A coalition of senior Labour MPs is urging Chancellor Rachel Reeves to spearhead a significant expansion of credit unions across the UK, aiming to provide millions of low-income households with access to affordable credit. This push for greater financial inclusion coincides with the tenth anniversary of the UK's military credit unions, which enjoy the patronage of Queen Camilla and offer service personnel a vital alternative to high-cost lenders.
Cross-Party Call for Legislative Change
In a letter to the Chancellor seen by the Guardian, the MPs, including several influential parliamentary committee chairs, have called for enhancements to the financial inclusion bill currently progressing through Parliament. Their central proposal is a new duty for every housing association to actively promote credit union membership to their tenants.
The group also demands that credit unions be granted access to the government's Help to Save scheme. This product, currently only offered by mainstream banks, provides a 50p bonus from the government for every £1 saved by someone on a low income. The MPs argue that such a move would directly support the financial resilience of those most in need.
A Sector Poised for Growth
Despite their potential, credit unions have historically struggled to gain a strong foothold in the UK's financial landscape, especially when compared to their prevalence in the United States and European Union. They range from larger institutions with high street branches offering current accounts to smaller, community-based groups providing modest loans.
However, recent data indicates a positive trend. Membership grew by 9% between 2020 and 2025, surpassing 1.5 million members. Total outstanding loans stand at nearly £5 billion, with almost half of that sum attributed to the robust credit union sector in Northern Ireland. Nevertheless, this total represents less than 5% of the estimated £120 billion in non-mortgage consumer debt held by UK households.
Royal Backing and a Model for Success
The campaign highlights the success of military credit unions as a blueprint for wider growth. Queen Camilla, a known advocate and member of London Mutual Credit Union since 2014, recently helped mark their 10-year anniversary. She has publicly positioned these community lenders as an ethical alternative to the payday loan industry.
Gareth Thomas, MP for Harrow West and a signatory to the letter, pointed to the enormous scale of military credit unions in the US as an inspiration for the UK's three services-focused unions: Serve and Protect, First Defence Finance, and Forces Finance.
The letter, also signed by defence committee chair Tan Dhesi, business committee chair Liam Byrne, and justice committee chair Andy Slaughter, sets a bold target. The MPs are calling on the Treasury to publish a formal plan to double the size of the credit union sector.
To achieve this, they propose a suite of measures:
- Introducing a "right to save" for all employees, beginning with teachers and nurses, allowing them to save directly with a credit union via payroll, similar to pension auto-enrolment.
- Mandating all social housing providers to promote credit unions to tenants and staff.
- Requesting the Prudential Regulation Authority to ease rules on lending between credit unions, helping them manage risk and expand their service offerings.
The MPs concluded their appeal by stating that given the ongoing cost of living crisis, the retreat of banks from communities, and the persistent threat of loan sharks, a renewed government focus on expanding affordable credit options is urgently needed.
