Proposals To Update UK Mutual Sector Unveiled

by Robert Lee, Tax-News.com, London

29 October 2007

Economic Secretary to the UK Treasury and City Minister, Kitty Ussher last week signalled her commitment to the mutual sector by delivering two key reform proposals requested by the sector.

Ms Ussher was in Manchester to meet with leading members of the cooperative and credit union sector.

The Minister revealed that the Government will publish a consultation paper in December 2007 setting out how it intends to take forward legislative reform for the sector.

The Minister also announced that she fully supports calls from the sector to relax membership qualifications for credit unions - usually referred to as the common bond, and to allow electronic communication between cooperatives and their members and other stakeholders.

Currently the scope of the common bond (membership qualification) for credit unions is restricted by law to, for example, residing in a particular locality, following a particular occupation, being employed by a particular employer. For example, a housing association could not affiliate with a single credit union because its properties could be established over several geographic sites.

The lack of electronic communication for formal purposes means transactions between cooperatives and their members and other stakeholders has to be paper-based, which is not sensible or efficient in the modern world.

Making these two amendments are important steps in allowing the cooperative sector to develop and expand as two significant barriers that inhibit their growth and development will have been removed.

Ms Ussher explained that:

"The excellent services provided by cooperatives and credit unions take place within an outdated legislative framework and overhauling this will be key to achieving a significant expansion of the sector."

"As a first step I am today announcing that we will make an order under the Electronic Communications Act 2000 to permit cooperatives to communicate with their members and the authorities electronically. I can also announce today that we will work with the FSA to include tenants and employees of housing associations within the common bond of existing credit unions."

"I want the sector to thrive and grow further, to be widely seen as a genuine alternative to proprietary companies across the country, not stereotyped as 'old fashioned' or confined to its Northern roots. This is a vision of credit unions as the modern day equivalent of 18th century 'town banks', providing a local, trusted, alternative to the national banks on every high street."

"To achieve this vision means removing barriers to cooperatives competing fairly in the marketplace, and enabling them to bring a greater range of services to a wider range of people. I'm determined to make this happen, and today's announcement and December's consultation paper will help us to deliver this goal."

The consultation document announced today to be released in December 2007 will set out firm legislative proposals for reform, taking into account alternatives for implementation, possible advantages and limitations, and providing clear options based on results of the first stage of the consultation.

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