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7 Nov 2006 : Column 194WH—continued

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Danny Alexander: I agree. One of my constituents was an agent and said that she intended to take it on herself to repay all the payments to the people with whom she had worked. That is an illustration of the attitude and of the guilt felt—quite unjustifiably, given that the problems are the responsibility of the company directors.

Chris Bryant: This is an important point. The British Retail Consortium is maintaining that one reason why it cannot put together a scheme is that there is no list of all the Farepak customers. The truth is that there is a list of all the agents, who are some of the most responsible people in this country when it comes to finances. That list could be an important source of getting the problem sorted out.

Danny Alexander: The hon. Gentleman is absolutely right. The agents are among the most responsible people in this country. I hope that the Minister takes up his point.

I have a couple of brief points to make. They follow on from the questions raised by the hon. Member for South Swindon. It is notable that just before the company went into administration, the non-Farepak parts of the European Home Retail consortium were sold off for £34 million. I trust that the proper use of that money and the propriety of that transaction will form part of the Department of Trade and Industry inquiry.

Mr. Oliver Letwin (West Dorset) (Con): Given the intervention by the hon. Member for Rhondda (Chris Bryant), will the Minister clarify the position vis- -vis the British Retail Consortium? I have a letter here from Findel plc which other Members may have received. It says specifically that Findel has the database of Farepak customers. Will the Minister confirm whether the BRC is indeed maintaining that it cannot operate a scheme because of the absence of such a database? That would be helpful. If that is its position, he will presumably be able to go back to it and point out that there is such a database and that Findel is apparently willing to make it available.

Danny Alexander: I am grateful for that intervention and hope that the Minister answers the question.

What is the role of HBOS in all of this? Surely it must have been aware that savers’ money—they were savers, whatever the technical definition—was being used to pay off outside debts? The bank must have known where the perhaps £1 million a week in repayments was coming from.

Mrs. Madeleine Moon (Bridgend) (Lab): HBOS stated that it had accommodated Farepak on many occasions to allow its management every opportunity to find a solution to the financial challenges. HBOS knew that the company had problems. Therefore, should it not acknowledge to the customers, who also no doubt bank with HBOS, its responsibility for dealing with the problem?

Danny Alexander: Whatever the legalities of HBOS’s role, its activities in this murky scandal have been morally highly dubious.

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Mr. Michael Moore (Berwickshire, Roxburgh and Selkirk) (LD): Is not the response of HBOS staggering? It has taken a legalistic route, but not only are people denied money that is theirs, they are now forced into the loan-shark regime, which will mean taking on debts that they probably cannot hope ever to repay.

Danny Alexander: I very much agree. As other hon. Members said, HBOS’s vast profits dwarf the losses of the people who are caught in this situation.

Michael Connarty: Does the hon. Gentleman not find it ironic that probably he along with myself, other Members of the Scottish parliamentary group and all the Members of the Scottish Parliament have been invited by HBOS to a champagne reception at the reopening of its refurbished headquarters on the Mound? Will he come with me and the people who have been ripped off by HBOS and Farepak to protest outside the champagne reception and demand that money is given back to the people from whom it has been taken?

Danny Alexander: I do not know whether I can accompany the hon. Gentleman, but he is right: the champagne at that event should have a bitter taste.

Will the Minister confirm that the DTI inquiry into the affairs of Farepak will include an investigation into the role played by the bank? It is critical that those issues are fleshed out in the official investigation.

The Minister has already done much good work on the subject, and I join other hon. Members in praising him for it. However, a great deal more needs to be done. I am sure that others will reinforce that statement.

Several hon. Members rose—

Miss Anne Begg (in the Chair): Order. I remind hon. Members that we are very short of time. We may be down to about two minutes each. I am in hon. Members’ hands.

10.12 am

Mr. Denis Murphy (Wansbeck) (Lab): Thank you, Miss Begg. Most of my points have already been covered, but I would like the Minister to comment in his winding up speech on a statement made by Neil Henderson-Begg, who represents the Hamper Industry Trade Association. After the collapse, he stated:

Naturally, they will. He said that customers are concerned about the time that elapsed between the suspension of EHR shares and Farepak’s ceasing trading, and that

which they were, very shortly after the collapse. He added that customers also need to know why Farepak’s lending banks allowed the situation to go as far as it did. That point has been touched on by several hon. Members.

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I also ask that the Minister examine closely whether the Government are one of Farepak’s creditors. Sadly, in the past, the small investor has normally been the last to be compensated. On this occasion, the Government and other large creditors should set an example, step back and allow any assets of the company to be used to form a compensation package for those people who have been so devastated by the loss of all their savings.

10.13 am

Adam Price (Carmarthen, East and Dinefwr) (PC): I shall speak briefly on that very theme. I congratulate the hon. Member for South Swindon (Anne Snelgrove) on her immensely impressive leadership on the issue.

We know that much of Farepak customers’ money was used for shopping, retail and gift vouchers, on which VAT was payable. VAT used to be payable on face-value vouchers only when they were redeemed, but that changed in 2003, so that VAT is payable when the vouchers are purchased. Unfortunately, the Government are usually at the front of the queue of creditors in such situations. We are talking about millions of pounds of VAT that was paid by Farepak customers. It is only right that that money should be repaid to them, as they did not get the goods on which it was paid.

Mr. McCartney: Hon. Members should talk sense. First, national insurance contributions, if they have been paid—there is no guarantee that they were—are for the pensions and unemployment and other benefits of the people who used to work for the company. We must get this straight: it is not the Government’s money. It is former employees’ money, and it is still to be found in the investigation whether it was paid. On VAT, again, until the investigation is complete, we cannot guarantee that any money was paid to the Government. We would like some sensible contributions, not ones that raise Aunt Sallies to be knocked down in order to get a political headline. That will not help the people we want to help.

Adam Price: I take the Minister’s point, but if VAT has been paid, clearly the Minister will want to consider hon. Members’ comments in that respect.

On what can be done in the future, we look forward to hearing what stage the Minister’s discussions with the Financial Services Authority have reached. Farepak is not the first case of a Christmas hamper voucher company getting into difficulties. There was the case of FHSC in February, and Choice Gift Vouchers went into bankruptcy earlier this year. We need to know what can be done now, given that several companies have had difficulties. We look forward to hearing what the Minister has to say about how quickly secondary legislation can be introduced under the Financial Services and Markets Act 2000 to add such companies to the list of those that are regulated.

Several hon. Members have rightly mentioned HBOS. One of the key questions that we need an answer to is why the offer from Park to buy Farepak was rejected twice. Park is the company that rescued FHSC and that prevented its customers from getting into the same problems as Farepak’s customers. What was the role of HBOS in preventing that rescue offer from being accepted?

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Mr. Mike Weir (Angus) (SNP): My hon. Friend mentions the role of HBOS, and we have heard about the roles that many people played. Is it not the case that the Minister, who has been working hard on the issue, needs to get all those people around the table so that they can all contribute to helping those who have lost out? Does my hon. Friend share my worry that the British Retail Consortium has said that there is no central database of customers? If that is so, it will be difficult to put together a rescue package.

Adam Price: We have heard about the Findel letter. If there is a database, surely the key reason for the BRC’s rejection of any offer is redundant. I am sure that the Minister will agree that the BRC must urgently revisit the offer that was initially made.

10.18 am

Mr. Jim Devine (Livingston) (Lab): I pay tribute to my hon. Friend the Member for South Swindon (Anne Snelgrove) for securing this debate. Let us be very clear what the debate is about: it is about legalised money-laundering, from the poor to the rich. Sir Clive Thompson is, without doubt, the 21st-century equivalent of the sheriff of Nottingham. I hope that later the Minister will play the role of Robin Hood.

This is an absolute scandal involving the organised poor. I do not say that in a patronising manner. Those people did not use loan sharks, bank overdrafts or credit cards; they saved. How many people are involved? Farepak had between 26,000 and 29,000 agents. If each of them had 10 clients, it would mean that Christmas has, in effect, been cancelled for 300,000 people.

Serious questions must be asked about the company. How long had it been in financial difficulty? It left the Direct Selling Association in 2004; if it were a member of the DSA today, it would have to compensate the people who lost their money. That suggests that it has been in difficulties for many years. Staff who worked in its headquarters have said to me that they knew that the company was in trouble last December. Financial newspapers were flagging up problems in June. The share price crashed in August, yet Farepak continued to take money when the vast majority of people had paid over the money. My constituent Carol Gullian has lost £12,500 as an agent. At a public meeting held in Blackburn, West Lothian, last week, more than 100 people turned up who had lost more than £100,000 between them. That is the extent of the scandal. Farepak were still writing letters to my constituents in March telling them that everything was okay, not to worry and that everything would be good this year.

HBOS made £4.8 billion profit last year. I have been told by somebody closely involved in that a rescue plan was organised in June this year and that £3.5 million was needed from HBOS, but it did not put the money in. If that is the case, HBOS directors need to be brought to the House to give a full explanation of their role in that deal.

Michael Connarty: I pay compliments to my hon. Friend and neighbour for the work that he has done on Farepak. He is known throughout Scotland as a leader on this problem. Does he agree that no Scottish Member of Parliament, no Member of the Scottish Parliament and no dignitary who represents anyone in Scotland should attend the champagne function that HBOS has invited us to at its headquarters?

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Mr. Devine: I would be grateful for the opportunity to join my hon. Friend at that demonstration outside the company’s headquarters. I agree that the same message should apply to everybody else.

Given the time pressures, let me say, in summary, that I do not believe that the Department of Trade and Industry alone should be investigating the company and its directors. The Serious Fraud Office should be called in to investigate the company. I have written to the forfeiture body to say that Sir Clive Thompson should have his knighthood withdrawn. He got it in 1996 for services to industry, would you believe? We obviously need legislation, and I look forward to hearing what the Minister has to say.

10.22 am

Mr. Christopher Fraser (South-West Norfolk) (Con): I, like others, have a number of constituents who have been deeply affected by the Farepak escapade and who, as a result, will suffer at Christmas. One of my constituents, who has acted as an agent for Farepak, came to see me recently on behalf of all the friends from whom she had, in good faith, accepted payments. She wanted to know what, if anything, she could do to put things right. She was particularly concerned that she might in some way be to blame. I did my best to reassure her and have written to the administrators, the Minister and Norfolk trading standards to seek their advice.

My constituents and I, in common with those in attendance today and the thousands they represent, seek the Government’s answer to a number of questions. What can be done in the immediate future to facilitate a rescue to help those who have lost significant amounts of money? I am pleased that the Minister for Trade has called for the Financial Services Authority to regulate Christmas savings schemes, but why were they not regulated before? How long will it be before the FSA regulates the schemes? The DTI has launched an inquiry; how long will it take? What steps will be taken to safeguard members of other hamper schemes in the meantime? Most importantly, why was money allowed to be collected after trading in EHR shares was suspended?

10.23 am

Dr. Alasdair McDonnell (Belfast, South) (SDLP): I congratulate you on your direction of the debate, Miss Begg. It has been a good debate. I congratulate the hon. Member for South Swindon (Anne Snelgrove) on securing the debate and allowing us the opportunity to discuss this matter.

I shall be brief. To me, the collapse of Farepak is a crisis, but to many people, such as the low-income families in my constituency and adjoining constituencies, it is a tragedy. Some figures have been bandied about. In my area, one lady, Linda Robinson, is out £20,000, £5,000 of which is not recorded. She has receipts for only £15,000 and the receipts for the rest are missing. Donna Lavery has lost £4,000. Sharon Gilmore is a single mother and she and her 90-year-old grandmother are caught up in the business, with a similar amount of money having gone missing through Farepak.

We estimate that some 3,000 people in Northern Ireland are affected by the problem, although we need to establish the exact numbers and how much each has
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lost. I welcome what some hon. Members have said about agents having more information, but some of the agents’ bookkeeping might not be as good as it should be. I appeal to the Minister to establish a single relief company or agency in each region, so that relief efforts can be co-ordinated and so that people will find Christmas. Perhaps the consumer councils in the regions would be useful. There is a desperate need to establish the exact amount of exposure, because Farepak was neither efficient nor effective in its management. I believe that money handed over in the past two weeks might not be accurately recorded and that the accounts might not be made available to the liquidator.

As I see it, we have three main tasks: to get relief urgently to those who have been robbed; aggressively to pursue criminal charges through the fraud squad or whatever other squad is required to ensure that the poor conduct of the company is punished; and to ensure that such a problem never happens again, perhaps through regulation. As the hon. Member for Wakefield (Mary Creagh) said, stringent financial controls, bonds and whatever else is necessary should be used. We need, too, to work with banks, credit unions and those responsible in the Treasury to ensure that those who have been savagely affected by the problems are not thrown into the arms of loan sharks to get past Christmas.

Miss Anne Begg (in the Chair): If those who still wish to speak can stick to one minute each, everyone might be able to get in.

10.26 am

Mr. Russell Brown (Dumfries and Galloway) (Lab): I will be as brief as I can, Miss Begg.

I have written to two dozen chief executives of high street businesses. A couple have responded already, but I found it almost breathtaking that one said that although they could not help directly, one idea that might be of interest would be if they sought to raise funds through collections or other fundraising activities in their stores. I am pleading with those companies to fork out and to help people, not to ask their customers to put money into a collection. That is not what is required.

In all honesty, I do not know how many people in my constituency have been affected or the sums involved. Before the debate, I spoke to someone connected with the administrators and asked whether they knew the numbers of agents and customers or the sums involved. The answer was simply, “No, we don’t.” Findel may well say that it has a database, but I am not convinced that anyone knows the true figures. I echo the plea that was made earlier: the British Retail Consortium should return to the table. However, above all else, we need to investigate the matter fully and if there has been criminal activity, we should deal with those people through the Proceeds of Crime Act 2002. We need to deal with that once we have tried to recover the situation for the good people of this country who put their faith in the company.

10.28 am

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