The Social Security Act 1986 introduced the Social Fund; whereas before, under the old ‘single payments’ system individuals in need had been able to apply for grants for furniture and a vast array of other items, these were now replaced by Budgeting Loans. While it was possible to argue a case for a Community Care Grant – even 27 years on I can still quote the regs – on the whole successful applicants were usually awarded a loan. Individual DSS offices had an annual budget and often ran out of money towards the end of financial year, if an application was declined in March it was usually worth waiting until April to appeal. This curtailing of DSS grants, aimed at cutting what was seen as the ever spiralling welfare bill, drove those on benefits to seek funds for essential household items and, to be honest, Christmas and Birthdays and general cash flow, from doorstep lenders such as Provident (once a shilling in the pound) and rent to buy stores or, in desperate times, the local loan shark. In an economy dependent on people spending money on goods and services the level of personal indebtedness rose to unprecedented levels.
By the time I started working for a North Birmingham Community Credit Union in 2005, credit unions (at least those working in local communities) were firmly viewed as in the camp of the sub-prime sector. So how had this come about? Changes in legislation in 1994 had removed the restrictions on the size of a credit union common bond (catchment area) which had previously been set at 30,000. As a result many of the local government employee credit unions such as Leeds and Birmingham extended their common bond to cover all the municipal district’s residents and workers. Further changes in 2004 had allowed for the maximum interest rate to double to 26.8% while at the same time the Bank of England rate had begun what would be a continuous plummet and was under 5%. Mainstream lending was becoming cheaper, more available and easier to apply for while community credit unions were becoming more expensive, less targeted to specific employees and generally regarded as a lender of last resort.
Around the same time both central and local government cottoned on to the idea of well-being. That is, the better an individual felt about themselves and their situation the more likely they were to vote for the party in power. It was apparent that people with a high level of indebtedness, struggling to make ends meet were generally unhappy, and in addition to being disaffected with national and local governments, this had a detrimental effect on their communities and society as a whole. Between 2005 and 2011 there was a high level of input in grants and time from the DWP and many local authorities, recognising that access to affordable loans was a key issue amongst the financially excluded. Unfortunately this reinforced the idea that credit unions exist solely for the benefit of the poor without acknowledging that all individuals require choice when it comes to financial services, though for those who don’t decide on a lender solely on cost, the choices mainly revolve around ethics, fairness, justice and transparency. Despite the work in recent times, of bodies such as the Archbishop’s Task Force, this perception has not gone away. When Church Times did a feature on options for those seeking ethical investments in October 2015 they did not consider including CMCU or credit unions in general. So while the social worker or housing officer might recommend the credit union to their service users, they go elsewhere for their savings and loans.