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December 17, 2008

Credit Unions a growing force

Calls to ‘socialise’ our banking system will continue to gather momentum and there is a growing appreciation of the opportunities presented by the credit union movement. Among options being discussed are making CU services available through the Post Office network and possibly delivering the Government’s £770m Social Fund

Ian Alexander, Newstart Magazine

Government considers delegating authority to make Social Fund loans

Credit unions and other third sector organisations might be empowered to issue loans on behalf of the government’s much-maligned Social Fund under proposals announced this week.

The fund, which provides more than £770m-worth of loans and grants to benefit claimants, is set to be over- hauled so that advice on budgeting and saving could also be provided to tackle underlying financial issues.

A government consultation paper also pledges to look at how community care grants could have a greater focus on vulnerable people and proposes a single loan system to replace crisis and budgeting loans.

The minister responsible for the Social Fund, Kitty Ussher, said: ‘What has struck me is in some parts of the country there is fantastic expertise and enthusiasm from a variety of external organisations -including, but not limited to, charities, debt advice and credit unions -that we could, in theory, work with to make our service even better, making affordable credit available to more people and providing greater financial advice and support in difficult economic times.’

Around three million claimants benefit from the one-off Social Fund payments, which help steer vulnerable people away from loan sharks.

But the performance of the fund, currently administered by Jobcentre Plus, was heavily criticised last year by the work and pensions commit- tee, which said it was ‘letting down’ the poorest in society and claimed attempts to centralise the system had failed (New Start, 23 May 2007).
Moves to contract out the provision of Social Fund loans and financial advice to private sector firms and the voluntary sector were rejected in a feasibility study earlier this year due to the economic climate.

Mark Lyonette, chief executive of the Association of British Credit Unions, said: ‘With proposed new legislation which will allow credit unions to expand to more areas of the country and enable more people to access their services, we would be happy to work with the government to explore the possibilities of delivering this service; something which would be far more accessible if credit union services were to be made avail- able through the post office network.’

The proposed changes could be in place from 2010.

Consultation responses should be sent by 23 December.

The Social Fund: a new approach, -new-approach.asp