Balls Launches Consultation On Credit Unions

by Robin Pilgrim, LawAndTax-News.com, London

22 June 2007

Economic Secretary to the UK Treasury, Ed Balls, on Thursday announced the publication of a consultation document on credit unions and cooperative organisations which "aims to ensure the sector has the best toolset to operate in the modern economy".

The consultation will seek to identify the legislative needs of cooperatives and credit unions and put forward the best solutions to allow them to operate effectively in today's and tomorrow's business world, Mr Balls revealed.

According to Treasury figures, almost 50% of the UK population belongs to a mutual organisation. The sector overall has over 30 million members, and combined total assets in excess of GBP400 billion.

Though membership of mutuals has grown over the last two decades, there have been limited changes to governing legislation. In November 2006, the Economic Secretary announced that the Government would review this, following concerns that existing legislation is out of date, and is in some instances restricting development and competitiveness of the sector.

Mr Balls explained that:

"The challenges of the 21st century, increased expectations from members and global competitive pressures make it imperative that we have a legislative framework that will facilitate the growth and expansion of the mutual sector."

"I hope that this consultation will result in the creation of a modern legislative framework for the mutual sector in Great Britain enabling it to stimulate innovation and competition."

The consultation will take a two-stage approach. The first stage, published yesterday, seeks views on the issues raised by stakeholders about the current legal framework, addressing issues identified by cooperative and credit union sectors as impeding development and in need of review.

The second stage will involve consulting on firm proposals for legislative reform, should a case for reform emerge. It will identify the alternatives for implementation, look at possible advantages and limitations, and provide clear options based on the results of the first stage of the consultation.

Any changes will aim to take into account the unique aspects of the sector, especially their mutuality and huge disparity in sizes, will be flexible enough to allow for future challenges, and will allow wider access to new and existing members, provide better services and improve competition both within and outside the sector.

The Economic Secretary concluded:

"Apart from the provision of financial and other services, the sector has an important role to play in helping to deliver government policy on financial and social inclusion and helping to build financial capability."

"The Government's GBP36 million Growth Fund to support credit unions to expand their loan service to financially excluded people is an example of the effective working relationship which will be further strengthened by this consultation."

"The long-term aim is to provide the mutual sector with a modern legislative framework which will enable them to compete even more effectively in the modern economy, and to continue to fulfil their valuable social role."

The consultation will run for 12 weeks, closing on 12 September 2007.

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