HM TREASURY News
Release (66/08) issued by The Government News Network on 30 June 2008
Economic Secretary
to the Treasury, Kitty Ussher MP, today confirmed Government plans
to make it easier for families to access the affordable credit
options offered by credit unions by removing the red tape
restricting the growth of the sector.
Kitty Ussher will outline the proposed changes in a speech at the
launch of a new All Party Parliamentary Group on Credit Unions.
The Government proposes introducing a Legislative Reform Order to
enable cooperatives and credit unions to grow in economic terms,
and to help increase their efficiency and ability to compete.
Kitty Ussher said:
"Now more than ever, given families
are feeling the pinch due to the tough situation in the
international economy. We want to make it easier for families to
access the affordable credit on their doorstep that is offered by
credit unions, rather than having to turn to more expensive
schemes, or at the extreme end, illegal loan sharks.
"We want to give all mutuals the chance to flourish - to
liberate them to compete more fairly and freely with companies, so
that common ownership becomes a genuine alternative to the company
form, and for the sector to continue to make a difference to even
more people across Britain.
"Cooperatives and credit unions make a significant
contribution to our economy, and to our society. Bringing the
legislation that governs them into the twenty-first century will
remove some of the outdated and unnecessary restrictions that are
limiting mutuals from growing and competing."
Changes planned in the Legislative Reform Order
include:
Credit Unions
* liberalising membership criteria
and radically changing the "common bond", so that credit
unions can provide their services to a wider range of people
*
making it possible for groups, rather than just individuals, to
become members
* allowing credit unions to pay interest on
members' deposits.
* removing the statutory limit on
non-qualifying members.
* allowing credit unions to charge the
market rate for services such as chequebooks and money
transfers.
Cooperatives
* Removing the £20,000 limit on
risk share capital which is transferable, but not
withdrawable
Cooperatives and Credit Unions
* Giving
societies the flexibility to choose their own accounting
year-ends
* Abolishing the requirement to have interim
accounts audited.
* Lowering the minimum age for being an
officer of a society to 16
* Bringing the fee for a copy of
the society's rules up to date
* Making it easier for
members to dissolve a society, subject to safeguards.
The Treasury will consult soon on the proposed Legislative Reform
Order, with a view to introduction in 2009. Work will continue on
preparing for primary legislation, so that further reforms can be
introduced when an opportunity arises.
Notes for Editors
Cooperatives
1. A cooperative is an autonomous association of persons united
voluntarily to meet their common economic, social and cultural
needs and aspirations through a jointly-owned and
democratically-controlled enterprise (International Cooperative
Alliance definition)
2. There is a present no law on cooperatives in Great Britain.
Many cooperatives are registered under the Industrial &
Provident Societies Act 1965 (IPSA 65)
3. Cooperatives may however establish under other legal forms,
including as companies (under the Companies Act), partnerships,
unregistered unincorporated associations and even as limited
liability partnerships. The FSA is the registrar for IPSs
registered under the IPSA 65 as cooperatives while Companies House
registers those set up as companies.
4. There are over 4,300 cooperatives in the UK, owned by over 11
million people. Together, they create and sustain nearly 200,000
jobs, and contribute £27 billion in turnover, and £8.5 billion in
assets to the UK economy. The most significant in terms of numbers
are consumer and worker cooperatives, cooperative consortiums,
agricultural cooperatives and housing cooperatives.
Credit unions
5. Credit unions are mutually financial organisations run by and
for the benefit of their members. Members generally benefit
through the provision of savings and loans at improved rates
although credit unions are increasingly offering other financial
services such as Child Trust Fund accounts.
6. Credit unions incorporate under the Credit Unions Act 1979 and
are registered and regulated by the Financial Services Authority.
7. Only individuals can be members of a credit union. Membership
is restricted to those that meet a membership qualification that
provides a "common bond" based on criteria such as
geographical area or workplace.
8. Interest on loans from a credit union cannot exceed 2% per
month. Dividends on members' shareholding may not exceed 8%
per annum.
9. There are around 600 credit unions in the UK with
approximately 500,000 members and assets totaling some £400 million.
10. Kitty Ussher outlined the changes in a speech to the UK
Cooperatives conference available and in a speech at the launch of
the All Party Parliamentary Group on Credit Unions. Both speeches
will be available from: http://www.hm-treasury.gov.uk/newsroom_and_speeches/speeches/econsecspeeches/speech_est__index.cfm
11. Review of the Great Britain cooperative and credit union
legislation: a consultation was published in June 2007. Over 200
responses were received and they were published along with the
Government's response in December 2007.
Legislative reform Order
12. Legislative Reform Orders are made under the Legislative and
Regulatory Reform Act 2006. They provide a way for Government to
modify legislation to remove or reduce burdens on persons arising
from legislation, without the need for primary legislation. The
Better Regulation Executive has overall responsibility within
Government for LROs.
Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk
This Press Release and other Treasury publications are available
on the HM Treasury website
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