Expand credit unions to boost cheap credit to low-income people, Labour MPs urge Reeves | Borrowing & debt
A group of Labor MPs have called on Rachel Reeves to support a major expansion of credit unions to increase access to cheap credit for millions of people on low incomes.
The move coincides with celebrations on Monday to mark 10 years of military credit unions in the UK, which are backed by Queen Camilla and offer an “ethical and affordable alternative to high-cost lenders” for service personnel.
MPs, including several parliamentary committee chairs, said the Chancellor should improve the financial inclusion bill passed by parliament by adding a duty on every housing association to encourage their tenants’ credit union membership.
In a letter to Reeves seen by the Guardian, MPs also demanded that credit unions be given access to the government’s Help to Save product, which allows people on low incomes to get a 50p bonus for every £1 they save, which is currently only on offer from mainstream lenders.
They said: “Since 2010, many opportunities have been missed in the UK to help credit unions expand to offer more affordable credit and better savings rates to more people.
“Given the cost of the livelihood crisis, the need to encourage greater investment in all our communities, loan sharks continuing to operate and banks continuing to withdraw from all but the wealthiest high streets, it is time for a renewed cross-government focus on the future expansion of credit unions.”
Credit unions are struggling to make headway in the UK, unlike many countries in the EU and US. Some credit unions mimic banks, offering savings and current accounts from high street premises, while others are more modest, lending relatively small amounts and based on properties shared with other community groups.
But, Membership increased by 9 percent To more than 1.5 million members between 2020 and 2025. outstanding loans reached almost £5 billionAlmost half are made up of credit unions in Northern Ireland, according to the latest data from the Bank of England. The total amount is less than 1/20 of the estimate. £120bn of non-mortgage financial debt It is held by households in England.
Gareth Thomas, MP for Harrow West and one of the signatories, said the US military credit union had become a major lender and a model for three military credit unions in the UK: Serve and Protect; First Defense Finance, part of the Plane Saver credit union; and Forces Finance, part of the London Mutual credit union.
In 2014, Queen Camilla announced that she was a member of London Mutual, which provides services to anyone living or working in the boroughs of Southwark, Lambeth, Westminster or Camden, among others.
He stated that credit unions should be viewed as an alternative to the payday loan industry.
Those who signed the letter include defense committee chairman Tan Dhesi, business and trade committee chairman Liam Byrne and justice committee chairman Andy Slaughter. Other MPs who signed the letter include Labor MPs Stella Creasy, Kate Osborne, Matt Western and Nadia Whittome.
They said: “Because credit unions play such an important role in tackling financial exclusion, we encourage you to publish a plan to double the size of the credit union sector.”
They said that to achieve this aim the chancellor must take a number of measures, including:
Every employee, especially teachers and nurses, should have a “savings right” and be able to ask their employer to let them save directly through a credit union through their pension auto-enrolment scheme.
Every social housing provider should promote credit unions to its tenants and staff.
