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Affordable Credit

Volume 470: debated on Monday 7 January 2008

4. What measures his Department has considered to improve access to affordable credit for those in receipt of benefits. (175869)

To date, more than 150 credit union and community development finance institution outlets delivering the growth fund have made more than 53,000 loans, with a total value exceeding £23 million. The recent allocation of a further £38 million for the period 2008 to 2011 will mean that many tens of thousands more people will gain access to affordable credit.

I thank my hon. Friend for his answer. He will be aware that there are more than 20,000 members of the Glasgow credit union in Glasgow; it is one of our successes. However, there are still 2 million people in the country without a bank account. The Association of British Credit Unions is asking for more calling points throughout the country. Given the planned closures of post offices throughout the country, particularly in Glasgow at this time, access to credit union facilities will be reduced. Will my hon. Friend tell me how we will provide those new points where people can get their money?

I am grateful to my hon. Friend for his question. He will understand that the Post Office network needs to be viable; that is why it is undergoing further changes. He will also know that there have been post office branch closures in the past four years; however, during that period, 800,000 more people have gained access to basic banking services. We are well on the way to achieving our target of halving the number of people without access to bank accounts.

Currently, 11 credit unions offer full banking services and we expect another 20 to do so in the coming year—that will partly be due to the extra support that we are giving them as a result of the growth fund. The additional investment that we have secured for 2008 onwards will achieve a further expansion of the credit union movement, making available more opportunities and access points for affordable loans.

Is the Minister not concerned about the implications of the Church of England’s recent report “A Matter of Life and Debt”? Some 8 million people in this country have unsecured debts of £10,000 or more, an increase of 30 per cent. in a year. Will not that increased pressure due to debt cause more difficulties for those seeking access to affordable credit and impact most severely on the poorest?

No, I do not agree; the problem is the affordability of the credit. If affordable credit is not available to those on very low incomes or benefit—who may, for perfectly good reasons, need credit at some point to deal with expenditure pressures—their alternative is to go to an unaffordable source of credit such as a doorstep lender. Is it better for them to pay interest of 1,000 per cent. on their loan or to take out a much more affordable form of credit from their local credit union? The investment that we are making through the growth fund, in expanding the credit union movement and affordable credit, will help people avoid the kind of debt problem that the hon. Gentleman is talking about.

Does my hon. Friend agree that one of the difficulties with local credit unions has been that only some of them have been accessible through post offices? We need a much more organised and strategic approach to the provision of credit via credit unions in local post offices. That would increase footfall in post offices and mean that more people attended them. It would also widen access to credit unions.

I entirely understand my hon. Friend’s point. He will therefore welcome the fact that part of the investment that we are making through the growth fund is in the physical resources and capacities of credit unions as well as just capitalising their loan books. He will see that the extra investment that we are putting in, in addition to the increased support that we expect to come from the banking sector, will help to create many more points of access at different areas in all the communities across the country, thereby helping again to increase access to affordable credit for many thousands of people.