UK Government To Modernise Legislation Governing Mutuals Sector

by Amanda Banks, Tax-News.com, London

31 December 2007

Economic Secretary to the UK Treasury, Kitty Ussher, has sought to reiterate the Government's support for a successful mutuals sector with the publication of a document setting out its intention to modernise legislation for cooperative and credit unions, when parliamentary time allows.

Following consultation, the Government has proposed a series of measures that would bring the legislative framework governing the sector up-to-date, in order to better equip cooperatives and credit unions to compete with proprietary companies and face the commercial realities of the 21st century.

Proposed changes would:

• Remove statutory obstacles to the appropriate use of electronic communications between societies, their members and the authorities;
• Implement the provisions of the Enterprise Act 2002 to bring the administration arrangements for certain mutual societies in line with companies;
• Make changes to the membership criteria for credit unions ('the common bond');
• Allow credit unions to admit corporate or unincorporated bodies to their membership; and
• Allow credit unions to pay interest on members' deposits.

Kitty Ussher exlained that:

"Responses to the initial consultation clearly show that there is an overwhelming commitment to, and recognition of, the need for change to legislation for both cooperatives and credit unions."

"The Government is committed to ensuring the ongoing success of the mutuals sector by removing barriers to their growth and development. The Government's vision is of a thriving and growing sector, where common ownership is a genuine alternative to the company form, and where mutuals can compete on a level playing field, offering diverse products and services, and delivering in their local communities."

She concluded:

"We're proud of the contribution made by cooperatives and credit unions. Updating the legislative framework in which they operate will be key to allowing them to develop and expand, enabling better service for members and providing greater choice and diversity in the financial services sector."

Cooperatives and credit unions have a combined membership of over 30 million, and total assets in excess of GBP400 billion, and play an increasingly important part in delivering public services and widening choice for consumers. The sector is also a significant employer, with over 8,000 cooperatives in the UK.

The Government aims to develop a sustainable, flexible legal framework for the sector to enable it to grow and develop over the next 10 to 20 years in line with changing needs and economic circumstances.

The Treasury has established a working group with representatives of the sector that will take forward detailed work on these proposals in the New Year.

The Government intends to bring forward primary legislation to address the issues raised in the consultation, and to help deliver an appropriate legislative framework for the sector, subject to the Parliamentary timetable.

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