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House of Commons

Friday 2 February 2001

The House met at half-past Nine o'clock


[Mr. Speaker in the Chair]

Orders of the Day

Outworking Bill

Order for Second Reading read.

9.33 am

Mr. Richard Burden (Birmingham, Northfield): I beg to move, That the Bill be now read a Second time.

I am grateful for the opportunity to present the Bill to the House and for the backing given by many hon. Members on both sides of the Chamber. The Bill has the support of the Minister for Competition and Consumer Affairs, my hon. Friend the Member for Pontypridd (Dr. Howells), my hon. Friends the Members for Leeds, North-East (Mr. Hamilton) and for Basildon (Angela Smith), the hon. Member for Worthing, West (Mr. Bottomley), my hon. Friend the Member for Bethnal Green and Bow (Ms King), the hon. Member for North Cornwall (Mr. Tyler), my hon. Friends the Members for Edinburgh, South (Mr. Griffiths) and for Amber Valley (Judy Mallaber), the hon. Member for Southend, West (Mr. Amess), my hon. Friend the Member for Plymouth, Sutton (Mrs. Gilroy), the right hon. Member for Caernarfon (Mr. Wigley) and my hon. Friend the Member for Stafford (Mr. Kidney). Many other hon. Members have written and spoken to me to express their backing, and I am pleased that the Bill has cross-party support.

Mr. Eric Forth (Bromley and Chislehurst): Where are they?

Mr. Burden: Let me inform the right hon. Gentleman that the hon. Member for Southend, West, who is one of his parliamentary colleagues, asked me to pass his apologies to the House. He wanted to be present, but he is attending the funeral of a friend.

The Bill seeks to outlaw bogus outworking schemes--or home-working schemes, as they are more commonly known. It is estimated that some 300 bogus schemes are operating in the United Kingdom at any one time. They are scams that prey on some of the most vulnerable people in society. They pretend to offer such people the chance to make money, usually by working at home, and often involve tasks such as addressing envelopes or making up kits. They require people to pay up front to get that opportunity. However, there is no real opportunity and the people who can least afford to do so end up paying for work that simply does not exist.

The scams are presented in a variety of guises. In some cases, people who have paid their money in good faith find that the promised work fails to materialise and that

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its proposer then disappears. Other respondents are asked to pay up front to obtain all the necessary materials for kits, but those materials turn out to be rubbish or simply do not turn up. Sometimes, the completed work is rejected for no good reason, so the hopeful worker who has paid up front never gets paid back for his or her labour.

Some proposers have the audacity to encourage participants to move on to different projects that are claimed to be more suited to their skills. Of course, an additional advance payment is then required. Some schemes turn out to be recruitment scams aimed only at getting the first victim to recruit other people to make the same mistake. In one of the more sophisticated scams, a premium rate telephone helpline was set up for participants who were experiencing difficulties with their work.

The amount that each respondent has to pay might seem relatively small to many hon. Members. All too often, however, it is taken from poor or vulnerable people to whom few other work opportunities are open. Such people often have family commitments and do not have surplus cash to lose. Those who prey on them can make a lot of money, even through small up-front charges. If large numbers of vulnerable people respond, the profits made by the scams can add up to large sums for the organiser. For example, a gain of £600,000 is considered to be appropriate for a medium-sized operation.

The Bill would make it unlawful for somebody to require advanced payment for information relating to outworking proposals. That provision will address, for example, the problem of schemes that promise information about home working in return for a fee, but whose promised directories of home-working opportunities turn out merely to be lists of other cheating schemes. Such schemes can mean that people are cheated twice--once for the cost of the directory, and then again when they respond to one of the so-called opportunities that it contains.

The Bill would also ban the promotion and advertising of bogus schemes, which currently happens in a variety of ways, including through circulars, cards in shop windows and notices on lamp posts. The schemes are even advertised on the backs of till receipts and, as I said, tend to target the unemployed and others who are restricted to working from home. For example, they target people who have caring responsibilities or are housebound. Those targeted are often on low or fixed incomes and are searching for a way of bringing in a bit more money to benefit themselves and their families in a manner that fits their domestic circumstances. They are the ones who are snared by the swindlers. They have little money in the first place, but end up even worse off.

I should like to give an example. An advertisement offered a payment of £5 for addressing 100 envelope labels. A one-off payment of £30 was required. It was claimed that the money would be refunded after 500 labels were addressed correctly. As the home workers found, the reality was different. People who replied to the advertisement first had to send £20 to receive details of the work that the firm was offering. As it turned out, the information was nothing more than a shortlist of companies providing jobs in return for another small fee. The original company was offering work at a rate of £5 per 100 labels, but only after workers had paid an additional £40. For that extra fee, they received only 100 labels, a list of companies and instructions that the

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letters on the labels must measure precisely 3 mm. Even when the workers took great care and time to ensure that the requirement was fulfilled, the completed labels were returned on the grounds that the letters were not precisely 3 mm. The workers were never paid and they never saw their advance payments again.

The case clearly shows how people can get caught out, first by paying money for details of work schemes and, secondly, when they pay extra money to join one of the schemes and take up the work on offer. The Bill would make both elements--issuing information about bogus outworking schemes for payment and taking money from people for supposed work--illegal.

Many hon. Members know of cases that have affected their constituents. Many of my hon. Friends and Conservative Members will want to talk about such cases. However, I want to give an example that applies to me. One of the schemes has the wrong list of fax and telephone numbers. After I had worked late in the House last night, preparing for today, I returned to my London flat to find a fax hanging out of the machine. It was interesting. It states:

Mr. Andrew Miller (Ellesmere Port and Neston): You are here.

Mr. Burden: Absolutely. The fax obviously caught my eye. It continues:

[Interruption.] I am happy to offer the fax to other hon. Members. However, to get more details, one has to dial a number from the fax machine: 090 6019 1839. The fax instructs people:

In spite of my better judgment, I dialled the number and another fax appeared.

It lists all the opportunities that are available. However, further on, it states:

It gives little information about payment. Surprise, surprise, it then provides a list of telephone numbers.

I have not telephoned those numbers, but I examined the small print on the first fax. It stated that simply faxing the form back meant a charge on a premium-rate telephone line. It took more than six minutes for the fax to appear. That cost me £7 simply to get the fax back. That is how such scams work. Perhaps the company responsible will realise its mistake; it probably did not

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expect its scam to be mentioned in the House of Commons the following day. However, people respond to such companies all too often.

Mr. Alan Duncan (Rutland and Melton): Surely the problem that the hon. Gentleman identifies is not outworking but spam faxes that trap respondents. That is a separate problem.

Mr. Burden: The hon. Gentleman is right up to a point. The problem of junk faxes and premium rate phone lines goes beyond outworking. A commission has been set up to try to tackle them. However, the problems are related. The fax that I described offers work, as defined by the Bill. It also offers a trip to Amsterdam for £1 return and a "souper" seven-day diet. Those do not constitute outworking and they need to be caught by other mechanisms. However, the middle offer,

clearly offers work. The fax directly refers to "work".

As well as the financial loss suffered by victims of home-working scams, there is another, equally important loss: self-esteem. I had not fully taken account of it when I first decided to promote the Bill, but home workers have made it clear that it is as important as financial loss. People have told me that, when they are mugged by the schemes, they feel that they have been mugs for being taken for a ride. For somebody who may be taking the first steps to get back into the labour market--I am sure that we all support that--or trying to get out of debt, that loss of confidence is crucial.

I have referred to the support, which I value, that has been expressed by colleagues. However, perhaps the most important backing that the Bill has received is from home workers and their letters and calls. I am grateful to citizens advice bureaux, the National Association of Citizens Advice Bureaux and the National Consumer Council for their assistance. The Department of Trade and Industry has been exceptionally helpful with the Bill, and trading standards officers throughout the country are already trying to crack down on the scams through the mechanisms that are available to them. The Bill will help them to do that.

We often complain about the press. However, on outworking, I want to thank the media, especially GMTV, The Mirror, BBC radio, "You and Yours", several regional radio stations--Radio WM in my area--and The Birmingham Post and the Birmingham Evening Mail. They have all done a great deal to highlight the scandal of home-working scams before the Bill was introduced and subsequently. Lastly, I should like to express my appreciation to the National Group on Homeworking, which is based in Leeds, for its work. My hon. Friend the Member for Leeds, North-East is here today. I recommend any home worker who is listening to the debate and needs advice and assistance to contact the National Group on Homeworking's helpline: 0800 174095. I hasten to add that that is not a premium-rate number.

The Bill that I am presenting today will create several new criminal offences to curb the unfair and unscrupulous practices that I have described. They are described in the Bill as outworking proposals. There has been some confusion about why I have spoken about home working when the Bill refers to outworking. We do not want the

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bogus schemes to escape simply by claiming that the proposed work need not necessarily be based in the victim's home.

The Bill covers all parts of the United Kingdom. I am pleased that that has been possible because we do not want one part of the UK to become a haven for such scams when everybody else is protected from them. The extension of the Bill to Scotland received the approval of the Scottish Parliament two days ago.

The Bill creates criminal offences, and is therefore a reserved matter under the Northern Ireland Act 1998 and it extends to Northern Ireland in accordance with the provisions of that measure. The subject matter is not devolved under the Government of Wales Act 1998 and therefore the Bill's provisions apply to Wales.

The enforcement provisions are set out in a schedule. They will be enforced by local authority trading standards officers in Great Britain and by the Department of Enterprise, Trade and Investment in Northern Ireland. The Crown Prosecution Service will also be able to prosecute those offences in England and Wales. Anyone who commits one or more of the Bill's newly created offences would be liable to a fine up to the statutory maximum, which is currently £5,000, for each offence.

I shall now describe briefly some of the key clauses of the Bill. Clause 1 defines the type of work that will be treated as an outworking proposal for the purposes of the Bill, and which will relate to the criminal offences set out in clauses 2 and 3.

For an arrangement to qualify as an outworking proposal, a person must hold out that work will be provided in return for advance payment and that the person undertaking the work will be paid for it, although not necessarily by the provider of the work. The worker is therefore required to send an advance payment, meaning that a payment must be made by the worker before he or she is paid for the work done. Examples of descriptions of advance payment given in the Bill--returnable deposits, registration fees and so on--are not intended to be exhaustive.

Certain types of arrangements that are not outworking proposals are excluded from the scope of the Bill. Employment agencies and employment businesses are already governed by legislative controls under the Employment Agencies Act 1973. A proposal made in the course of such business does not fall within the ambit of the Bill. That provision is set out in clause 1(2)(c).

Clause 1(3) ensures that legitimate business opportunities and arrangements such as franchises and direct selling are not inhibited. Clause 1(2)(b) gives the Secretary of State the power to make regulations to exempt from the provisions categories of proposals that would otherwise count as outworking proposals. That is a deregulatory provision, which I am sure will have the approval of the House. Clause 6 provides that that provision will be subject to the negative resolution procedure.

Possible categories of proposals for exemption would need to be considered on a case-by-case basis, and their exclusion would need to be justified. It is not envisaged that such cases will emerge very often. However, if a category of outworking proposal was regarded as legitimate, and would genuinely benefit workers, the exemption provisions could be used, provided that that category was distinguishable from the unscrupulous

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practices that the Bill makes unlawful. The power will, therefore, act as a useful safety net to ensure that legitimate business arrangements and opportunities are not inhibited.

Clauses 2 and 3 make provision for criminal offences. Clause 2(1) makes it a criminal offence to seek or receive payment in response to an outworking proposal. "Payment" bears its ordinary meaning in these clauses. The term therefore catches simple methods of payment such as cheques, as well as the more unusual forms such as moneys received in relation to premium rate telephone lines, as in the example that I gave earlier. That is an important point, given that many of these scams profit from the use of premium rate telephone services, by inviting people to call them for advice about completing work or for information about work.

The organiser of an outworking proposal commits an offence if he or she places an advertisement for outworking that contains information about an outworking proposal that makes it more likely that a person will respond by making a payment in advance. The organiser also commits an offence if he or she asks anyone else to place or distribute such an advertisement. Those measures are covered by clause 2(2) and (3).

The Bill also creates criminal offences in circumstances in which a person who is not the organiser issues, circulates or distributes an advertisement if he or she knows, or ought to know, that it is likely to cause a person to respond to an outworking proposal by making a payment, or if he or she causes someone else to do so. If there is no knowledge, and no reason why the person ought to have known, they will have committed no offence. Even if the elements of one or other of those offences are satisfied, it should be noted that, in relation to such offences, the person may be able to rely on the defence provisions contained in clause 4.

In relation to the advertising offences committed by a person other than the organiser, it should be noted that outworking proposals are advertised in a number of ways. They can appear in newspapers, on television and on the internet. They might appear on notice boards in shops, on the back of till receipts, pinned to lamp posts or on fliers that are posted through people's letter boxes, often inside reputable free newspapers or magazines.

In some cases it will be obvious to the advertiser that the advertisement is for outworking. The advertisement may expressly state that the worker is required to make a payment when responding to the advert. In cases in which it is not obvious from the advertisement, the commission of an offence will depend on whether the advertiser ought to know that the advertisement is for an outworking proposal. It is not possible to state in advance all the circumstances in which a person should know that. The degree to which someone ought to know will depend on factors such as the size of his or her enterprise and the resources available.

Clause 3 makes it a criminal offence to seek or receive money for the provision of information about home working or outworking when the information given relates to outworking proposals of the type outlined in clause 1.

Clause 4 sets out the defence of due diligence, and clause 5 gives effect to the schedule that sets out how the offences in the Bill are to be enforced. Paragraphs 2 and 3 of the schedule cover the powers that enforcement officers will have to enforce those duties. They are very

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similar to powers in other consumer protection legislation such as the Trade Descriptions Act 1968, the Consumer Protection Act 1987 and the Property Misdescriptions Act 1991. If hon. Members want to discuss other paragraphs in the schedule during the debate, we can do so.

Clause 7 provides for any public expenditure incurred in the enforcement of the Act, and clause 8 sets out the Bill's application to Northern Ireland.

The Bill's main provisions will come into force by commencement order. That is covered in clause 9. I envisage that that will take place about 12 weeks after the Bill receives Royal Assent. I think that that will allow a long enough period for the Government to promote awareness of the Bill, with a view to reducing the number of outworking proposals in the system and alerting advertisers to the new provisions.

On compliance cost, the Bill controls outworking proposals. Legitimate businesses employing outworkers such as flexible workers should not be affected because they do not require an advance payment. There is very little compliance cost. Business groups have supported action against scams. It is not in their interests to compete against schemes that operate unfairly in the ways that I have described.

Genuine business opportunities, such as franchise arrangements, in which a payment is made in return for the right to operate the franchise, or direct selling arrangements in which the seller will often pay for catalogues and sample products, will be excluded from this legislation. If there are other legitimate business practices that are not excluded at the outset, and which have a compelling reason for requiring an advance payment, a case can be made for their exclusion under the Secretary of State's power in clause 1.

The Bill will make unlawful schemes that deceive the most vulnerable members of our society. Such schemes seem to promise those people everything that they need: good pay, instant job opportunities and the ability to work from home at hours that suit them. The schemes are offered by companies that pretend to understand the difficulties faced by those people and to offer them a way out. In reality, they deceive them, obtaining money from them in exchange for a false promise.

As well as hitting vulnerable people, such scams undermine businesses operating legal and decent home-working schemes. The Bill will ensure that such businesses can operate legally and fairly without being tarred by the brush of the swindlers. The Bill is in the interests of everybody except those operating bogus schemes, and I hope that hon. Members on both sides of the House will express their support for it today.

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