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Ed Balls publishes Co-operatives and Credit Union Review consultation

HM TREASURY News Release (69/07) issued by The Government News Network on 21 June 2007

Economic Secretary, Ed Balls signalled the government commitment to the mutual sector today by publishing a consultation document that aims to ensure the sector has the best toolset to operate in the modern economy.

The consultation will seek to identify the legislative needs of cooperatives and credit unions and put forward the best solutions to allow them to operate effectively in today's and tomorrow's business world.

Almost 50 per cent of the UK population belongs to a mutual organisation. The sector overall has over 30 million members, and combined total assets in excess of £400 billion.

Though membership of mutuals has grown over the last two decades, there have been limited changes to governing legislation. In November 2006 the Economic Secretary announced that the Government would review this, following concerns that existing legislation is out of date, and is in some instances restricting development and competitiveness of the sector.

Ed Balls said:

"The challenges of the 21st century, increased expectations from members and global competitive pressures make it imperative that we have a legislative framework that will facilitate the growth and expansion of the mutual sector.

"I hope that this consultation will result in the creation of a modern legislative framework for the mutual sector in Great Britain enabling it to stimulate innovation and competition."

The consultation will take a two-stage approach. The first stage, published today, seeks views on the issues raised by stakeholders about the current legal framework, addressing issues identified by cooperative and credit union sectors as impeding development and in need of review.

The second stage will involve consulting on firm proposals for legislative reform, should a case for reform emerge. It will identify the alternatives for implementation, possible advantages and limitations and provide clear options based on results of the first stage of the consultation.

Any changes will take into account the unique aspects of the sector especially their mutuality and huge disparity in sizes, be flexible enough to allow for future challenges, allow wider access to new and existing members, provide better services and improve competition both within and outside the sector.

Ed Balls said:

"Apart from the provision of financial and other services sector has an important role to play in helping to deliver government policy on financial and social inclusion and helping to build financial capability.

"The Government's £36 million Growth Fund to support credit unions to expand their loan service to financially excluded people is an example of the effective working relationship which will be further strengthened by this consultation.

"The long-term aim is to provide the mutual sector with a modern legislative framework which will enable them to compete even more effectively in the modern economy, and to continue to fulfil their valuable social role."

The consultation will impact on over 8000 industrial and provident societies and over 500 credit unions and runs for 12 weeks, closing on 12 September 2007.

NOTES TO EDITORS

1. At the Building Societies Association annual lunch on 9 November 2006 Ed Balls announced that the Treasury in partnership with representatives of the Cooperative sector and other stakeholders would undertake a review of the Cooperatives legislation - the Industrial and Provident Societies and the Credit Unions Act.

2. Cooperatives are defined by the International Cooperative Alliance (ICA) as "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". The majority of GB cooperatives meet these criteria.

3. Most of the Great Britain cooperative sector are registered under the Industrial and Provident Societies Act 1965 (IPSA 65) although they may also register as other legal forms including as companies (under the Companies Act), partnerships, unregistered unincorporated associations and even as limited liability partnerships.

4. As at December 2005 there were 8,132 'live' IPSs registered with the Financial Services Authority, with about 19 million members and total assets of nearly £120 billion. The most significant in terms of numbers and assets are consumer and worker cooperatives, cooperative consortiums, agricultural cooperatives and housing cooperatives.

5. Credit Unions are financial cooperative societies offering their members loans out of the pool of savings built up by the members themselves. The Credit Unions Act 1979 (CU Act 79) is the main Act of Parliament governing credit unions in Great Britain, however they are registered under IPSA 65 and are subject to most of its requirements.

6. There were 567 registered credit unions in Great Britain as at 30 September 2006 with just under 1/2 million members and total assets of just under £500 million.

7. 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

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