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The failure of joined up Government

With the recession upon us and people struggling to make ends meet one would have thought that any Government worth its salt would do everything it could to keep people out of debt and out of the hands of loan sharks. Certainly that is the rationale behind previous support for credit unions, who have built up a good reputation for working in socially and economically deprived areas and helping to keep people solvent.

However, I have discovered that because Credit Unions are now regulated by the Financial Services Authority rather than the Registrar of Friendly Societies, who had the responsibility before 2000, they are being treated like any other financial institution and are required to pay to the FSA a total of £8.5 million to help cover the cost of baling out the banks.

I am a member of LASA Credit Union and I recently attended the launch of a partnership initiative designed to help homeless people in Swansea between The Wallich, the Swansea Bond Bank, and Swansea’s LASA Credit Union. It is a good example of the work that is going on. Can anybody imagine a High Street bank helping homeless people get a roof over their heads?

I am shocked therefore that organizations such as Credit Unions, who have been set up to tackle financial exclusion are being targeted in this way to help pay off the cost to the taxpayer of rescuing insolvent banks.

When £19.7 billion of our money was paid out to rescue the greedy bankers from the consequences of their own folly, last year, my understanding was that the banks that got the money would pay the taxpayer back. Instead the FSA is levying a charge on all the organisations it controls, including each and every UK credit union so as to meet the debt.

Credit unions are not the same as banks and other High Street lenders. They are owned by their members, many of whom help to run their credit union as unpaid volunteers, offer loans at low interest, and encourage saving. Many of their members are on fixed and low incomes.

This charge is particularly hard to swallow when we remember that part of the problem was caused by inadequate regulation of the banks by the FSA. It is the responsibility of the banks who borrowed our money to repay it not community based co-operative organisations working to help alleviate hardship and poverty.

There is little time to put this right. Credit Unions have been told that if the first instalment of interest is not paid on or before 1st September then they will incur penalties. Surely Labour Ministers cannot allow that to happen.

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  3. Not very joined up Conservative thinking

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12 Responses

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  1. citizenx says

    Are you able to give some detail as to how this is supposed to work (i.e. how much – is it a percentage of monies held, levy on membership, etc)?

    Does seem an extraordinarily poor decision but whats new with government and the FSA?

  2. Peter Black says

    All I have is a letter from a Credit Union to the Treasury Minister which is reproduced on my website at http://www.southwaleslibdems.org.uk/news/000728/assembly_member_demands_labour_rethink_on_credit_union_charge.html The FSA have confirmed that the story is correct.

  3. citizenx says

    Thank you for highlighting this story Peter, I wouldn’t have known of it otherwise.

    I think they speak for me when they say

    “The board of directors consider that the demand for any exceptional levy is immoral and unreasonable and we are therefore not prepared to authorise any payment in this respect.”

    Lets hope someone in government see sense.

  4. Sam says

    Has WAG taken a position on this – or is this a ‘new’ revelation?

  5. Peter Black says

    It is new. I have written to Treasury and drawn Vince Cable’s attention to it.

  6. Mark Reckons says

    Good work Peter. I have blogged on this myself here:

    http://markreckons.blogspot.com/2009/08/why-are-credit-unions-being-made-to.html

    I am also trying to encourage people to tweet using the hashtag #NoCreditUnionLevy

  7. Simon Jerram says

    I can see the logic of getting successful large institutions to share their portion of the bill, because their actions contributed to the climate in which similar institutions failed.

    Credit unions on the other hand…

    The problem, partially, has been that some banks have got too big to fail and too unfocussed to be responsible. The solution has been to bail out bigger institutions, while forcing smaller ones to merge or be bought out. This may cure the symptoms of the banking crisis, while worsening the cause.

  8. The Economic Voice says

    The banks should be paying a levy to the Credit Unions to help put right what they got so badly wrong.

  9. bill says

    I think you’ll find that Douglas Alexander is Secretary of State for International Development, not ‘a treasury minister’ Peter.

Continuing the Discussion

  1. The banks won’t help you, but you must help the banks « What You Can Get Away With linked to this post on August 20, 2009

    [...] news from Peter Black this morning that the FSA will be introducing an extra charge on Credit Unions (totalling around £8.5m) to help [...]

  2. Britain is dying  linked to this post on August 22, 2009

    [...] the restrictive regulations. (To give an example of how desperate these regulations have become, read this, punishment for attempting self [...]

  3. BLOGDIAL » Blog Archive » Britain is dying – action is needed now linked to this post on August 22, 2009

    [...] the restrictive regulations. (To give an example of how desperate these regulations have become, read this, punishment for attempting self [...]