My Lords, I am most grateful to the noble Lord, Lord Tomlinson, for the opportunity to speak on such an important and timely issue. I am the chairman of an insurance brokering and financial services organisation and in my business life I have supported mutual insurance offices and building societies for the arrangement of insurance policies and mortgages. A number of these organisations have demutualised to become limited liability companies, but I am very much in favour of mutual organisations. I support and promote the credit unions, because they incorporate the ideals of mutuality and transparency.

The current economic situation has highlighted the number of people in this country who have been and are being failed by traditional, commercial financial institutions. Recently, we have seen the consequences of lending institutions that are too relaxed about the scale and focus of personal debt. Those suffering the most are those who were most vulnerable in the first place. That some people have felt the need to resort to unscrupulous and illegal loan sharks is highly regrettable and a sad indicator that, as a society, we have not been able to take care of our most vulnerable. There have been horrible incidents where people have been treated very badly by the loan sharks.

The credit union network currently makes up only a very small share of the financial services market, but that can and should change. That change in culture is necessary, if we are to avoid the debt trap that so many families have fallen into. Credit unions foster a culture of thrift and responsible lending within a community. They can provide those who may not normally have access to loans from the more traditional banking sector with a responsible and ethical way of borrowing. Unlike many traditional banks, credit unions will usually offer debt management and counselling for those in financial difficulty in a non-judgmental and unintimidating way. There are well noted examples of credit unions being a positive force for change in disadvantaged communities.

There is still a huge divide in this country between those who are able to access the types of financial services that many of us take for granted and those who have to resort to the financial black market. Government have a role to play in closing this gap and in ensuring that financial exclusion is tackled. Credit unions can and should be part of the answer.

The benefits and rewards gained from being a part of a mutual organisation such as a credit union are far greater than just financial. Because credit unions are owned and managed by their own members, usually voluntarily, there exists a huge incentive to make the union successful. This, coupled with the obligation that members share a common bond, means that the community element is incredibly strong among these unions. We have heard much recently about communities in Britain, about their breakdown and about the need to return to the days when people felt a common bond and were willing to help their neighbours. Credit unions can help in communities where a common bond may have been lost by bringing together people who live in the same area, share an occupation, belong to the same organisation or attend a place of worship.

Credit unions, and other good mutuals, offer good services to their customers and are able to show strong accountability to their members. They are able to combine a public service ethos with a strong customer focus, something normally better attributed to the private sector. They should be part of the overall mix of financial services available to people, increasing choice in the market and promoting more than just profit. It is also important that credit unions remain true to their savings ethos and protect themselves from becoming just another financial institution. Credit unions have the potential to reach many more communities and customers than they do at present, but this will require extra effort on the part of the Government. I look forward to seeing the growth of these community-based unions.