A group of Labour MPs have called on Rachel Reeves to support a huge expansion of credit unions to increase access to cheap credit for millions of people on low incomes.
The move coincides with celebrations on Monday to mark the 10-year anniversary of the UK’s military credit unions, which are supported by Queen Camilla and provide “an ethical and affordable alternative to high-cost lenders” for service personnel.
The MPs, including several parliamentary committee chairs, said the chancellor should enhance the financial inclusion bill going through parliament by adding a duty on every housing association to promote credit union membership to their tenants.
In a letter to Reeves seen by the Guardian, the MPs also asked that credit unions be given access to the government’s Help to Save product, which lets people on a low income get a bonus of 50p for every £1 they save, and is now only on offer from mainstream lenders.
They said: “Since 2010, many opportunities to help credit unions expand in the UK to offer more affordable credit and better savings rates to far more people have been missed.
“Given the cost of living crisis, the need to encourage more investment in all our communities, continuing activity by loan sharks and the ongoing retreat of banks from all but the wealthiest high streets, a renewed cross-government focus on the future expansion of credit unions is overdue.”
Credit unions have struggled to make headway in the UK, in contrast to many countries in the EU and the US. Some credit unions mimic banks, offering savings and current accounts from high street premises, while others are more modest, lending relatively small amounts and based in properties shared with other community groups.
However, membership has grown by 9% between 2020 and 2025 to more than 1.5 million members. Outstanding loans amounted to almost £5bn, with almost half accounted for by credit unions in Northern Ireland, according to the latest Bank of England data. The total amounts to less than one-twentieth of the estimated £120bn of outstanding non-mortgage financial debt held by UK households.
Gareth Thomas, the Labour MP for Harrow West and one of the signatories, said the military credit union in the US had become a huge lender and a model for the three military credit unions in the UK: Serve and Protect; First Defence Finance, which is part of the Plane Saver credit union; and Forces Finance, part of London Mutual credit union.
In 2014, Camilla revealed she was a member of London Mutual, which provides services to, among others, anyone who lives or works in the boroughs of Southwark, Lambeth, Westminster or Camden.
She has commented that credit unions should be seen as an alternative to the payday loan industry.
Signatories of the letter include the defence committee chair, Tan Dhesi, the business and trade committee chair, Liam Byrne, and the justice committee chair, Andy Slaughter. Other MPs who have signed the letter include the backbench Labour MPs Stella Creasy, Kate Osborne, Matt Western and Nadia Whittome.
They said: “As credit unions play a crucial role in tackling financial exclusion, we encourage you to publish a plan to double the size of the credit union sector.”
To achieve this aim, they said the chancellor should adopt a series of measures, including:
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Every employee, starting with teachers and nurses, should have a “right to save” and be able to request that their employer allows them to save directly with a credit union via the pensions auto-enrolment scheme.
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The City watchdog, the Prudential Regulation Authority, should ease the rules on credit unions lending to each other to help them manage their financial security and expand the range of financial services they can offer.
