MoD pondering military credit union

The Ministry of Defence will look at the possibility of taking money from forces personnel's wages to invest in a military credit union if a credible provider comes forward, defence minister Philip Dunne has said.

The MoD broadly supports the concept of a military credit union
The MoD broadly supports the concept of a military credit union

Mr Dunne acknowledged that armed forces personnel are sometimes exploited by payday lenders and said the MoD broadly supported the concept of a military credit union to help them save.

But such a credit union would be run by another organisation, whether it is a charity or another provider such as an existing ethical investment business.

He said the Government has this year had positive discussions with the credit union industry and service charities such as the Royal British Legion but want one of the organisations to take the lead.

Mr Dunne said the Association of British Credit Unions Ltd (Abcul) has expressed a wish to take the discussions further and that the MoD "stand absolutely ready to do so".

During a Westminster Hall debate, Mr Dunne said: "If we get into discussions with a serious, credible entity that's willing to establish a credit union we can certainly look at the possibility of payroll deductions as one means of providing either interest payments or investment through their payroll savings products.

"But I can't commit in the absence of knowing which party we're dealing with and the suitable structures around which it would be placed to be able to commit to do that.

"Military payrolls are not uniform or simple. It strays rather beyond my departmental responsibilities and therefore for me to commit other ministers and other elements of the department to things about which I am not expert would be a career-inhibiting thing to do, so I'm not going to do that.

"But I will certainly undertake that if we pursue discussions with a credit union this can be something that can be on the agenda for discussion."

He was responding to Labour frontbencher Gareth Thomas, who is calling on the Government to fund a feasibility study into a military credit union part-funded by payroll deductions.

Mr Dunne said: "You have asked repeatedly about the prospect of the Ministry of Defence funding a feasibility study.

"I think we are of a mind to support one or more organisations that wish to take the lead in investigating the feasibility of a credit union but we don't think it's appropriate for us to take the lead.

"So as and when an organisation steps forward then that is something that we are willing to look at with them and to work with them on how we can best support the establishment of a credit union.

"But we think this would be best done by an organisation that is already embedded with relationships with service personnel and their families."

Opening the debate, Mr Thomas had said: "Our forces personnel often face particular challenges in accessing financial services and have sometimes limited opportunities to develop financial management skills.

"In addition, as Lord Ashcroft has pointed out, there are often hard transitions from military to civilian life and there exists a potential for worrying about debt to be a life-threatening distraction.

"So I hope you will in your remarks outline your commitment to a feasibility study to establish a military credit union to report by the end of this Parliament."