Westminster Hall
Tuesday 7 November 2006
[Miss Anne Begg in the Chair]
Farepak
Motion made, and Question proposed, That the sitting be now adjourned.—[Tony Cunningham.]
9.30 am
Miss Anne Begg (in the Chair): Order. Before I call Anne Snelgrove to discuss Farepak and the voucher-hamper industry, may I point out to hon. Members that the bottom line of the digital clock on the wall is jammed? The time it shows is irrelevant, so if Members keep an eye on the top line, they will see the real time.
Anne Snelgrove (South Swindon) (Lab): rose—
Chris Ruane (Vale of Clwyd) (Lab): Will my hon. Friend give way? [Laughter.]
Anne Snelgrove: The number of Members present shows that there is huge interest in the subject.
I applied for this Adjournment debate on behalf of my constituents whose involvement in the hamper company Farepak, which began trading many years ago in Westleigh in my constituency, has had devastating consequences for them. Some were customers and some were employees. I thank Mr. Speaker for giving me the opportunity to ask the Minister what we can do to give our constituents some kind of Christmas this year, what we should do to ensure that they receive justice and understand what happened at Farepak, and what we must do to ensure that it will never happen again.
The issue affects many of Mr. Speaker’s constituents, and it is the same for many Ministers and Whips, including my hon. Friend the Member for Workington (Tony Cunningham), who has done so much for his constituency. Others have done much for their constituencies, but they cannot speak out today.
David Taylor (North-West Leicestershire) (Lab/Co-op): Will my hon. Friend give way?
Anne Snelgrove: I shall just make a little progress.
At least 150,000 people are affected by what has happened at Farepak, and many Members, some of whom wished to attend today but could not do so, have written to me in support of the debate. They include my hon. Friends the Members for Eccles (Ian Stewart), for Dumfries and Galloway (Mr. Brown), for Paisley and Renfrewshire, North (Jim Sheridan) and for Birmingham, Hall Green (Steve McCabe). I am pleased to see so many hon. Members present who are ready to speak for their constituents.
In all our constituencies, families were robbed of their Christmas when the hamper firm Farepak collapsed on Friday 13 October. I remember as a child at Christmas competing for attention with 45 cousins—the other grandchildren of my grandparents. My poor grandparents had to find a present for each of us every
year, and amazingly, there were always 45 to 50 presents under their tree. It was some achievement, and companies such as Farepak knew it.
Farepak capitalised on the fear that, without some kind of savings system, Christmas would be a failure, and it is galling to look back on its promotional material now. The brochure featured a mum and her family around the Christmas tree, and it said:
“This year give your family the best Christmas ever”.
To those hon. Members who have asked me why people invested in a voucher company and not in a bank, the message on the brochure is a simple but powerful answer. They were trying to avoid debt, and many had no other place to turn to for a savings scheme that paid out at Christmas.
Mr. Russell Brown (Dumfries and Galloway) (Lab): I congratulate my hon. Friend on securing this debate. Does she agree that given the plight of many families, there is every likelihood that people will turn to loan sharks to try to retrieve their desperate situation?
Anne Snelgrove: I agree, and I shall provide some details later about how we may be able to help.
My constituent Vicky Turner, who is a mum of three children, was an agent for Farepak. She lost £4,366, including £840 of her own money, which she had collected from seven customers. She has come to London today, sponsored by my local paper, the Swindon Advertiser, on behalf of the hundreds of Farepak victims, and she wants answers as much as I do.
Anne Snelgrove: I shall give way to my hon. Friend the Member for North-West Leicestershire (David Taylor).
David Taylor: Credit unions would be a good source of short-term loans. Does my hon. Friend agree with the sentiments of early-day motion 2874? The issue ranges wider than Farepak. Indeed, Halifax Bank of Scotland has a responsibility for what has happened, because it allowed Farepak to continue to trade, even though it was in significant difficulties. HBOS must have known the type of families and individuals who were trying to save with Farepak while it raked in £1 million a week to reduce Farepak’s overdraft. Was not it either cupidity or stupidity on the part of HBOS?
Anne Snelgrove: I agree, and I shall address that point a little later.
My constituent and others were told by Farepak that there was no problem with the vouchers and not to worry, when everyone knew that it was all going wrong. On 30 June, the company announced that it would run out of money by the autumn unless funds could be borrowed. That followed the collapse of Choice Gift Vouchers, the voucher company that Farepak used, which led retailers to demand that companies such as Farepak pay for their vouchers up front, when before they had been allowed credit. On 23 August, Halifax Bank of Scotland said that it would lend no more money to Farepak, because the company was beyond saving.
Farepak was a subsidiary of European Home Retail, which included Kleeneze and other companies. An investigation by The Sunday Telegraph into Farepak’s accounts revealed that millions of pounds were regularly transferred between Farepak and European Home Retail. It was said that Farepak money was used to pay off the overdraft with HBOS.
Mr. Frank Field (Birkenhead) (Lab): I hope that Halifax Bank of Scotland is tuning into my hon. Friend’s debate, because I have rarely seen Westminster Hall so full. When she said that we must consider what we can do, is not there one culprit in the dock—Halifax Bank of Scotland? It was calling in monies for the overdraft, and those monies were coming from our constituents’ savings. I hope that the Minister will be tough when he replies, and say that HBOS ought to put forward the monies to make good the hard-won savings of our constituents.
Anne Snelgrove: Many people, including HBOS, need to answer some serious questions. Although I understand that such transfers are not necessarily illegal, they are certainly unethical, and that is why we need better regulation of the sector. People have written to me to say that the European Home Retail group comprises seasonal companies, so if HBOS had not cut off their funds, they might have made it through to Christmas. There is a question mark over the way in which the bank has behaved, and my right hon. Friend is right to look into it. I thank him for his work.
Ian Stewart (Eccles) (Lab): I congratulate my hon. Friend on securing this important debate. Is she aware that this morning, the media announced that Sainsbury’s will accept Farepak vouchers? If that is true, will she join me in paying tribute to the Minister’s work in calling for the large companies to do so, and ask him to go further and call for the other large companies to accept Farepak vouchers, too?
Anne Snelgrove: I agree, and I congratulate the Minister on his work on the situation. Sainsbury’s has said that it will accept up to 25 per cent. of the value of the vouchers, and Tesco has also announced a scheme. I challenge other companies such as Asda and Marks and Spencer to do so. Marks and Spencer announced record profits today, which is marvellous.
John McFall (West Dunbartonshire) (Lab/Co-op): I congratulate my hon. Friend on securing this debate. Does she share my disappointment that the British Retail Consortium has withdrawn from negotiations? The message from this forum is that the BRC must return to the negotiating table and redouble its efforts. Given that Farepak is the third company in the sector to go bust, in my capacity as the Chairman of the Select Committee on the Treasury, I have written to Sir Callum McCarthy, the chairman of the Financial Services Authority, to say that the sector needs regulating. Before the end of the debate this morning, the Minister must address that point.
Anne Snelgrove:
I could not agree more. Soon after the issue was raised on the Floor of the House during Trade and Industry questions on 19 October, all our
hopes were raised with news of a British Retail Consortium good-will gesture. However, like many other Members, I was disappointed that, at home time last Thursday, just as we were leaving Parliament for our constituencies, so no one could be found to appear on the news, the BRC slipped out the news that it would not put together a rescue package. It is disappointing.
Tom Brake (Carshalton and Wallington) (LD): Will the hon. Lady give way?
Anne Snelgrove: I shall make some progress.
The BRC let Farepak customers down badly by promising something that it could not deliver. However, there are ways forward, as some of our big retailers have shown.
Mr. Brian H. Donohoe (Central Ayrshire) (Lab): My hon. Friend may not know, but Members debating a statutory instrument on the Big Lottery Fund last week identified that the fund had not allocated some £10 million. It might be useful if the Minister were to approach the fund for that money.
Anne Snelgrove: That sounds like a very interesting way forward, and I am sure that the Minister will consider it.
Chris Ruane: Will my hon. Friend give way on that point?
Anne Snelgrove: Yes, on that point, then I must make some progress.
Chris Ruane: I thank my hon. Friend. I suggest a further source of funding: dormant bank accounts. There are billions of pounds in such accounts, and perhaps that should be tapped into to be fair to the people who have suffered under Farepak.
Anne Snelgrove: My hon. Friends are coming up with creative ways to find the money, as I would expect. As long as there are organisations willing to act as distributors, we can achieve something. In my constituency, the radio station GWR FM is distributing gifts collected via various avenues. I shall be going along this Saturday when they distribute them. I will take my gifts from the House of Commons shop—the teddy bears George and Toffee—and I hope that other hon. Members will do the same for the children of their constituents.
Loan sharks are now banging on the door, asking whether my constituents need expensive credit at an annual percentage rate of at least 120 per cent. The Minister might like to help me to endorse credit unions as a way forward. They can provide emergency loans of up to £250 for each saver. Usually those loans are available only to those who have saved for a minimum of 12 weeks, which would cut out the Farepak customers if they were to join now. However, Farepak customers have shown that they can save regularly. I have asked some companies in Swindon to donate £1,000 each to underwrite the loans, thus making it possible for those opening new accounts this week to receive a loan before Christmas at an interest rate of 12.6 per cent. I can announce today that MAN ERF and Nationwide, which have their headquarters in South Swindon, have already
pledged £1,000 each. In that way I hope to keep people in Swindon out of the clutches of loan sharks who charge interest rates of between 197 per cent. and 500 per cent. The cash donations will help families to start on the right savings path.
Mr. Denis Murphy (Wansbeck) (Lab): Is my hon. Friend aware that there has been a little good news this morning with the announcement by Park Group, an organisation similar to Farepak, that it has offered £1 million in compensation to be put into any rescue package that can be put together?
Anne Snelgrove: Those rescue packages are indeed welcome, but hamper firms must have stringent regulations imposed on them, so that this never happens again.
Bob Spink (Castle Point) (Con): Will the hon. Lady pay tribute to the work of the citizens advice bureaux? She will no doubt accept that credit unions are unevenly distributed around the country, and even where there are such unions, people will not be able to avail themselves of their services before Christmas. Even though credit unions are part of the solution, the Minister should be aware that they will not help this year. Does the hon. Lady agree that, in the longer term, the Financial Services Authority should control such companies, as it does, for example, holiday companies?
Anne Snelgrove: I agree with the hon. Gentleman on the last point. I congratulate the citizens advice bureaux on the work that they are doing, and I also congratulate the churches in my constituency that have been counselling depressed people.
My hon. Friend the Member for Workington has collected £10,000 from the Nuclear Decommissioning Authority to help to expand the credit union scheme in his constituency. I wish to announce, and help to launch, an appeal by the Western Daily Press, which is co-ordinating an effort that I hope will get hundreds, if not thousands, of Christmas gifts to Farepak customers. Congratulations to it.
Tom Brake: Does the hon. Lady agree that, if such voluntary measures are not effective, the best way to secure compensation will be for the Department of Trade and Industry’s investigation to recommend who should pay compensation, how much and by when?
Anne Snelgrove: There are 47 shopping days until Christmas, and we need to get on with this as quickly as possible. The DTI needs to bring forward a scheme, and I am pressing for that.
I hope that the Minister will join me and other hon. Members in calling on the top retail companies, who do so well at Christmas, to use their corporate social responsibility budgets to help to save our constituents from loan sharks and to give them a good Christmas. My constituents have been adding to the profits of those companies in recent days by buying extra toys for the GWR charity campaign.
One of the most obvious companies to which we should look is Findel plc. On Friday 13 October, when Farepak went to the wall, Kleeneze was bought by Findel plc. It has a database of Farepak’s customers
and is in a position to support fundraising schemes. It has issued a press release suggesting that FTSE 100 companies contribute £50,000 into a savings fund, which would be interesting. Does the Minister know how much of Farepak’s customers’ money can be traced to Findel? I doubt whether that is a legal issue, but as a matter of corporate responsibility, Findel should help Farepak customers.
Mr. Tom Clarke (Coatbridge, Chryston and Bellshill) (Lab): I am grateful to my hon. Friend for her excellent leadership and for introducing the debate. Although I welcome all the initiatives that are intended to help people, my constituents take the view that they want their money or their vouchers, and if under the present law people cannot be held accountable, the law ought to be changed.
Anne Snelgrove: My right hon. Friend makes an excellent point, and I am about to turn to that issue. We must provide more than something under the tree or on the table for these folk; we should make every effort to ensure that they get justice. There has been a lot of talk in the House recently, in discussions on the Companies Bill, about corporate social responsibility. We should also be able to talk about corporate social irresponsibility. What Farepak did was immoral, but I am interested in whether it was also illegal.
We do not have the stocks any more, but I wish publicly to name the Farepak directors. [Hon. Members: “Hear, hear.”]. They were the finance director and company secretary Stevan Fowler, the independent non-executive directors Neil Gillis, Paul Munn and Michael Johns, the chief executive William Rollason—I understand that he is soon to appear in an Australian court, possibly on a not unrelated matter involving another company—the executive director Nicholas Gilodi-Johnson, who is set to inherit £70 million, and the chairman Sir Clive Thompson, formerly of Rentokil, who is a modern-day Scrooge. He bemoaned a 30p rise in the minimum wage when he was earning more that £2 million a year, he wound up the pension scheme at Rentokil for all but the executives and then walked off with a £690,000 a year pension. No doubt Sir Clive and the directors will be eating a very big turkey this Christmas and enjoying it.
Mr. Eric Joyce (Falkirk) (Lab): My hon. Friend might be aware that Sir Clive Thompson is also a director of iSoft, which is attracting news and attention for other reasons at the moment. If she were running a company and looking for a non-executive director, would she be looking in the general direction of Clive Thompson?
Anne Snelgrove: I think that that is a rhetorical question. I certainly would not.
Mr. Wayne David (Caerphilly) (Lab): Is my hon. Friend aware that Farepak continued receiving money from customers up to 13 October, when it went into administration, even though its shares were suspended in August?
Anne Snelgrove: My hon. Friend is right; a cheque from one of my constituents was cashed 15 minutes before the administration.
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