounts that socially excluded people need, and credit unions are stepping forward to fill the gap. However, credit unions' new ability to offer mainstream financial services not just to the socially excluded but to everyone represents a landmark in the development of credit unions.
I will not be satisfied until the loan sharks who prey on the most vulnerable people have been driven from our streets, communities and television screens. Credit unions have a key role to play in offering sustainable financial services that—unlike those offered by many lenders—do not rip people off. However, the exploitative lending practices of other bodies are causing problems for credit unions. As Christine May said, the increasing use of protected trust deeds as an escape route from debt threatens the ability of credit unions to carry on funding. Protected trust deeds protect people who have ludicrous amounts of debt as a result of irresponsible lending. However, responsible lenders such as credit unions are hit by the loss of funds that the protected trust deed system entails. Just when a person most needs a credit union, they can find that it cannot lend to them. Like Christine May, I hope that ministers will listen to the credit union movement and ensure that credit unions are dealt with separately in the Bankruptcy and Diligence etc (Scotland) Bill. That would be a step forward.
Donald Gorrie and others made the wider point that better regulation is needed to deal with loan sharks who advertise their services on television and create ludicrous debt problems for people throughout Scotland. Like Bill Butler, I hope that the new powers for credit unions that the motion celebrates will do more to bring credit unions firmly into the financial mainstream. Indeed, I confidently predict that credit unions will play a key role in the wider financial services sector in Scotland. Credit unions can play a part in ensuring that not just the poor and marginalised but everyone in Scotland has the opportunity to make an ethical financial services choice. Long live credit unions.
I join other members in congratulating my colleague Christine May on securing the debate on credit unions. She has long supported credit unions, as have many other members.
I will use this opportunity to talk about protected trust deeds—I hope members will forgive me for doing so—but first I will talk about financial exclusion. I will not rehearse the scale of the challenge that we face in ensuring that the poorest people in society have access to an adequate income, affordable credit and the full range of financial products that most people in our communities enjoy. Although more people have bank accounts than ever before, a significant number of people remain without financial products. Needless to say, individual indebtedness remains a persistent problem that we need to tackle because, as many members know, its impact on families is devastating.
I am clear that by tackling financial exclusion, credit unions are part of the solution. They provide access to low-interest loans, help to improve financial literacy and provide a lifeline for many communities. I welcome the extension to the range of services that they can offer, which now includes insurance products, bank accounts and flexible loans. I congratulate the Executive and the Deputy Minister for Communities on their positive work on the issue, which has resulted in growth in the number of credit union members in Scotland.
As members would expect, I pay particular tribute to Vale of Leven Credit Union and Dumbarton Credit Union, which provide a quality service to all sections of my local community. Vale of Leven Credit Union first highlighted the problems with protected trust deeds and was followed soon after by Dumbarton Credit Union, Dalmuir Credit Union, Baillieston Credit Union, Parkhead Credit Union and Capital Credit Union. My postbag and, I am sure, that of other members has been full with correspondence on protected trust deeds. I remind members that the majority of credit unions are small mutual organisations that work in the community to help their members manage their debts. Surpluses are reinvested in the local community.
I will highlight some of the real problems that the sharp increase in the use of protected trust deeds has caused. No credit union is large enough to support the continuous losses that are incurred through non-recovery of loans as a result of protected trust deeds. The system lumps credit unions together with massive creditors such as the Royal Bank of Scotland, HBOS, Visa and MasterCard, all of which are major global players that charge much higher fees than credit unions and—some would argue—much higher interest rates. It is interesting that some trustees charge about £200 an hour to administer trust deeds and that their expenses are paid before creditors see a penny. There are also credibility issues. For example, some trust deeds allow as legitimate expenses £200 a month for one primary school child to have school lunches—I am interested in knowing what school that is—and £100 a month for dog food. That dog must be very well taken care of. Credit unions suffer disproportionately from losses as a result of protected trust deeds.
I echo the call for the Deputy Minister for Communities to talk to the Deputy Minister for Enterprise and Lifelong Learning. I offer three possible solutions. First, we could treat credit unions as we treat the Student Loans Company—in relation to which we have a derogation from European Union competition law—which might enable the Executive to consider the issue differently. Secondly, small community-based credit unions could be ranked above the massive creditors when funds are distributed from protected trust deeds. Finally, if we extended the debt arrangement scheme to include more people, we would reduce the need for protected trust deeds.
I, too, congratulate Christine May. At the risk of upsetting Donald Gorrie, with whom I agreed during his members' business debate last week, I point out that I, too, became a member of Capital Credit Union, to put my money where my mouth was as a member of the Parliament. Incidentally, I have learned to save again, which I have never been terribly good at. Credit union members are encouraged to save their money in the union to build up a pool of funds for other members, which, I am happy to say, is what I have done since I joined the credit union.
There are myths about the membership of credit unions. In late 2004, the Executive carried out research on credit unions, which found out some interesting information. In the survey, 1,591 credit union members responded from 29 Scottish credit unions. The typical member is middle-aged or older, female, white Scottish in ethnic origin, an owner-occupier and in work. That sounds like me and I am not what people think of as the typical credit union member. The survey found that very few members are under 30, from ethnic minority backgrounds, unemployed or permanently sick or disabled. The idea that credit unions are a poor person's bank, besides being derogatory, is simply not borne out in the statistics. Only 14 per cent of respondents were in receipt of a means-tested benefit. That is one myth about credit unions.
Another issue that came out of the survey was that members wanted their unions to offer more ways in which to use the bank, which, of course, is the focus of today's debate. It is a consensual debate and I intend it to remain so, but there are issues about how much is known about credit unions by the public at large.
I am a practical politician, and I like to do what I call the Asda-Tesco test, which is when I ask people what they know about an issue. If I were to go up to Asda or Tesco shoppers and ask them what they know about the Royal Bank of Scotland, HBOS, the Clydesdale Bank, Lloyds TSB or any of the other big banks, they could tell me something. If I were to ask them, "What is a credit union?", I would find that many people simply do not know. Credit unions may be common in Bill Butler's neck of the woods, but there are parts of Scotland where, if one was to do the supermarket test and ask people, "What is a credit union?", people would be unable to answer. That is a great pity, because the people who would benefit from being in a credit union are the very people who are shopping about. There is an issue there about publicising exactly what a credit union is, what it is not, what it can do and why it is different from the conglomerate of banking services to which Mark Ballard referred. One of the recommendations of the survey was that credit unions should modify and extend their office opening hours and provide pay points for electronic banking. To the best of my knowledge, such services are not available.
I am prepared to accept a motion without notice to extend the debate by up to 10 minutes.
Motion moved,
That, under Rule 8.14.3, the debate be extended until 6.00 pm.—[Christine May.]
Motion agreed to.
I am pleased to support the motion and congratulate Christine May on securing the debate. I also congratulate the minister on the measures that are being introduced. I am proud to be a member of the Glasgow City Council Credit Union, which, as the largest in the country, is the daddy of them all.
As members might expect, there is an excellent credit union in the Castlemilk area of my constituency. I salute the role that credit unions play in the financial sector and in tackling social problems such as debt management. I welcome the minister's measures to strengthen credit unions. In Glasgow, that will give further impetus to the role of credit unions in the city's regeneration where, with the support of the city council, some credit unions have expanded from—if members will pardon the expression—hole-and-corner operations to professional organisations with a high street presence.
As has been highlighted, there is one cloud on the horizon: the potential undermining of credit unions by the bad debt of individuals sheltering behind protected trust deeds. Jackie Baillie outlined ways in which that threat might be averted by the actions of the Parliament. The next time our country's economic strategy, "A Smart, Successful Scotland", is refreshed, perhaps Scottish Enterprise will acknowledge the value of credit unions, not just for the social economy but for the real economy.
I congratulate Christine May on securing the debate and declare an interest as a member of the Land o' Burns Credit Union and a council member of the Scottish Agricultural Organisation Society. As a lifelong believer in co-operation and mutuality, on being elected it seemed appropriate that I should join the Land o' Burns Credit Union. I have been a member of that credit union for about six years.
I welcome the fact that more than 179,000 adults in Scotland are members of credit unions and that there is a total of 131 credit unions. Just as important, the assets that the credit unions hold—£185 million—represent significant savings at a time when many people are getting further and further into debt. Many of those who are socially and financially excluded can and do use that type of saving as a first step to saving and using financial products. In that regard, credit unions provide a valuable bridge to a preliminary understanding of the banking and financial services market.
In Ayr, the Land o' Burns Credit Union, based at the John Pollock Centre and led by Rose McLaughlin, is seeking to expand its customer base. I very much support its efforts to attract more members.
Others have alluded to the huge potential of credit unions throughout the country to expand. For that reason, I welcome the replacement of the credit union capacity fund with the credit union assistance fund. I encourage our credit unions to access and use the new fund, particularly with a view to attracting more new and younger members. A lower age profile for our Scottish credit unions would encourage the next generation of savers to make an earlier commitment to saving, which would benefit some of the most disadvantaged people in our communities.
A further advantage is the fact that people are introduced to organised borrowing at affordable rates, which reduces the ambit of the doorstep lenders and loan sharks who operate in our most disadvantaged communities. The credit union assistance fund will also allow credit unions to diversify their product range and offer more sustainable services and different types of services to their customers. That, too, is to be welcomed.
I welcome Christine May's motion. I do not always agree with her but, in this instance, she has expressed well the positive work and aspirations of credit unions, which are very worthwhile organisations.
I congratulate Christine May on securing the debate and declare an interest as a Co-operative Party-sponsored member.
Many members have touched on the fundamental issues. We are sending a strong message that the co-operative and mutual philosophy can influence and shape many issues in our country. There is no doubt that, in tackling access to credit, the model that the credit union movement has developed is an example to us all and should be extended as much as possible throughout the country. I never thought that it would be defined as the "daddy of them all", as my colleague Charlie Gordon said. That is an interesting phrase to use, because we are talking about ensuring that, irrespective of people's income, the credit union idea of encouraging a mutual approach can change and underpin the philosophy in poor neighbourhoods and other parts of Scotland. The fact that even John Scott can say that he, a traditional Conservative, supports the mutual model indicates its breadth of appeal. I welcome that conversion and hope that it will extend to others in his party.
I hope that Frank McAveety appreciates that it is not a conversion but a lifelong belief in co-operation and mutuality.
I concede that and hope that John Scott's proselytising mission can continue, based on his experience.
There are two big challenges. One major piece of research said that the challenge was to stop the stripping of wealth and assets from some of the country's poorest neighbourhoods because of the actions of credit companies. In my constituency, which covers the east end of Glasgow, the BCD—Bridgeton, Calton and Dalmarnock—Credit Union, which is now one of the biggest in the United Kingdom, is doing substantial work. I heard a simple example last week of a £300 loan that was to be repaid at £9 a week. The total interest on that loan from one of the major commercial credit companies was £195; the credit union would have charged less than £11.25, which is a saving of nearly £184 on a single loan of only £300. That shows the scale of the wealth that unsustainable credit arrangements are taking out of poor neighbourhoods.
The BCD Credit Union is a good example of the new model of credit union that is genuinely thinking about ways of providing its customers with a quality service. It has already undergone a substantial development in that pensions and benefits are now paid directly into more than 500 of its members' accounts. Last week, for the first time, it became able to provide foreign currency. Bulgaria and Poland seem exceptionally popular as destinations this summer, and good credit arrangements can be made available by the BCD Credit Union should members wish to access them.
The formation of the credit union movement throughout Europe, particularly in Ireland, has been touched on. Given the caricature of the east end of Glasgow that is based on the religious divide that has characterised that part of the city for far too long, the partnership between the BCD Credit Union and a credit union in Dublin is amazing. Those credit unions share information, experience and knowledge. That is a great example of that part of Glasgow and that part of Ireland coming together for the benefit of the people who need it most. Hopefully, the more we talk about these things, the more we can demonstrate the benefit of mutual operation.
Challenges remain ahead. I welcome what the Executive and, in particular, the Minister for Communities, have taken on so far in this regard. Hopefully, the debate will encourage further discussion.
I will end by referring to Christine May's speech. My mother used to keep her money hidden in the kettle. We can keep the extended metaphor going to a question that John Swinney and many others have had to face:
"Spout, handle, lid of metal,
what's inside the Singing Kettle?"
We know the answer. If it is a quality credit union, it would probably be the best thing to come out of the Singing Kettle from the kingdom of Fife.
I will not share with members my family folklore about the Singing Kettle. I just do not want to go there.
It is a privilege for me to wind up the debate, and I welcome the opportunity to highlight the good work of credit unions throughout Scotland. I congratulate Christine May on securing the debate and all members on their speeches, which were worthy of the work that has been done by credit unions and of their significance in our communities. It is a great privilege for me to have responsibility as a minister for the area of credit unions.
I pay credit to Jackie Baillie who, in the early days of the Parliament, as Minister for Social Justice, drove the credit union agenda and argued for their significance. I also thank those in the credit union movement who have helped shape the policy. It is not something from Government; it has been developed with credit unions and the credit union movement, and it is their work that has allowed us to reach this stage.
I should declare an interest: I love the co-operative movement and the credit union movement. They bring together social commitment, energy and the passion of voluntary activity with the hard-headed, businesslike approach that is required and which has brought great success. The great test of the co-operative movement is its capacity to give practical delivery to ideas, not saying that ideas are woolly and unachievable but going into communities and showing that things can be done—not imposed on communities, but coming from them. I recently had the privilege of visiting the Newarthill Credit Union. It is located in a new building on the main road, built with not one coin of public money but every bit with private and collective endeavour. That speaks to all that is good about the co-operative movement.
Charlie Gordon spoke about co-operation and mutual options and the challenge for our approach to enterprise and the economy. That is precisely why the Executive supported the co-operative development agency and located it inside Scottish Enterprise. The agency is involved in social matters, but it is also about shaping what we define as economic and what works for the economy. That is why I believe there is such strength in it.
I wish to address some points made by individual members before getting into my own contribution to the debate, as I know that people will want them to be responded to. On the Bankruptcy and Diligence etc (Scotland) Bill, we are very much alive to the issues around protected trust deeds. I have already spoken to Allan Wilson, the Deputy Minister for Enterprise and Lifelong Learning, about the matter. I know that he is working with and speaking to the credit union movement about it. We are conscious of the significance of the points that have been raised by Jackie Baillie and others. We are happy to continue that dialogue to a resolution.
On the issue of supporting small credit unions in extending their facilities, and touching on the points made by John Swinney about starting up credit unions, in the moneys that have been allocated for the next two years, £100,000 a year has been specifically identified for that very practical work. I am keen to speak to credit union and other representatives about how such support can be developed. We know that credit unions have the ideas, and we will need to support them in willing the means for their practical delivery.
I acknowledge that the credibility of credit unions is an issue. In my constituency, there is no doubt about the visibility of the local credit union. It was opened in a shopping centre, it looks like a bank and people are using it in increasing numbers. That is a message for us in supporting the credit union movement.
The financial problems that people face can be both a cause and a consequence of poverty, as members have highlighted. Not only might someone be struggling on a lower income, they will have to pay more for the credit that they need. That is simply unjust. We recognise that and it underpins the work that we are trying to do.
When we launched the financial inclusion action plan, 11 per cent of people in Scotland did not have a bank account—with all the consequences of that—and 37 per cent of Scottish households had no savings. That forced them to borrow as the only way they could budget for everyday things such as a washing machine, or even shoes for the kids, but in doing so they had to pay more. A third of low-income families were behind with bills and debt repayments, and they had to deal with all the consequences of that. We know that those individuals and families can benefit from the services that a credit union offers. Those services are not offered only in communities, but where they are, they give local people confidence and understanding. I agree that credit unions are not just for the poor; they are for us all. That sense of mutual support is significant.
As part of our action plan, we have worked to support credit unions and to help them to grow. Our capacity fund, which was launched in 2003, has rewarded 24 successful applicants with a total of £700,000 to help projects throughout the country.
As has been recognised, last year we secured from the European Commission the critical decision that public bodies in Scotland could fund credit unions to provide some basic financial services to their members. That allows credit unions to work with people who are financially excluded. That pioneering and hard-won decision paved the way for making available to credit unions a suite of new services from April this year. Some of those services have been highlighted: they include savings accounts, budgeting accounts, insurance products and flexible credit.
Coping with the unexpected is a challenge for people who are on a low income and, through that suite of products, credit unions can help such people with managing on a tight budget. Under a credit union budgeting account, a credit union will pay bills on a saver's behalf, which will help people to break the debt cycles that can lead to such damaging financial despair for struggling families.
As well as traditional fixed loan rates, credit unions will be able to offer flexible credit that is linked to the borrower's ability to repay. That may require a loan guarantee fund and offers the opportunity for credit unions to change how they do business. As well as opportunities, a flexible credit union facility presents challenges and risks for credit unions and opens up fresh approaches to how services might be developed.
I think that I mentioned that £400,000 a year will be provided for products and that £100,000 a year will be provided for small grants to cover expenses and I have talked about the challenges ahead.
How many people are not aware of credit unions? Given that people are inundated in the afternoons by advertisements for consolidated loan companies that offer high rates, does the Government have a role, or should credit unions be supported, in running advertisements at the same time as those companies purvey consolidated loans, which can take people further into debt?
The Government may have a role, but our reaction would be shaped by what the credit union movement does. I agree that a broader issue is financial education and challenging institutions that offer extortionately expensive credit—we are working with the UK Government on that. Financial education is needed in our schools to let our young people know about the sensible choice. One feature of the credit union movement is that it links savings with borrowings and helps people to get a grip on their money.
Christine Grahame's point that people should understand the credit union movement is well made. I would love Scotland to be the same as Ireland, where credit unions are seen on the high street and are the norm. There is a job to be done, which we can discuss further.
Several members referred to the risk of the exposure of credit unions to bad debt. One way in which the service of general economic interest funding can be used is to develop loan guarantee schemes to protect credit unions when a loan is not repaid.
The SGEI approval scheme enables the Executive to approve Scottish credit unions, which will then be eligible to receive public funding for promoting financial inclusion through providing one of the four products. That opens up the opportunity for credit unions to seek funding for those products not only from the Scottish Executive but from Communities Scotland, local authorities, Scottish Enterprise and Highlands and Islands Enterprise.
In the past few years, we have made substantial progress on tackling poverty and on tackling financial exclusion and understanding how it is experienced and how we can work with others to challenge it. However, many challenges still face families and individuals who are on low incomes, particularly in the management of their finances. Credit unions play a key role in pursuing and achieving our aim. They have achieved a lot and are going from strength to strength. That means that we are on target to increase credit union membership.
There is scope for us to do even more. I am pleased that we have begun to receive applications for approval to offer SGEI products and I look forward to receiving more. I encourage all credit unions—large and small—to review their policies and products and to think about how they can deliver modern services that meet all their members' needs. I know that the movement will respond to that challenge and that, as in the past, it will engage with every level of government on shaping the policy that will determine how we address the key challenges of financial exclusion, which the poorest and most vulnerable in our communities experience so sorely.
Meeting closed at 18:00.