In the face of bank branch closures and increasing financial exclusion, Co-operative Party MPs Gareth Thomas and Chris Evans called on Treasury Minister Harriet Baldwin to redouble efforts to stimulate further expansion of financial mutuals, identifying them as a crucial way of ensuring access to banking services for all.
Gareth Thomas cited communities such as a Thamesmead estate of 50,000 homes in South London where residents currently face a 40 minute car journey to reach their nearest bank as the reason why efforts to support and champion the sector cannot wait. He stated that:
This trend is towards bank branch closures, and we tend to see that more in areas of deprivation and of the greatest need. Given that in the areas people often face high interest rate alternatives…we should hear more from the government about how they intend to create more responsible finance.
Both Co-operative Party MPs argued that credit unions ought to be central in the Government’s response to such financial exclusion. Chris Evans pressed the Minister to look at the potential of legislation to free credit unions from current regulation that prevent their expansion. This would enable them to grow into new markets, eventually forming a national network of community owned banks. Gareth Thomas asked Ministers whether it was not time for public sector organisations such as the NHS or TFL to be given a statutory duty to promote credit union membership to their employees.
Gareth Thomas’ contribution sought to highlight the role of other types of financial mutuals, such as Building Societies. Building Societies are particularly effective in serving their communities because, he argued, they do not face shareholder pressure to simply maximise profits. It is of course not just individuals who benefit from mutual finance. Gareth highlighted the £250 million worth of lending that responsible finance organisations such as Community Development Finance Institutions (CDFIs) pump in to small and medium size business each year.
The pair also raised the need for greater amounts of transparency within the provision of financial services, backing the Community Investment Coalition’s call for banking data to be made more usable and accessible. This, they noted, could form the backbone of a UK-style Community Reinvestment Act which obliges lenders to serve all parts of the geographical areas they serve, including those with lower-incomes.
Within both frontbench responses from John McDonnell (Shadow Chancellor) and Conservative Minister picked upon these themes within the debate with John McDonnell stating:
Credit Unions are critical to our society to our society now, particularly in areas of deprivation…I agree with his [Chris Evans] call for Government assistance to help credit unions take that step up to become local community banks; they have great potential for that.