THE Minister of State for Commerce, Mr Pat Rabbitte, said that arising from consultations he would be bringing forward amendments to the Credit Union Bill. New issues might also arise from debate on the Bill in the Dail.

The Bill must however maintain "the fundamental ethos of credit unions as community self help institutions," he said. "I want to see them remaining as important providers of personal finance to their members. Correspondingly, I do not want to see them becoming banks or building societies."

Moving the second stage, he said it was the first piece of legislation specifically devoted to credit unions for over 30 years. It would provide a statutory framework for their development and growth and enable them to provide an enhanced range of services for members.

They would be able to develop additional services beyond traditional savings and loans. Some of them were now selling insurance products and providing foreign exchange and there was an increasing desire to exploit the possibility of an ATM network.

"Many credit unions have shown commendable initiative in starting to provide some additional services on a pilot, basis, but credit unions in general are, I believe, very conscious that a lot of work lies ahead in bringing their services up to date.

Referring to the new ceiling of £20,000 on shares, deposits and loans in the Bill, he said this compared to the current ceiling of £6,000. "These new resources will help provide an enhanced capital base which will allow them to expand and improve the range of services which they offer to their members."

The maximum loan period of five years was being removed. Unions would be allowed to lend 20 per cent of their funds for more than five years and 10 per cent for over 10 years.

In choosing the £20,000 limit, Mr Rabbitte said the strength of the credit union movement was in catering for the personal financial needs of members. Credit unions are not commercial, "for profit banks", nor were they building societies. "I do not believe that they should become banks or building societies." They should not seek to diversify their activity into corporate or other commercial business. One effective way to achieve that was to cap the amount of shares, deposits and loans applying to individual members.

The appropriateness of the limits in the Bill had been questioned, but the average shareholding at present was £1,000. The average amount which a member had on deposit was around £100. The average loan was £2,000.

"When these are considered by reference to the £20,000 figures included for shares, deposits and loans in the Bill, it is clear that substantial scope exists for credit unions to increase the level of share and deposit holdings of members in their credit unions. The same holds true for the credit unions' loan book."

The other issue which had to be taken into account was their relatively favourable tax regime. They were exempt from corporation tax because of their non profit making status. Savings were not subject to DIRT, although members were individually required to declare dividend and interest income from their savings on their tax returns.

"I have no idea how faithfully credit union members discharge their liabilities in this regard, but my earlier figures of the average share and deposit holdings of members suggest that by reference to current experience, an average individual liability to DIRT would be small."

The treatment of credit unions on corporation tax was fully justified by their social and mutual purpose. It was, however, necessary to ensure that they were not used as tax avoidance schemes by unscrupulous individuals with significant personal wealth.

"Neither I nor the Government nor, I am sure, the League of Credit Unions want such individuals to play ducks and drakes with the system as a recent correspondent of mine on the subject of taxation and credit union accounts memorably puts it."

Regarding supervisory arrangements, Mr Rabbitte said the Registrar of Friendly Societies was being given new powers to enable him to be satisfied as to the capability of any credit union to undertake additional services which it wished to offer.

"Credit unions have an excellent track record of security for their members' savings, and I want the registrar to be able to act where necessary to resolve any emerging difficulties arising in any individual credit union and thereby to preserve their excellent reputation as sound community based financial institutions.

Mr Ned O'Keeffe (FF, Cork East) said the £20,000 limit was very low and should be reconsidered.

The salaries of executives in some private sector companies set a very bad example to workers when compared to the amount paid to people who ran the credit unions. "Fat cat" salaries would have to be curbed, by legislation if necessary. "These people maintain they are entitled to it because they made a success of the company, but I don't believe in people getting half a million pounds a year.

The debate will continue next week.