Minister calls on landlords to boost credit unions ahead of likely Post Office link-up

Published by Ross Macmillan for 24dash.com in Housing and also in Central Government, Communities, Local Government

Welfare reform minister Lord Freud has called on councils and social landlords to help boost their local credit unions in a bid to ensure the poorest in society have equal and fair access to financial services.

The Government has spent £113 million in the past six years on the movement and sees it playing a key role in the role out of Universal Credit.

Universal Credit, which comes in from October 2013, will replace six income-related work-based benefits, including housing benefit, and will be paid to claimants monthly.

Responding to a question in the House of Lords last week on whether councils should be encouraged to help with the start-up costs of credit unions - in particular with the very high council taxes that are levied on premises - Lord Freud agreed.

He said: "Yes, my Lords, credit unions are local organisations. It is very important that social units in the locality help them. Just as important as local authorities are social housing groups. There are already 20 such groups working with credit unions, which is very important."

He added: "...we are determined to support it in such a way that it becomes viable in the long term. We are attacking illegal loans, which are coming down a bit. There are various supports for poorer people, such as payday loans, rent-to-buy and home credit. It is a very complicated picture, but we are determined to push this new factor as hard as we can."

A study commissioned last year by Lord Freud looked at how the Government could support credit unions. An announcement on its findings is due to be made shortly.

Lord Freud said that making credit union accounts accessible via post office counters was part of the review and is under "active consideration".

Asked whether the Government could adopt a more ambitious target of doubling the totality of consumer credit with unions from 2% to 4% in the next five to seven years, he said it would be "difficult".

Lord Freud said: "It is very difficult to grow an industry from an organisational base that is not yet viable. We need to make sure that individual institutions are able to handle the growth that we want them to take on. That is not just about money; that is about trying to make the right changes to management and organisation. It is not an easy thing to do."

New powers that came in last month free the credit unions to extend their services to community groups and social housing tenants.

A number of housing associations are looking to "beef up" their local credit unions during a 12-month demonstration project that will see samples of housing association and council tenants paid their housing benefit directly.

The project is to determine the safeguards and support landlords and tenants need under Universal Credit.