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Farepak

Good morning, Miss Begg. I thank all right hon. and hon. Members for participating in what has been a passionate and sometimes genuinely angry debate. People should be angry about the situation that we are discussing. This is one of those areas in which Members of Parliament can, I hope, make a difference. First, I shall put on record the basic facts of the case. Then I shall talk about what I have been doing and the proposals for a way forward, and give some information about the administration, the investigation and the regulatory framework. I want to give a commitment. It would not be prudent to answer all the questions that have been asked here today, and I shall explain why. An investigation is going on, and I want to ensure, as the Minister, that I act appropriately, so that if at any later date there are further investigations, inquiries or, indeed, charges, no one can put up a slick lawyer or barrister in the High Court and use what I have said in the House to allow someone to avoid a proper inquiry. It is important that I give as much information as I can, but I also ask hon. Members to trust me. At each stage, I will come back to the House, in a forum such as this or in other forums, to keep hon. Members fully up to date on the inquiry, the investigation and the appropriate action that will need to be taken later. Like other hon. Members, I was appalled when I heard about what happened. It took me back 35 years to the time when I was a 20-year-old with two children. We paid for our Christmas by joining a hamper club, a Christmas club. That was what a young family did. My parents and grandparents did it before me. It was part and parcel of the community in which I was brought up and it remains part and parcel of that community. These things are deep in the psychology of the community. This is about self-opportunity in saving and ensuring that every member of the family does as well as they can at Christmas. People save throughout the year. It was passed on from generation to generation that that was what we did. That is why the events involving Farepak are so appalling and why I took the action that I did. I know from personal experience what it would be like to be affected by such events. I shall recap briefly on the basic facts of the case so that everyone is clear about them. Farepak’s main business was essentially a Christmas 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 per cent. of the business involved hampers. Some 80 to 85 per cent. was done through vouchers. The vouchers would have been sent out about now, the hampers nearer Christmas, and the rest of the industry is currently doing exactly that—hon. Members may be asking what is happening with other companies. It appears that this company had some 26,000 agents. We are trying to identify, through the administrator, how many of those are active agents. That work is ongoing. The number of customers is uncertain, because the relationship was always with the agents, not the customer base. The company itself had no direct information, but it appears that there are probably in excess of 100,000 customers. That is an estimate from the administrator. The situation has affected whole families and whole streets in communities up and down the country. The total amount due to those customers is not known, but we have heard that many individuals are owed hundreds of pounds and some, at least, are owed thousands. I would like to give an assurance. BDO Stoy Hayward made a statement a few days ago, following a meeting with me, that cheques sent to Farepak and received by the joint administrators after the company went into administration on 13 October were never banked, and that some customers will already have received their returned cheques. That process will continue for some time. Because of the volume of correspondence to be processed, there is no set limit on the time that it will take for those cheques to arrive, but the administrator is trying to get it done by the end of November. That money will be returned by the administrator, and not seized and retained. The company was placed in administration on 13 October on application to the High Court. The administrator has confirmed that the company will not be able to fulfil orders that it has received for either vouchers or hampers, and—I must be straight; there is no point in dressing it up—it is pennies, not pounds, that it will return, at the end of the investigation, to those who lost their money. I cannot comment on the possible reasons for Farepak’s failure. That is, of course, subject to investigations by the administrator and my Department’s companies investigation branch. I cannot prejudge the outcome of those investigations but I undertake to pass on to the investigators all the points raised by hon. Members this morning, including some points that I have heard for the first time. This is an appalling state of affairs. The impact on so many family Christmases, in so many parts of Britain, can only be imagined. I fully share the concern that so many hon. Members have expressed about the effect on hard-working people, many of them among the least well-off, who aimed to put by something for Christmas, so that when that happy time of year came round again, they could be sure of participating without getting into debt. Let us be clear that the people affected are not ordinary, but extraordinary, and that they come from extraordinary communities, where they try to do the best they can by their families, friends and workmates. What has happened is not their fault. They have been let down by the so-called top people. My first priority is to mobilise whatever resources or assistance may be available to help to alleviate the impact of the collapse on the customers and their families, in the limited time available before Christmas. That is why I made it clear in the House, when my hon. Friend the Member for South Swindon (Anne Snelgrove) raised the matter in questions on 19 October—I cannot praise her too highly for what she has done, not only in securing the debate, but behind the scenes, with my hon. Friend the Member for Workington (Tony Cunningham) and other colleagues, in their communities—that I had discussed the way forward with the administrators and contacted the British Retail Consortium. That led to a meeting on 21 October to discuss the potential for a good-will gesture to help the most needy people, who have lost out completely. It readily agreed to the meeting, which was held at the Department of Trade and Industry to assess the level of the problem caused by the company going into administration. We agreed that the aim should be to find a package that would be simple, fraud-free and not derisory, and which would be easy to administer at store level as well as providing as much choice as possible for the customers to shop where they wanted. The retail sector has no legal obligations in the matter, and the package would not have been a compensation package, but the British Retail Consortium accepted in principle the idea of a good-will gesture, given the exceptional circumstances surrounding Christmas, and agreed a statement setting out the arrangement, to be placed in the public domain. I am sorry that the consortium has come to the view that the practical difficulties are too severe, and has abandoned its efforts to devise a good-will package. I am very grateful to the BRC for its help so far and its continued willingness to support our efforts to find a solution. I know from the individual retailers who have contacted me that they remain willing to consider supporting any alternative proposal that is sufficiently simple and timely. I have also had initial discussions with the chairman of HBOS, Lord Stevenson, about the possibility of the banking community, including his own bank, making a contribution, and we have agreed to further discussions following today’s debate. I am sure that Lord Stevenson would like me to report further to the House on the discussions that we have had. I want to make it clear to hon. Members that I am not in discussions with him about the role of HBOS, or allegations about that role. That is a matter for the investigations. I am discussing his ability, and the sector’s ability, to make a contribution. He has made it clear that some of the allegations in the press are fallacious, and I am sure that a defence will be set out on that basis. However, he has also said that HBOS will, as a company, work with the investigators and support any work that they want to do to get to the bottom of the issues. The discussions that I am having are fire-walled. The other matter is for the investigators, and hon. Members with allegations to make should make those to the investigators, not to me. I shall report back on my discussions with HBOS. I make it clear to hon. Members that I am not giving up on this issue. I am as committed to it as they are, and we need to make a difference to hard-working people. I was mindful of what the BRC said and accepted what it said, in good faith. I have no reason to believe otherwise. As a consequence, my office and staff have been working around the clock—we were in the office at half-past 1 this morning—trying to bring together what I shall propose. We have been working closely with the Family Fund, a registered charity based in the city of York, whose chief executive is Marion Rowe. She is well-respected in the government, business and charity sectors. She and her team have, in the past few days, been working tirelessly with the administrators. The fund’s main focus is on providing assistance to families with disabled children, and it was originally prompted by the thalidomide disaster, so we are talking to skilled people. The fund has 30 years of experience of grant-making and providing assistance to families, including the large-scale distribution of vouchers. In 2006, it distributed £27 million on behalf of the Government to more that 46,000 low-income families with disabled children. I am genuinely pleased to announce to the House today that the Family Fund is setting up a dedicated voucher fund for Farepak customers, called the Farepak response fund. The Government are strongly behind that. The fund will be independent of all agencies and will accept donations from all sectors. In recognition of the need for a good-will gesture this Christmas, may I suggest to hon. Members that we should take the moral high ground today? We received a pay rise this week. I ask hon. Members to donate a day’s pay to the fund, because I shall be going out there and asking a lot of people, who have no legal obligation to make a contribution and about whom many remarks have been made today. I want to do that from the moral high ground.