Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 280-290)


6 JUNE 2007

  Q280  Chairman: I do have a suspicion though. It is launched on 1 June this year and, forgive me, the suspicion is that all this has started because we have started to look at this and everything is happening this week. That is the issue.

  Mr Williams: No, that is not the case. We have been trying to launch this very quickly, for the very reason that the Committee is concerned about, that obviously there are people already planning their savings for this Christmas.

  Chairman: John, you see if you can make more sense.

  Q281  John Thurso: Can I turn to a different issue actually and go back to the question of regulation? Last December you concluded that there was no clear case for specific regulation of the hamper products industry; is that still your view?

  Mr Williams: Yes, that is our view and indeed, following up from the earlier conversation, we are very pleased to have the protections in place that we heard about an hour ago. We are still arguing that it would not be proportionate to try to regulate prepayments in this way.

  Q282  John Thurso: We have heard evidence, which you may well have heard this afternoon, from the Park Group that they are perfectly content to come under the auspices of the FSA and their regulation. They have announced the trust scheme and there are other variants of escrow schemes that are available. In your executive summary you said the best options appeared to relate to reform of company law, improving consumers' rights to take representative actions and consideration to banning the hamper scheme business model. In light of the evidence we have heard, do you think banning the model, making directors personally liable and changing company law are actually a better option than decent regulation through the FSA? Is that a serious and credible statement?

  Mr Williams: We have to recognise that there are a very, very wide variety of prepayment schemes and indeed there are many prepayment practices which would also be caught if one were seeking to regulate them. If one is seeking regulation of prepayment arrangements in the economy we think that would be very complicated and disproportionate to the issues that were raised.

  Q283  John Thurso: Clearly, specific industries have a greater impact on the consumer, that has fairly long been recognised. For example, money that is held by professionals is held in an escrow account, the travel industry which I used to belong to is either bonded or has particular schemes in place, the hamper industry which has very particular details because it is holding clients' money over a longish period of time and is a financial instrument now seems to have come up with quite a good scheme and is open to further. Would it not have been better for you to have actually gone into, in a little more detail, those things that should actually be regulated rather than those things like simply putting down a deposit for a fridge you are going to buy, or something, which quite properly may not need to be or would be better not regulated?

  Mr Williams: As I say, our approach has been to encourage self-regulatory practice through our code approvals and to make sure that the codes that get approved in industries that are coming forward for approval include proper protection for prepayments. Our overall practice therefore is to encourage self-regulation rather than to come in with a new regulatory regime for all pre-payment practices.

  Q284  John Thurso: Do you seriously consider banning the hamper scheme business model?

  Mr Williams: No, I would say that these schemes are attractive to certain groups of people who find them readily accessible and readily understandable. There are risks entailed in them, and unless we can mitigate those risks then one should consider whether to ban them. We have heard this morning that it has been possible to mitigate those risks through negotiated protections and trust arrangements.

  Q285  John Thurso: I am sorry to press you on this, but it interests me that you, a body I have the greatest respect for and look to for advice and help, suggest that consideration is given to banning the hamper scheme business model—that comes in paragraph 3 of your executive summary—when it seems from all the evidence we have got that that actually should not even be on the table.

  Mr Williams: As it has turned out it has been possible to put in place what we understand from this afternoon's conversation are robust protections for prepayers' money. In those circumstances I do not think it would be appropriate to consider that. If it had been impossible to mitigate risk, then it might have been appropriate to consider banning such schemes.

  Q286  John Thurso: You are now investigating the merger between Park Group and Home Farm Hampers. In doing so, how far are you examining the wider savings product market in which those firms can be?

  Mr Williams: We have to consider exactly what the right market definition is to consider this market in, so we have to consider whether it is just Christmas hamper savings in the most narrow sense or whether there is a wider market for prepayment arrangements or a wider market for savings arrangements. We are still in the process of considering that.

  Q287  John Thurso: Do you expect that to be out by the end of June?

  Mr Williams: Our timetable runs within the next month.

  Mr Brown: It will be during July.

  Q288  John Thurso: We can look forward to that during July. Lastly, could I just ask what range of remedies is available to you to prevent the abuse of a dominant market position?

  Mr Williams: In relation to a merger or in relation to a market question?

  Q289  John Thurso: Really in relation to a market question with a dominant position.

  Mr Williams: If there was a dominant firm abusing its position then our main instrument is the Competition Act and Chapter II investigation under the Competition Act.

  Q290  Chairman: Mr Fingleton has written to me giving his apologies, but I wonder if you could pass on to him our concerns and perhaps we could have a chat on that.

  Mr Williams: Of course.

  Chairman: Thank you for your attendance.

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