Select Committee on Treasury Thirteenth Report

4  Christmas saving schemes

The collapse of Farepak

56. On 13 October 2006, Farepak Food & Gifts Ltd was placed into administration. This followed the collapse of its parent company, European Home Retail plc. Farepak's main business was as a Christmas saving club. The company took payments during the year, mostly through a network of agents, and delivered in return either vouchers redeemable in a range of stores, or a hamper. Some 10 to 15% of the business involved hampers, with the remainder being through vouchers.[167] The collapse took place before vouchers or hampers for Christmas 2006 had been sent out, and the administrators soon confirmed that the company would not be in a position to fulfil orders for either hampers or vouchers and that the process of administration would not lead to substantial returns of money to those who had made payments.[168] It was estimated that over 100,000 customers lost savings with a value of over £43 million as a result of the collapse.[169] The collapse caused great distress to many families, materially affecting the quality of the Christmas for which they had sought to save. It led to what was characterised by the then Minister for Trade, the Rt Hon Ian McCartney MP as "an appalling state of affairs".[170]

57. The collapse of Farepak gave rise to three areas of concern—relating to the circumstances of its collapse and that of European Home Retail plc, practical assistance for those whose 2006 Christmas had been directly affected and the wider implications for other products and their regulation. With regard to the first area, the then Secretary of State for Trade and Industry announced that the Department's Companies Investigation Branch was conducting a confidential investigation into the circumstances surrounding the failure of Farepak. Officials would seek to interview whomever they considered could assist them in their inquiries. The Companies Act did not allow the results of investigations of this kind to be made public, but any evidence pointing to improper conduct on the part of anyone involved might be passed to regulators or prosecuting authorities.[171] Alongside the report of that Branch, the administrators can report to the Secretary of State any findings of misconduct.[172]

58. With regard to the second area, the then Minister of Trade announced in November 2006 the establishment of a "Farepak response fund" which would be operated by a "Family Fund", which would be a registered charity.[173] The Family Fund received donations totalling over £7 million to provide a goodwill gesture to those who had been affected. Vouchers and Farepak food packages, so far as these were available and deliverable, were sent out to Farepak agents in good time for Christmas 2006.[174]

59. In our initial consideration in November 2006 of the collapse of Farepak and in the current inquiry we have examined and sought evidence on only the third area of concern, relating to the implications of the collapse of Farepak for other products and their regulation.

The "hamper" product and its rivals

60. The "hamper" product is operated and marketed as a way of saving for Christmas. Customers make regular payments, either weekly or monthly, throughout the year in order to plan, budget and pay towards their Christmas in advance. Customers have the choice of purchasing hampers, vouchers or other products chosen from a catalogue. The goods or vouchers are distributed in November or early December. Customers choosing to receive vouchers obtain vouchers with a face value identical to the amount paid during the year, and these vouchers can be redeemed on the high street. Similarly, the amount paid during the year is available for the purchase of hampers and other products for the price set out in a catalogue.[175] Although often referred to as a "hamper" product, the Park Group, which is now the largest company in that particular market,[176] told us that 90% of its sales were in the form of vouchers,[177] and similar proportions were reported earlier in respect of Farepak.[178]

61. "Hamper" products represent only one form of "saving" for Christmas through prepayment. Some businesses which provide a home service offer hamper saving schemes as a sideline. Some dairy companies operate schemes in which regular payments can be made to a milkman towards a hamper or other Christmas purchase.[179] Home credit companies have also offered Christmas hampers through saving schemes, although the use of this method seems to be diminishing.[180]

62. A number of large supermarkets and other large retailers offer savings schemes through stamps or cards which are either explicitly or implicitly aimed at spreading the cost of Christmas. Some of these schemes are marketed as Christmas savings schemes and others offer incentives, such as a free stamp, for redemption in December.[181]According to the Pomeroy review:

Retailers' savings schemes are not covered by any compensation scheme. Customers depend on the retailer's overall financial strength and reputation for probity.[182]

63. There is also a range of even more informal Christmas saving arrangements, through butchers and toyshops and small savings clubs based in social clubs, pubs and workplaces.[183] The Pomeroy review considered that "it may be that the inherent risks run by participants [in informal schemes] are potentially greater than those run by customers of the hamper industry".[184] Ms Amanda Winkworth, Manager of Portsmouth Savers Credit Union, told us of a Christmas club in Portsmouth where £134,000 was stolen from the club operator three weeks before Christmas so that all members lost their savings.[185] The OFT noted in December 2006 that such informal schemes were also vulnerable to fraud and that the scale of losses at an individual level could be similar to that seen in the case of Farepak, even though far fewer consumers would be affected.[186]

64. Alongside these various products and schemes, there are a number of regulated financial products directed towards Christmas saving. A number of credit unions offered Christmas accounts before the collapse of Farepak, often with payment of dividends or bonuses linked to retention of the account until November.[187] For example, the Portsmouth Savers Credit Union established such an account in response to the loss through an informal saving club to which we referred in the previous paragraph.[188] In response to the collapse of Farepak, many more credit unions have offered Christmas accounts for 2007.[189] Four building societies responded to the collapse of Farepak by offering festive savings accounts, all of which were available by 1 February 2007.[190] Halifax is piloting a Christmas Saving Account for its social banking customers which offers cash or high street vouchers.[191] The Post Office is reported to be considering whether to launch a specific Christmas-branded Post Office Card Account savings sub-account in time for Christmas 2008.[192] In view of the penetration and social base of Post Office Card Accounts, which have been opened by more than 4 million customers in receipt of State benefits, Mr Pomeroy considered that the Post Office would be "a very valuable provider" of a Christmas-branded product.[193] All of these products and proposed products benefit or could benefit from FSA regulation and the protection available under the Financial Services Compensation Scheme.[194]

The appeal and customer base of the "hamper" product

65. Although there are rivals to the Christmas "hamper" product, there are a number of reasons why that product retains its appeal. A key strength of that product lies in the use of agents who collect payments, providing a vital prompt to save for those who might not otherwise do so.[195] The Park Group told us that it had 104,000 agents in 2007, so that there were on average about four customers per agent.[196] Customers are usually recruited by agents from among relatives, friends, neighbours or work colleagues, ensuring a strong social bond underlying the transaction.[197] Agents earn a commission paid by the provider, which in the case of the Park Group averages around 4% of the value of the products sold.[198] Agents also deliver hampers and other products to customers, and this aspect of home service is particularly appreciated by elderly customers and less mobile customers and those in rural areas.[199]

66. Customers of hamper companies greatly value the idea that the money paid to agents is "untouchable" and that Christmas has been paid for in advance.[200] The Pomeroy review observed that the double "lock-in"—that money could not easily be returned and that its value was returned in the form of vouchers or products so that it was spent on Christmas—was seen as the key benefit by many customers: "the effect is to insulate the money saved against any financial pressures that the household may experience and to remove the temptation to spend it on anything other than goods for Christmas".[201] Mr Pomeroy told us that one of the main findings to emerge from his work was

the very high importance people place on having a good week at Christmas. It is because that is so important that they are prepared, in some cases at the expense of personal hardship, to ring-fence that money. It has that degree of importance for them.[202]

67. Viewed as a financial product, the most immediately apparent downside of saving for a hamper or a voucher is the absence of any interest payment. We were told that customers were generally not concerned at the lack of interest. Customers understood that comparable financial products paid interest, but were aware that the interest from a formal saving product with the same payment levels would be small and would not off-set the perceived advantages of the "hamper" product.[203]

68. In its initial study following the collapse of Farepak, the OFT made some observations about Farepak's social base:

Many Farepak customers appear to come from households on low or irregular incomes, possibly benefit dependent, and do not appear to use mainstream banking, credit or savings products.[204]

The Pomeroy review admitted that there was little data about the customer base of the hamper market, but reached similar conclusions, suggesting that "customers come primarily from households with low incomes (either on benefits or low wages, or a combination of the two) and are relatively unsophisticated financially".[205] That review also pointed to evidence from its workshops that many users had a distrust of mainstream financial services providers.[206]

69. Based on its own questionnaire data, the Park Group gave a somewhat different characterisation of its own customer base, stating that:

They are generally banked and are familiar with using financial products—some 94% of our customers have a bank account, 53% have a credit card and 73% have a debit card … The Christmas saving market has matured considerably in recent years in terms of the relative affluence of those who purchase Park's products. As an indicator of this, some 66% of our customers own a computer, of which 56% have internet access, predominantly through broadband (72%).[207]

Mr Gary Woods, Managing Director of Park Retail Limited, thought that the characterisation used in the OFT review might have been based on outdated information, while conceding that there might be "a slight difference" between the social base of Farepak and that of the Park Group.[208]

70. The Pomeroy review acknowledged that Christmas saving schemes were a distinct product meeting a distinct need.[209] Ms Claire Whyley, Deputy Director of Policy of the National Consumer Council, agreed that it was important to distinguish saving for a specific purpose from other forms of saving and to recognise the "big emotional investment" that families placed in Christmas.[210] The Park Group emphasised that they provided a popular and successful product which was convenient and "fun", appealing to many people who also chose to save in more conventional ways.[211] Mr Pomeroy agreed that the product was "valued" by its users.[212] The Minister conceded that, when he had commissioned the Pomeroy review, he had presumed that it would find that "hamper schemes were a bad deal for customers",[213] but that

one of the important findings from the Pomeroy review into low income savings is that there was a number of attributes in a Farepak-style savings scheme which actually were very attractive to low-income savers, the fact that it is an easy way to save, very local and often through people who were trusted and who often actually had a friend or a relative at the school gate.[214]

Financial viability

71. As was noted earlier in the context of retailers' savings schemes, the security of a prepayment system or informal saving product can depend upon the financial performance and reputation of the provider.[215] The Park Group argued that the "hamper" product was commercially viable. It suggested that Farepak was a profitable company at the time of its collapse, brought down by the difficulties of its parent company, European Home Retail plc.[216] Hamper companies earn income from the profit margin on hampers and other products, the discounts they obtain from retailers on vouchers and the interest earned on the money pre-paid to them by customers. The Park Group also obtains income from the sale of its generic voucher, the High Street Voucher.[217] In late June 2007, the Park Group announced its financial results for 2006-07, including a pre-tax profit of £5.4 million. It stated that "Christmas 2006 was the most successful in Park's history". It admitted that orders for 2007 were 30.6% below those for 2006, reflecting the loss of confidence in the market following the collapse of Farepak, but saw signs that confidence was returning.[218]

Trust accounts and the Christmas Prepayments Association

72. One of the most important conclusions of the Pomeroy review was that the Christmas saving market should no longer rely on the existing appeal of the product and the claimed financial viability of participating companies. That review stated:

The schemes involve substantial amounts of customers' money being paid in advance and held by the companies. For the future, it is essential that this money should be properly protected.[219]

The Pomeroy review noted that the remaining firms in the market were discussing methods of protection with the Department of Trade and Industry and recommended that that Department "urgently ensure that secure arrangements are put in place by hamper scheme companies in order that customers' prepayments are effectively protected".[220]

73. In late March 2007, at the time of the publication of the Pomeroy review, it was announced that the Department of Trade and Industry had "secured agreement from the hamper industry to establish an industry-led scheme to ensure that consumers' interests are fully protected through the establishment of secure, ring-fenced accounts", also refrred to as "trust account".[221] Mr Pomeroy welcomed the announcement, seeing success in securing the safety of customers' money as necessary for the future operation of the hamper industry.[222]

74. Earlier, in December 2006, the OFT had drawn attention to the costs that would be associated with the establishment of such trust accounts and the risk those costs posed to the viability of the hamper industry.[223] In June 2007, the Park Group confirmed to us that there would be administrative costs associated with the establishment of trust accounts in excess of £100,000, but thought that administration costs would "not be too significant" and would not need to be passed on directly to customers.[224] The Group would continue to earn interest on such accounts, although the operation of trust accounts would affect the Group's access to working capital.[225]

75. In April 2007, the Park Group told us that it was "currently moving forward" to create trust accounts.[226] On 6 June, the Group informed us that it had reached heads of agreement for the terms of trust accounts with the Department of Trade and Industry earlier that week, on Monday 4 June.[227] In the meantime, customer accounts would be treated separately from the Group's banking pool.[228] The only outstanding matters were in the hands of lawyers, and it was expected that final agreement would be reached "by the end of June".[229] On 19 June, the Minister said that "we really need, in particular, Park to get on with sorting this out" and hoped for a final resolution "in the next weeks".[230] On 7 August 2007, the Park Group informed us that "it has taken slightly longer to establish the trust arrangements" than it had anticipated, but that the trust company and bank accounts had been established and that the trust would be legally confirmed on 13 August 2007.[231]

76. The trust established by the Park Group and those of other hamper providers are intended to be overseen by an independent trust—the Christmas Prepayment Association. On 17 May 2007, the then Minister for Trade announced that Derek Walpole, Deputy Chief Executive of the Family Fund, and Suzy Hall, founder of the Unfairpak campaign, had agreed to take on the roles of Chairman and Director of Consumer Affairs in this new body.[232] A third independent director, who is a chartered accountant, was also nominated.[233] The Association will be funded by its members, the Park Group and the Variety Christmas Club.[234]

77. The OFT operates a Consumer Codes Approval Scheme for voluntary self-regulation by traders. Under the OFT's Scheme, organisations can apply for approval of codes of practice which meet the OFT's core criteria and work well for consumers in practice. The Scheme includes a criterion relating to the protection of prepayments and deposits.[235] The OFT told us that, "if the new Association does have the prepayment protection requirement for its members, we would very much welcome an approach from them for code approval".[236]


78. Following the collapse of Farepak, three main operators remained in the Christmas "hamper" market. One of these, Variety Christmas Club, represented less than 10% of the market measured by turnover.[237] The second operator was Home Farm Hampers, which had been part-owned by Farepak until October 2006. On 7 March 2007, Park Group, the largest single operator in the market, acquired Home Farm Hampers, giving the Park Group over 90% of the market.[238] The Park Group told us that Home Farm Hampers would have closed but for the merger.[239]

79. In view of the large share of the hamper market concentrated in a single company and comments made about value for money, the Pomeroy review recommended that the OFT consider whether there were any competition issues that needed to be addressed in the hamper scheme market.[240] In March 2007, the OFT agreed to consider whether a full inquiry into competition in the market for Christmas saving schemes was needed,[241] a decision welcomed by Mr Pomeroy.[242] In April, the OFT announced a specific enquiry into the acquisition of Home Farm Hampers, and invited comments.[243] We have previously referred to a range of rival products available to those seeking to save specifically for Christmas,[244] and the Park Group's response to the OFT's work is founded in the belief that "the Christmas savings business forms part of a demonstrably wider market where Park only has a small market share".[245] The OFT indicated to us that market definition would play an important role in its enquiry.[246] On 23 August 2007 the OFT announced that the merger had been cleared and would not be referred to the Competition Commission.[247] The OFT subsequently explained that it had come to this decision because of its conclusion that there was not a realistic prospect that the merger would result in a substantial lessening of competition, in part because of the range of other savings options available to customers.[248]

Further regulatory options

80. Hamper products such as those provided by the Park Group and formerly provided by Farepak are not regulated by the FSA. They are not considered to be financial services, because what is purchased is not money but goods or vouchers exchangeable for goods.[249] When we first reported on the collapse of Farepak we noted that products offered by Farepak were not subject to FSA regulation and were outside the scope of the Financial Services Compensation Scheme, and concluded that "the Farepak case has highlighted a serious lack of consumer protection which could have much wider implications for savings products of this kind".[250] We recommended that, as a matter of urgency, "the Government, in conjunction with the OFT and FSA, consider whether appropriate safeguards are in place to protect those who have entrusted their money to others".[251]

81. The OFT published an initial review of the regulatory framework in December 2006, which included a contribution by the FSA.[252] That review concluded that a clear case for regulating the hamper scheme business model specifically or prepayments more generally had not been established.[253] The OFT told us in June 2007 that the agreement reached for the protection of prepayments within trust accounts reinforced its initial view that FSA regulation would not be proportionate.[254] The initial review in December 2006 canvassed the possibility of banning the hamper business model altogether, for example by limiting the length of time during which prepayments could be made, but the OFT did not consider this to be an appropriate option for consideration in view of the agreement on trust accounts.[255]

82. Three main reasons were advanced in the initial review and in evidence as to why FSA regulation would be inappropriate. First, it was suggested that regulation would involve disproportionate costs, which might be borne by the consumer or might jeopardise the sustainability of the business model of hamper providers.[256] The Minister attached considerable weight to this suggestion, arguing that the OFT review had concluded that FSA regulation

would essentially wipe [hamper schemes] out, that their ability, given the kinds of margins they run on, to deal with FSA regulation would mean that it was a non-viable business model and, therefore, to regulate them was effectively to extinguish them.[257]

83. The second reason advanced against FSA regulation related to the difficulty of distinguishing between hamper products and other forms of prepayment. The distinct characteristics of hamper products could not be defined easily in law.[258] Regulation covering all forms of prepayment would be, in the OFT's view, disproportionate, not least because many businesses depended on prepayments to provide working capital.[259]

84. The third reason related to the uncertain boundary between hamper products and other forms of informal saving. Long-term protection to consumers using informal schemes would not be afforded if only certain major hamper businesses were regulated.[260] Consumers might choose to opt to belong to savings clubs with even lower levels of protection.[261]

85. Citizens Advice did not accept the arguments against FSA regulation, and believed that financial regulation was appropriate in view of the size of the market.[262] The Park Group told us that a small part of its business, relating to insurance, was already regulated by the FSA, that the Group was "embedding the FSA principles into our business" and that it was "fairly relaxed" about extension of the FSA's remit to cover more of its business.[263]

Conclusions on regulation of the "hamper" market

86. The collapse of Farepak caused distress for many families. Although we have not examined the particular circumstances of that collapse, we have heard evidence suggesting that the "hamper" market does not operate with a flawed business model, and the "hamper" product has distinct positive features enabling it to compete within the broader Christmas saving market. The establishment of trust accounts by the Park Group and the prospect of the adoption of such accounts across the "hamper" market go a considerable way towards allaying concerns about consumer protection within the market. To reinforce confidence in that market, we want the Christmas Prepayments Association to agree a code of practice that meets all criteria within the Office of Fair Trading's Consumer Codes Approval Scheme and is thus approved by the Office of Fair Trading. Provided that the operation of trust accounts within that market proves to be satisfactory, it seems likely that regulation by the Financial Services Authority of the hamper market will not prove to be proportionate or appropriate. An extension of FSA regulation and the additional costs associated with such regulation would create a risk that consumers might choose other, cheaper informal saving products with lower levels of consumer protection.

The wider protection of prepayments

87. In December 2006 the OFT observed:

The failure of Farepak highlights the risks consumers accept, often unknowingly, when making a prepayment for goods or services. Reasons why a business might fail to supply goods or services for which payment (either part or in full) has been made could range from incompetence to fraudulent trading or business failure.[264]

It is very common for prepayments to be required for goods or services. These often take the form of deposits, but can also be in the form of staged payments. Prepayments range from those for funerals to those for certain meters for gas or electricity. Prepayments are particularly associated with funerals, holidays, flights and car rentals, as well as purchases of furniture or electrical goods.[265] A request to make a prepayment is a common feature of scams.[266] However, prepayment is often an essential component of a legitimate business model.[267]

88. Various steps have already been taken to protect customers making prepayments. A scheme has been devised to enable prepayments for funerals to be protected by trust funds or insurance as an alternative to FSA regulation.[268] The criteria for the OFT's Consumer Codes Approval Scheme, to which we referred earlier,[269] require that a code of practice shall address protection of deposits or prepayments as appropriate to the sector, and the OFT accompanies those criteria with an assessment of the level of financial detriment or inconvenience which would be caused if goods or services were not provided..[270] Some protection of prepayment in the travel industry exists, although, as we noted recently, the protection afforded to prepayments under the code of conduct of the Association of British Travel Agents is not sufficient to enable it to be approved by the OFT under its Consumer Codes Approval Scheme.[271] The OFT has taken action in the past under the Unfair Terms in Consumer Contracts Regulations against home improvement contracts which required all or most of the payment before work had been carried out.[272] The OFT has also noted that the implementation of the Unfair Commercial Practices Directive might lead to there being grounds for action in cases where prepayments are not adequately protected.[273]

89. Despite these steps, there is evidence that protection of prepayments is incomplete or inadequate. Company failures in some sectors can cause consumer losses where individuals have paid a deposit.[274] In late 2006, we heard evidence about the potential risks associated with extended warranties provided by manufacturers, whereby an expensively purchased warranty could be rendered worthless if the provider went into liquidation.[275] The informal saving schemes operated by retailers to which we referred earlier depend upon the financial solvency of the retailer.[276] The coverage of the OFT's Consumer Codes Approval Scheme is incomplete, and a study for the OFT in October 2006 concluded that "there is an imperative that the Scheme now expands to cover a wider range of sectors and that there is continued publicity to promote awareness of the scheme among consumers".[277]

90. The collapse of Farepak has highlighted the lack of attention that public policy had paid to a range of informal savings and prepayment vehicles with inadequate consumer protection. Notwithstanding our specific conclusions about regulation of the "hamper" market, we remain concerned about the limitations of consumer protection for prepayments generally. We recommend that the Government and the Office of Fair Trading, as a matter of urgency, consider:

  • what further steps can be taken to extend the coverage of consumer protection for prepayments through codes compatible with the Consumer Codes Approval Scheme;
  • what further measures can be taken to schemes for the protection of prepayments that are affordable to the businesses concerned;
  • how far implementation of the Unfair Commercial Practices Directive will permit more effective enforcement action against inappropriate prepayment requirements; and
  • what further measures can be taken to promote consumer awareness of the risks associated with prepayments.

We further recommend that the Government report on progress in each of these areas in its response to this Report.

Public awareness on options for saving for Christmas

91. The Pomeroy review noted that, because of Farepak's collapse, former users of hamper schemes were in search of ways of saving in advance of Christmas in order to avoid going into debt. The review recommended that, "in view of the uncertainty that has been caused over Christmas savings schemes, and the risk that this may prevent people who would otherwise have saved for Christmas from doing so, the Government should consider mounting a specific campaign to make consumers aware of their options".[278] Mr Pomeroy told us that he found that some people who had formerly saved with Farepak were disoriented and insufficiently aware of other options. He envisaged a campaign to deal with that problem: "I am talking now about Christmas 2007 and not beyond that".[279]

92. The Government responded to the review's recommendation in March 2007 by making £1 million available to the OFT "to conduct a consumer awareness campaign in the coming months on Christmas saving schemes and mainstream alternatives".[280] When we took evidence at the start of May, Mr Pomeroy and other witnesses stressed that they viewed the launch of the awareness campaign as a matter of urgency, not least because many people started to save for Christmas in February.[281] Ms Whyley cautioned that "we may well have already missed the boat this year".[282] The OFT agreed to conduct a consumer education campaign, which was launched on 1 June 2007 under the title of "Save Christmas".[283] The OFT suggested to us that they had worked very quickly to put together a public awareness campaign in little more than two months from the initial proposal.[284] The OFT had consulted credit unions and some other providers of Christmas-related products prior to the launch, as well as consumer groups such as Citizens Advice, but implied that consultation with the Park Group was contingent upon final agreement on trust accounts.[285]

93. The OFT stated that the aim of the "Save Christmas" campaign was "to encourage those wishing to save for Christmas to look at the features of hamper schemes and alternative options and to empower them to make decisions that are better for their particular circumstances".[286] We were told that the campaign would cover most options for Christmas saving and attempt to describe the risks in each case.[287] The short leaflet for consumers which the OFT has published covers almost all of the product options which we referred to earlier,[288] and, in relation to each, provides answers to questions such as "Do I get interest on my money?", "Will they collect the money from my home?" and "Is there any protection?".[289]

94. This basic consumer information is to be supported by other measures. The campaign began with a public relations launch, which the OFT considered had gone well in terms of attracting widespread media coverage.[290] The OFT told us that the next phase of the campaign would involve consumer education activities delivered locally by organisations that had face-to-face contact with the campaign's intended audience, starting in Scotland and moving to other areas during the second half of 2007.[291] The OFT argued that the campaign's concentration on affected communities explained why the campaign was not nationally prominent.[292] The Minister supported the use of "existing local, trusted networks", which he thought would be more effective at reaching the intended audience than "a standard, off-the-shelf, national advertising campaign".[293]

95. The OFT initially indicated to us that the campaign would end "in late November/early December" with a national advertising campaign with associated public relations designed to "reiterate and reinforce the messages at a time when consumers are deciding how they will save for Christmas 2008".[294] Of the total budget of £1 million, £400,000 will be devoted to national advertising.[295] There was some inconsistency in the OFT's oral evidence about the precise timing of the advertising campaign. Witnesses from the OFT at times referred to "December this year" and "the end of the year" as the best time for advertising about decisions on saving options for Christmas 2008.[296] However, Ms Sue Cook, the OFT's Acting Director of Communications, also told us that the OFT would be running the national advertising campaign "in December and January because our research tells us that people start to decide how they are going to save for Christmas in December and start to actually start the schemes in January".[297] Subsequent written evidence from the OFT indicated that the campaign on savings options for 2008 would take place "at the end of 2007 and the beginning of 2008".[298]

96. The original purpose envisaged for a consumer awareness campaign by the Pomeroy was to respond to the needs and concerns of consumers affected by the collapse of Farepak relating to Christmas 2007. It is not immediately evident that the campaign begun by the Office of Fair Trading in June 2007 will be effective in responding to this intention. We are concerned by the inconsistencies in the evidence from the Office of Fair Trading about the best time for a national advertising campaign directed towards saving decisions for Christmas 2008. We recommend that, before committing to expenditure for a national advertising campaign, the Treasury review the conduct of the campaign by the Office of Fair Trading and ensure that the Treasury is satisfied that the appropriate timing has been determined to inform consumers in making saving decisions for Christmas 2008. We expect the Treasury to report on the outcome of that review in its response to this Report.

97. In addition to making a specific recommendation about a campaign about Christmas saving, the Pomeroy review also drew attention to the need for Government initiatives relating to financial capability and financial inclusion to take full account of "all products that are used for the purpose of saving, even if in legal terms they are not formally saving products".[299] In particular, that review recommended that "informal saving schemes should be given greater emphasis within … the Thoresen review of generic financial advice",[300] to which we referred earlier.[301] In evidence to us, Mr Pomeroy argued that those giving generic financial advice needed to be aware of informal financial products and to give them appropriate emphasis.[302] In response to the review, the Government confirmed that the Thoresen review would "consider how to provide better generic advice on informal saving".[303] We welcome the inclusion of informal saving within the range of matters to be considered by the Thoresen review of generic financial advice. We look forward to reviewing the proposals of that review on how such advice can give due weight to informal saving options, bearing in mind the risks to the consumer that continue to be associated with some informal saving options.

167   Review of Christmas saving schemes, para 1.1, p 5; HC Deb, 7 November 2007, col 206WH Back

168   HC Deb, 7 November 2007, cols 206-207WH Back

169   HC (2006-07) 53, para 58 Back

170   HC Deb, 7 November 2007, col 207WH Back

171 Back

172   HC (2006-07) 437, p 34 Back

173   HC (2006-07) 53, para 59 Back

174   HC (2006-07) 437, p 34 Back

175   Review of Christmas saving schemes, paras 2.1, 2.3, 2.7; Ev 55 Back

176   See paragraph 78. Back

177   Qq 174-175 Back

178   See paragraph 56. Back

179   Review of Christmas saving schemes, para 2.15, p 11; Qq 235-236 Back

180   Review of Christmas saving schemes, paras 2.16-2.17, p 11 Back

181   Ibid., paras 5.17-5.22, p 23; Q 150 Back

182   Review of Christmas saving schemes, para 5.23, p 23 Back

183   Reivew of Christmas saving schemes, para 2.18, p 11 Back

184   Ibid., para 2.19, p 11 Back

185   Q 181 Back

186   Office of Fair Trading, Farepak: review of the regulatory framework: Advice from the Office of Fair Trading, December 2006, paras 28, 59 Back

187   Review of Christmas saving schemes, paras 5.12-5.14, pp 21-22; Ev 49; Qq 179-181, 307 Back

188   Q 181  Back

189   Review of Christmas saving schemes, para 5.14, p 22; Ev 49; Qq 179-180, 307 Back

190   Ev 68. See also Review of Christmas saving schemes, paras 5.9-5.10, p 21 Back

191   Ev 62 Back

192   Review of Christmas saving schemes, para 5.26, p 24 Back

193   Q 38; Review of Christmas saving schemes, para 5.25, p 24; HC (2005-06) 1717, paras 98-99 Back

194   Review of Christmas saving schemes, para 5.16, p 22; Ev 62 Back

195   Review of Christmas saving schemes, para 4.10, p 16; Qq 4, 6, 8 Back

196   Q 129 Back

197   Ev 55; Farepak: review of the regulatory framework, paras 16, 19; Review of Christmas saving schemes, para 2.4, p 9 Back

198   Qq 130-135; Ev 55; Farepak: review of the regulatory framework, para 17; Review of Christmas saving schemes, para 2.4, p 9. The Park Group also pays a commission to customers who choose to trade on their own behalf: Ev 55. Back

199   Qq 137, 174; Ev 55, 56; Farepak: review of the regulatory framework, para 19; Review of Christmas saving schemes, para 4.9, p 16 Back

200   Farepak: review of the regulatory framework, para 20 Back

201   Review of Christmas saving schemes, paras 4.5-4.6, p 15 Back

202   Q 10 Back

203   Qq 6-7, 137-138; Ev 56. See also Farepak: review of the regulatory framework, para 24; Review of Christmas saving schemes, para 4.21, p 18 Back

204   Farepak: review of the regulatory framework, para 22 Back

205   Review of Christmas saving schemes, para 3.3, p 13 Back

206   Ibid., para 4.15, p 17 Back

207   Ev 56 Back

208   Q 165 Back

209   Review of Christmas saving schemes, para 5.30, p 25. See also Q 28. Back

210   Q 90 Back

211   Ev 56, 57; Qq 165, 174 Back

212   Review of Christmas saving schemes, para 4.22, p 18; Q 4 Back

213   Q 309 Back

214   Q 303 Back

215   See paragraph 62. Back

216   Ev 56; Q 170 Back

217   Review of Christmas saving schemes, paras 2.6-2.7, pp 9-10 Back

218   Statement by Peter Johnson, Chairman of the Park Group plc, 27 June 2007, available at Back

219   Review of Christmas saving schemes, para 4.23, p 18 Back

220   Review of Christmas saving schemes, para 4.23, p 18 Back

221   Financial inclusion: the way forward, para 4.24, p 45; HC (2006-07) 437, p 34 Back

222   Qq 3, 4, 11 Back

223   Farepak: review of the regulatory framework, para 58 Back

224   Qq 122, 143 Back

225   Qq 140-142 Back

226   Ev 56 Back

227   Qq 113-115 Back

228   Q 158 Back

229   Qq 116-121, 155 Back

230   Q 309 Back

231   Ev 74 Back

232   Ev 71. The Unfairpak campaign was set up following the collapse of Farepak to provide information and advice for those affected: see Back

233   Qq 125-126 Back

234   Q 127 Back

235   Farepak: review of the regulatory framework, paras 78-80 Back

236   Q 216 Back

237   Review of Christmas saving schemes, para 2.11, p 10 Back

238   Ibid., para 2.10, p 10 Back

239   Q 150 Back

240   Review of Christmas saving schemes, para 4.24, p 18 Back

241   Financial inclusion: the way forward, para 4.24, p 45 Back

242   Q 5 Back

243   Ev 74; Statement by Peter Johnson, Chairman of the Park Group plc, 27 June 2007 Back

244   See paragraphs 61-64. Back

245   Statement by Peter Johnson, Chairman of the Park Group plc, 27 June 2007; Q 150 Back

246   Q 286 Back

247   Ev 75 Back

248   Office of Fair Trading, Completed acquisition by Park Group plc of Home Farm Hampers Limited: The OFT's decision on reference under section 22(1) given on 23 August 2007: Full text of decision published 31 August 2007 Back

249   HC (2006-07) 437, p 34 Back

250   HC (2006-07) 53, para 62 Back

251   Ibid. Back

252   Farepak: review of the regulatory framework; Ev 66 Back

253   Farepak: review of the regulatory framework, para 8; Ev 72 Back

254   Q 281 Back

255   Farepak: review of the regulatory framework, paras 10, 77; Q 285 Back

256   Farepak: review of the regulatory framework, paras 8, 66 Back

257   Q 310 Back

258   Farepak: review of the regulatory framework, para 74; Q 227 Back

259   Farepak: review of the regulatory framework, para 55; Ev 72; Q 282 Back

260   Farepak: review of the regulatory framework, para 59 Back

261   Q 181 Back

262   Ev 65; Q 110 Back

263   Qq 144-149 Back

264   Farepak: review of the regulatory framework, para 29 Back

265   Ibid., paras 30-31 Back

266   Office of Fair Trading, How to recognise a scam, available at Back

267   Farepak: review of the regulatory framework, paras 32-33 Back

268   Farepak: review of the regulatory framework, paras 70-74 and Annexe, section A Back

269   See paragraph 77. Back

270   Ev 75; Farepak: review of the regulatory framework, paras 80-85 Back

271   Treasury Committee, Fourth Report of Session 2006-07, Are you covered? Travel insurance and its regulation, HC 50-I, paras 30, 41; Farepak: review of the regulatory framework, Annexe, section B Back

272   Farepak: review of the regulatory framework, para 37 Back

273   Ibid., paras 38-39 Back

274   Ibid., para 55 Back

275   HC (2006-07) 50-I, Qq 21, 23-26, 100 Back

276   See paragraphs 62-63. Back

277   Office of Fair Trading, Review of impact on business of the Consumer Codes Approval Scheme, October 2006, para 1.26 Back

278   Review of Christmas saving schemes, para 6.4, p 27 Back

279   Q 14 Back

280   Financial inclusion: the way forward, para 4.24, p 45 Back

281   Qq 17-18, 56, 100 Back

282   Q 100 Back

283   Ev 73 Back

284   Qq 217-223, 276, 280 Back

285   Ev 73; Qq 100-101, 199-201, 225, 260-263 Back

286   Ev 73 Back

287   Qq 235-237 Back

288   See paragraphs 60-64. Back

289   Office of Fair Trading, Save Xmas: A quick guide to paying for Christmas, June 2007 Back

290   Q 249 Back

291   Ev 73 Back

292   Qq 223-224, 232-233 Back

293   Qq 314, 312 Back

294   Ev 73 Back

295   Q 252 Back

296   Qq 244, 255 Back

297   Q 246 Back

298   Ev 75 Back

299   Review of Christmas saving schemes, para 6.2, p 27 Back

300   Ibid. Back

301   See paragraphs 31-32. Back

302   Qq 12-13 Back

303   Financial inclusion: the way forward, para 4.24, p 45 Back

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