A powerful coalition of Labour Members of Parliament is urging the Chancellor to back a dramatic expansion of credit unions across the United Kingdom, aiming to provide millions of low-income households with access to fair and affordable credit.
Cross-Party Push for Financial Inclusion
The call, detailed in a letter to Chancellor Rachel Reeves seen by the Guardian, comes as the nation marks the tenth anniversary of the UK's military credit unions. These specialist unions, which enjoy the patronage of Queen Camilla, offer service personnel an ethical alternative to high-cost lenders. The MPs argue that with minor enhancements to the Financial Inclusion Bill currently before Parliament, the benefits of cooperative lending could be extended far more widely.
The signatories, who include several influential parliamentary committee chairs, propose placing a new duty on every housing association to actively promote credit union membership to their tenants. They are also demanding that credit unions be granted access to the government's Help to Save scheme, a product currently exclusive to mainstream banks that offers a 50p bonus for every £1 saved by low-income individuals.
A Sector Poised for Growth
In their letter, the MPs state: "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." They cite the ongoing cost of living crisis, the retreat of banks from local high streets, and persistent illegal lending as compelling reasons for a renewed government focus.
Despite these challenges, the sector has shown resilience. Membership across all UK credit unions grew by 9% between 2020 and 2025, surpassing 1.5 million members. Total outstanding loans stand at nearly £5 billion, according to Bank of England data. However, this sum is dwarfed by the estimated £120 billion in non-mortgage household debt, highlighting the vast potential for growth.
A Blueprint for Expansion
The MPs, including Gareth Thomas, Tan Dhesi, Liam Byrne, and Andy Slaughter, have outlined a concrete plan to double the size of the credit union sector. Their key proposals include:
- Establishing a "right to save" for all employees, beginning with teachers and nurses, allowing them to save directly with a credit union via payroll.
- Mandating every social housing provider to promote credit unions to tenants and staff.
- Requesting the Prudential Regulation Authority to ease rules on lending between credit unions to improve their financial stability and service range.
The campaign draws inspiration from the success of military credit unions in the United States. In the UK, the three main military unions—Serve and Protect, First Defence Finance, and Forces Finance—follow this model. Queen Camilla, a longstanding member of London Mutual Credit Union, has previously championed them as a vital alternative to the payday loan industry.
With political pressure mounting and a clear policy roadmap on the table, the government now faces a decisive moment to bolster community finance and provide a lifeline to those struggling with the high cost of credit.
