My hon. Friend has stolen one of my lines from later in my speech. She makes an entirely appropriate point: credit unions can offer access to an affordable loan while encouraging people to save at the same time. When the loan is paid off, the incentive to keep saving is still there.
Credit unions have until now enjoyed the support of Members on both sides of the House. From 2006 to 2007 the growth fund, launched by the Co-op party’s—and now Strictly’s—very own Ed Balls, saw more than 400,000 affordable loans offered and saved recipients between £120 million and £135 million in interest that would otherwise have been paid to high-cost lenders. It is that type of success that, after a long Co-operative party campaign under the last Government, saw Ministers, led by the right hon. Member for Broxtowe (Anna Soubry), agree to allow three credit unions to offer services to our soldiers, sailors and airmen and to their families—in short, to offer an armed forces credit union. Given the funding from the Department for Work and Pensions under the last Government to expand credit unions, it seems odd that Ministers should tonight want to continue to exclude credit unions from offering a product in a market in which they already have significant interest and penetration.
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Credit unions—I think this is the point my hon. Friend the Member for Makerfield (Yvonne Fovargue) was alluding to—routinely require those borrowing money from them to save as they repay their loan. On completely paying off their loan, those who have borrowed from a credit union have their own pot of savings, which some have never had before. That approach sees many members continue to save over a far longer period after they have overcome the inertia or budgeting difficulties that perhaps prevented them from getting into saving in the first place.
Credit unions also help people to save towards a particular short-term goal. The idea of a rainy day fund, which a number of hon. Members talked about on Second Reading, is often not tangible enough for people to begin a savings habit, whereas saving for Christmas, to go on holiday, to buy a particular good or to access a particular service is. Indeed, according to the Association of British Credit Unions Ltd—the excellent credit union trade body—the available evidence suggests that people are more likely to begin to save towards a defined goal. In this way, they demonstrate to themselves that they can save, and from there more saving takes place. I am told that this is basic behavioural economics.
Other advantages of allowing credit unions to offer Help to Save include the fact that NS&I is not a particularly familiar organisation for many low and middle-income earners. Its offer is fairly impersonal and remote, with little face-to-face contact or obvious customer support. It is difficult to think that many of the target audience will be particularly inspired by such an offer, whereas a credit union trusted by friends or family and able to provide face-to-face support will, for some, be the difference between signing up and starting saving or not.
If credit unions were supported by this House to offer Help to Save, it would boost their ability to grow. It would further raise public awareness, and potentially introduce credit unions to a new group of savers. Given credit unions’ lack of advertising and branding firepower, compared with the great megaliths of financial services, such as the banks, that can only be helpful to the Government’s claimed aims of increasing support for credit unions and creating a more diverse banking market.
New clause 1 locks into law the right of anyone wanting to join a credit union to request payroll deduction. When saving is in the interests of the individual and the country at large, why should we not expect business and other employers to help a little by making it as easy as possible for people who want to save? One way some choose to save is by having an amount, which they decide, deducted automatically from their pay packet by their employer. That is a process they can stop immediately, and it is known as payroll deduction.
Yet, at the moment, whether or not payroll deduction is allowed is entirely in the gift of the employer. The best employers have no problem with it. Often, they will reach agreement with local credit unions or credit unions that operate in their industry. Once they have done so, payroll deduction will be offered by their back office. Indeed, the Ministry of Defence granted the facility of payroll deduction to three credit unions, which now offer services to our soldiers, sailors and airmen and to their families. In so doing, they help to save them, as I alluded to, huge amounts of interest. Some £1 million of affordable credit is already being offered to military personnel.
ABCUL has pointed out to me that the Department for Work and Pensions is the latest Whitehall Department to offer payroll deduction for credit union services to their staff. Again, it has chosen three particular credit unions to work with: Commsave, Hull & East Yorkshire, and Voyager Alliance. A number of staff who work for the DWP have already benefited to the tune of several hundred thousand pounds-worth of affordable loans. Many other Departments in Whitehall also offer this facility. Most police forces offer payroll deduction for credit
union members, as does much of the NHS. Hospitals, NHS trusts and other parts of government are quite right to do so. Unfortunately, however, some outsourced payroll companies try to exploit the terms of their contract and demand a fee for agreeing to offer such a service to an employee.
Payroll deduction takes a tiny amount of time to sort out, yet some employers will not do the right thing to help their employees to save in the way that best suits them. The worst offender that I know of currently is Transport for London, which employs almost 28,000 staff. It claims that there is no demand for credit union access. It says that it offers generous emergency assistance if staff get into problems, that it would be costly to offer payroll deduction, and that it certainly would not want to get into the picking of which credit unions to work with. I struggle to see why, in this regard, TfL is any different from the Ministry of Defence. There were not thousands of soldiers queuing outside the MOD to join a credit union either, and it cost the MOD, whose payroll is outsourced, a fee. Ironically, the payroll company concerned offers payroll deduction to its own staff. TfL’s offer, important as it is, of emergency loans if staff get into trouble is a bit of a red herring. This is about making it easy for an employee to save on an ongoing basis with a reputable and regulated credit union. If the MOD can work out which credit unions to work with, it should not be beyond the wit of Transport for London to do so as well. I hope that TfL will change its mind. We are having discussions with it, and I hope it will come to see sense in the end; it has a responsibility to do so. Nevertheless, Government should cut through this sort of nonsense and legislate to allow employees the right to request payroll deduction up front through joining a credit union. If saving is both in the individual interest and in the national interest, we should seek to make it as easy as possible for this to be offered.
The last amendment in my name in this group is amendment 1, which would lower the qualifying period of the Help to Save product before the Government top-up begins from 24 months to 12 months. There was some debate in Committee about reducing the time that people have to wait before the top-up is granted. I simply draw the House’s attention to the evidence put in by StepChange, the debt advice charity, suggesting that 24 months was too long to ensure that the Government’s objective of incentivising more savings was met.
I look forward to hearing the views of other Members. I hope that Ministers will, in particular, reflect on the case that I have made for amendment 2. If they are not willing to shift on this issue, I will seek your leave, Mr Speaker, to divide the House on it.