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HM Treasury - Consultation on Social Investment Tax Relief

Summary of response

ABCUL believes that, as co-operatives providing ethical financial services often in competition with high-cost lenders and with a view to extending financial inclusion in society, credit unions should be eligible to benefit from investments which attract Social Investment Tax Relief. Credit unions’ social value is accepted and recognised by a range of organisations and authorities and, as such, we feel that it should also be recognised by the proposed Social Investment Tax Relief. Such organisations include:

  • UK Government – the Government has provided various forms of support for an expanded and sustainable credit union sector, most notably the DWP’s Credit Union Expansion Project, and has done so in recognition of the social value credit unions create.
  • Big Society Capital – BSC has recognised credit unions as social enterprises that can benefit from investments channelled from BSC through financial intermediaries in acknowledgement of their role in extending financial inclusion.
  • Prudential Regulation Authority and Financial Conduct Authority – smaller credit unions receive preferential fees for regulatory authorisation in recognition of the social value they engender.
  • Various social enterprise representative bodies – bodies such as Social Enterprise UK, Social Enterprise Mark, Social Enterprise Scotland, the Welsh Social Enterprise Awards, Social Enterprise London and other regional and district representative groups all acknowledge credit unions’ status as social enterprises.

Further evidence of credit unions’ status as social enterprises is provided by the objects of a credit union as defined by the Credit Unions Act 1979 which are four-fold:

  • the promotion of thrift among the members of the society by the accumulation of their savings;
  • the creation of sources of credit for the benefit of the members of the society at a fair and reasonable rate of interest;
  • the use and control of the members’ savings for their mutual benefit; and
  • the training and education of the members in the wise use of money and in the management of their financial affairs.

These objects demonstrate the clear social goals which credit unions are required to fulfil by statute. While it is true that these benefits accrue largely to the direct membership of the credit union, the membership of most credit unions is open to large groups of potential members defined by residence of working in a certain area or being employed by a particular employer – the benefits, therefore, are not exclusive to a restricted group in the sense envisaged by the consultation document.

Similarly, as co-operatives, credit unions are registered under the Industrial & Provident Societies (I&PS) Act 1965 and adhere to the principles thereby laid down. As such, the Financial Conduct Authority is required to approve upon registration that the credit union, as an I&PS, has a clear community of interest. Furthermore, the FCA decides registry matters with reference to the International Co-operative Alliance’s Statement of Co-operative Identity, the seventh principle of which is “Concern for Community” and commits all co-operatives, including credit unions, to operating for the benefit of their wider community.

The key point of this submission, therefore, is to ask HM Treasury to extend the criteria for investee entities to cover either all bona fide Industrial & Provident Societies or, at the very least, to extend it to those entities registered as credit unions under the Credit Unions Act 1979. We believe this is fair and appropriate given credit unions’ general acknowledgement as social enterprises and the efforts that various bodies are making to encourage the growth of the sector – growth that would be encouraged by additional investment and incentives towards that goal.

The full response is available to download on the right of the screen.

ABCUL - September 2013