By Tulip Siddiq MP, Shadow Economic Secretary to the Treasury (Shadow City Minister). This article was first published in the Autumn edition of Society Matters magazine.

Britain has a long tradition of fostering the principles of co-operation and mutual support, and the histories of the mutual movement and the Labour Party in this country are closely entwined.

Building societies and credit unions are an integral part of this tradition, and they continue to support working people to access affordable financial services and gain greater control over their lives. 

Building societies play a vital role in providing people with a low risk, member focused banking alternative, and research has shown that trust in building societies is consistently high. Building societies are also typically well capitalised, making the sector more resilient to financial shocks and better able to lend and plan for the long-term.

Credit unions serve an extraordinary 1.9 million members and 2.1 million depositors across the UK. There is currently around £1.7 billion in loans to credit union members, providing a crucial lifeline to the most financially vulnerable in society and preventing people from turning to loan-sharks and high interest loans.

Despite the distinctly British character and history of credit unions and building societies, and the important role they play in promoting financial responsibility and resilience among their members, the sector’s needs are too often ignored by this Conservative Government.

The number of mutual credit unions has plummeted by more than 20% since 2016. It has been ordinary families who have paid the price, with many forced into the arms of unethical lenders. This is only going to get worse as the Conservative’s cost-of-living crisis deepens.

This is because credit unions and building societies are working within an outdated regulatory regime – leaving them unable to compete on a level playing field with standard providers.

With the UK’s departure from the EU we must rethink the rules governing the sector to give greater flexibility and allow building societies and credit unions to grow.

While the recently published Financial Services and Markets Bill does contain some welcome and long overdue provisions, such as enabling credit unions to offer a wider range of products, so far, the Treasury’s plans for the sector have lacked ambition.

If the Government is serious about supporting consumers to gain greater control of their personal finances after Brexit, and supporting credit unions and building societies to grow and reach their full potential, Ministers must use the upcoming Bill to put forward a radical vision for the sector.

A Labour Government would provide this radicalism by doubling the size of the co-operative and mutual sector. This will require regulators, such as the FCA and PRA, to have an explicit remit to report on how they’ve considered specific business models, including mutual credit unions and building societies, to ensure they’re given parity of esteem with standard providers.

The Labour Party and the mutual movement share a commitment to building a society in which power and wealth are fairly shared. Together we can build a stronger and fairer Britain outside of the EU.

What Next

As Labour’s Shadow City Minister, I will be pushing the Government to address the barriers facing the mutual sector. Please follow me on twitter at @TulipSiddiq to receive updates on my work on the Bill in the weeks and months ahead.

The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.