As Shadow Communities Secretary, my brief includes financial inclusion.
I also speak for my party on Europe and am a member of the Assembly’s External Affairs Committee, examining the implications for Wales of withdrawal from the European Union and working to ensure Welsh interests are safeguarded.
Unlike the idiots who were allowed to wreck our banking system, I am a qualified banker, who worked in the building society sector prior to my election to the National Assembly for Wales in 2003.
Although my Building Society successfully rejected demutualisation, it had fallen into the same trap as the big banks and several other building societies in appointing unqualified “wide-boys” at the top.
In consequence, they were amongst the Building Societies which had to be rescued by the Nationwide Building Society in the financial crisis of 2007-2010.
De-mutualisation took hold internationally during the final decades of the 20th Century, generating the growth of new mutual financial organisations – providing financial services at competitive rates to members and supporting sustainable community development.
As the Centre for Social Justice has stated, we need to “enable consumers to take on credit without taking on unmanageable debt, allow debtors access to the type of debt advice right for them, give every consumer the opportunity to learn how to manage their money effectively, and encourage Britain to develop a savings culture again”.
Much will depend upon Credit Unions in Wales working together and growing their saver base, enabling the development of smaller, shorter term loans and other products.
Financial affordability, education and inclusion are key, with Credit Unions making personalised assessments and serving many who would otherwise be excluded from mainstream credit.
Let me declare that two of my daughter’s work in the third sector, one as a Money Adviser and the other as a Debt Adviser.
The UK Credit Unions Act freed credit unions to work with organisations such as housing providers, community groups, employers, social enterprises and charities to bring financial services to new groups of people.
Credit Unions need to grow and become the preferred alternative to high interest lenders.
In my meetings with the Association of British Credit Unions Limited, they told me that the key issue facing Credit Unions’ financial sustainability was the scheduled end to Welsh Government funding in 2017.
They also told me that they were working with Credit Unions in Wales to develop a solid evidence base showing added social value and to focus on broadening their membership base collaboratively, but needed the next Welsh Government to provide capacity building support for the transition beyond 2017.
I repeatedly called on the Welsh Government to deliver this and welcomed their announcement of over £400,000 for credit unions during 2017-18.
It is estimated that in 35 million of the 52 million loan transactions annually in the UK, people would save by using a Credit Union, yet only 2.5% of people in Wales currently use Credit Unions – compared to 46% in the United States.
When the law changed in 2012, Credit Unions were allowed to advertise fixed rate savings for the first time- and it is noted that when the Gateway Credit Union, based in Pontypool, opened a savings account offering 1.75% the following year, they were swamped.
Speaking in the Assembly Chamber last month, I called on the Welsh Government to examine the not-for-profit community banking model developed in Wales by Responsible Finance:
- working with credit unions, where credit unions can’t.
- raising capital from other social enterprises, businesses, Local Authorities and Town Councils
- providing finance and support for people, businesses and social enterprises that cannot access finance from high street banks.
- And working with others, including WLGA, Cartrefi Cymru and Wales Co-operative centre, to develop a public bank model.
They are concerned that the Welsh Government’s Development Bank could end up competing with them at higher cost, when there is a compelling business case for the Welsh Government to support them with very limited funds - where £100,000 Welsh Government funding would enable £3 million lending and deliver jobs for £4,000 that would cost the Welsh Government model £35,000 each.
The UK Government response to the House of Lords European Union Committee Report, “Brexit: Financial Services”, published last December states “The future relationship should allow for the freest possible trade in goods and services, including financial services, between Britain and the EU’s member states.”
Impact data released by the School for Social Entrepreneurs demonstrates how building bottom up change through the social economy could be done.
The referendum result and economic uncertainty clearly poses challenges for the social sector.
Whatever comes next, it is needed now more than ever – building on the commitment of social investors to work in partnership with them to meet the challenge.
ENDS