Farepak Response Fund
The final item of business is a members' business debate on motion S2M-5107, in the name of Elaine Murray, on the fund for Farepak victims. I ask members who are leaving the chamber to do so quietly. The debate will be concluded with any question being put.
Motion debated,
That the Parliament welcomes the setting up of a fund by the Department of Trade and Industry to recompense Farepak victims, such as those in Dumfries; notes that retailers are being asked to make contributions; notes also that MPs are being asked to contribute a day's salary to the fund, and considers that MSPs should do likewise.
Farepak Food and Gifts was a company supplying Christmas vouchers and hampers to the public, who purchased them over a period of up to 10 months. The company ceased trading on 11 October and went into administration on 13 October. An estimated 140,000 families across the United Kingdom lost their Christmas savings, sustaining a combined loss of around £40 million.
From my experience of the constituents who have contacted me, it seems that most of the savers were women. Most were on low incomes, were in part-time work or were pensioners. These were people who wanted to save for Christmas, not take out a loan or use a credit card. It was because their family incomes were low that they saved for Christmas in this way, putting aside money month by month that could not be touched if the kids needed new trainers or cash was needed for a family holiday. That is why they did not save using a bank—various people have asked me that. They wanted to be sure that the money would be left untouched until it was needed for Christmas.
Unknown to them, however, European Home Retail, Farepak's parent company, was touching their money and using it to prop up other parts of its failing business empire. It has been suggested that that was going on from the beginning of this year. EHR told the stock exchange in June that it had problems and that it would run out of funds by the autumn unless further funds were made available. In August, HBOS advised that it would make no further funds available. The Hamper Industry Trade Association asked EHR to ensure that Farepak customers' money was ring fenced and would be available to customers at Christmas. EHR refused to do so and continued to encourage its customers to make payments for the period until 31 October. Companies House reckons that between £17 million and £23 million of Farepak customers' money—money that was carefully set aside by low-income families to provide for Christmas—was paid out by Farepak to EHR.
There is no doubt who the villains are in this unhappy Christmas carol—they are the Farepak directors: ultra-wealthy individuals such as Sir Clive Thompson, Nick Gilodi-Johnson and William Rollason, who used the hard-earned cash of Farepak customers to try to bail out their failing enterprises. Their bankers, HBOS, deny any responsibility. Shane O'Riordain, the general manager of group communications for HBOS, advised me last week in a letter that
"HBoS stood behind its customer, EHR, through its financial difficulties for as long as we could. We believe it was the right thing for the bank to stand behind its customers. We have behaved honourably throughout."
However, it is a pity that Farepak did not stand behind its customers. Further, if HBOS had pulled the rug out from under EHR during the summer, those customers would have lost less and would have had more time to make arrangements for Christmas.
HBOS has also stated that it will not donate any more than £2 million as that might, somehow, imply responsibility. However, with profits of £2.9 billion, I suggest that HBOS could do more without prejudice.
What is being done and what can be done to help the families that have been affected and to reassure people that this will not happen again and that, if possible, those who are responsible for their plight will receive some form of just deserts?
Some families—those whose agents paid by credit card—will have been able to reclaim their contributions. Indeed, some have already been repaid. I am pleased to say that the first constituent who contacted me has received her money back because her agent paid by credit card. However, many will not be repaid. The Farepak Response Fund was established under the auspices of the Family Fund—which, fortuitously, has a reception in the garden lobby of the Parliament tonight. The Family Fund was established more than 30 years ago in response to families that were affected by thalidomide and has supported families affected by disability ever since.
The Farepak Response Fund is not a compensation fund. It will distribute goodwill payments to customers, via their agents, in the week before Christmas. Because of that deadline, the fund was due to close on Friday. However, today the deadline was extended to 6 pm next Wednesday. I am hoping to use this debate as a plea to businesses and banks in Scotland and to individuals who have not yet made contributions to make donations to the fund in the next week. As of this morning, almost £4.9 million had been donated, including £144,000 from individuals. However, I ask members to bear it in mind that, as around £40 million has been lost, that sum represents a recovery of only about 8p in the pound.
Argos, Alliance and Leicester, Asda, Boots, Business Performance, Co-op, Debenhams, Findel, HMV/Waterstones, Jessops, John Lewis, Halfords, Marks and Spencer, Morrisons, Park Food, PKF, Ryman stationers, United Norwest, Tesco, Fifth Business, W H Smith and Woolworths have all pledged or made payments to the response fund—now we know who the good guys are—but many banks and businesses out there have still not made any payments. Indeed, some banks that have a high profile in Scotland have yet to contribute. Of course, I hope that fellow MSPs will donate, too. I point out that the response fund can claim back, through gift aid, the tax that someone has paid on a donation, so it will be worth more than the actual amount that is given.
It would be great if enough cash came flooding into the response fund to enable everyone to get their money back, but that is unlikely, so families may well have to borrow. The credit unions are keen to help. They can make loans available to new members while charging considerably less interest than do major credit providers. However, many of their existing members will also want to take out savings or loans to cope with the expense of Christmas. Therefore, I ask whether the Executive can help by providing some sort of security for the credit unions to help tide them over so that they can offer loans to Farepak savers.
On the issue of just deserts, the companies investigation branch has already started an investigation into Farepak. It is possible that there could be criminal investigations thereafter. The Office of Fair Trading is looking at the need for legislative change to prevent such an event from happening again.
I end by repeating my plea to colleagues, businesses and Scottish citizens to make a donation so that we can help these families to have the enjoyable Christmas that they deserve. We know who the Scrooges are. I hope that we will all act as the Ghost of Christmas Past, the Ghost of Christmas Present and the Ghost of Christmas Future by putting pressure on our colleagues and on businesses to help these families have the Christmas that they deserve and make Santa come for their children. [Applause.]
A considerable number of members wish to speak in the debate. I remind those in the public gallery that it is not appropriate to applaud.
I congratulate Elaine Murray on securing this important and timely debate. Like many members, I have been contacted by dozens of constituents who have been affected by the crisis. Friday 13 October was an unlucky day for hundreds of my constituents, as it was for thousands of people throughout Scotland who were customers of Farepak, because the company went into receivership on that day.
In many communities in my constituency, Farepak recruited agents who, in turn, recruited their families, neighbours, friends and people in their workplaces. It is galling to see that the front page of the brochure that was given to agents and their customers a few months ago states:
"GIVE YOUR FAMILY THE BEST EVER CHRISTMAS"
and
"Start saving now for Christmas 2006".
As members know, many families now face a disappointing Christmas unless we pull out the finger and do what we can to help make up for the loss that they face.
The Farepak scheme was especially helpful to families that went out of their way to budget and, as Elaine Murray said, it was particularly pertinent for many low-income families in Scotland. That is certainly the case in my constituency. To give some idea of the scale of the impact area, members should know that, in many of our smaller close-knit communities where people know many other people, agents signed up their families, neighbours, friends and workplace colleagues. I received an e-mail from one workplace in Elgin that said:
"From our office alone we have lost nearly £5,000 in store vouchers between 14 members of staff and their families, and we are all aware of others in the Moray area who have lost large sums of money. … Sir Clive Thomson who was the Chairman of Farepak was given a knighthood for services to industry in the 1990s but has been allowed to basically steal this money from us with no intention of providing goods or service."
I have received similar e-mails from other small communities. An e-mail from Lossiemouth states:
"I am an agent for Farepak (or was!) and my customers including myself have lost £4,000 of voucher orders."
An e-mail from the small community of Rothes says:
"My wife is (or was) a agent of farpak whose personal loss is £850.00 but her clients total loss is £3100.00".
Another e-mail from Lossiemouth says:
"My family has lost £730 through vouchers I ordered through Farepak freedom2shop. Freedom to be fleeced more like."
I am sure that those stories are reflected throughout Scotland.
As Elaine Murray said, it was particularly galling that Farepak accepted money from agents right up to the last moment. I have spoken to constituents who sent in cheques on the Monday that were cleared on the Friday when the company went into receivership. As things stand, those constituents have lost every penny of that money, which is despicable. Financial problems were known about as long ago as July, but the company continued to take money. Customers gave it money in good faith until the moment it went into receivership.
It is unfortunate that the people who are involved in the crisis—the former bosses of Farepak and HBOS, for example—have had many arguments. We must help Farepak's customers, who are stuck in the middle. It is all very well for former bosses of the company and other companies to have a big public battle, but the United Kingdom Government and the Scottish Government must pull out their fingers and do what they can to help the victims of the crisis. We must bring those victims some Christmas cheer in the next few weeks.
I congratulate The Press and Journal, which has started a campaign to help the 10 families in its circulation area that have been most affected by the crisis. It has appealed to businesses throughout that area to give donations. I am sure that members support what it is doing.
Thousands of Scots have been affected by what has happened. We must do what we can to help low-income families in particular, agents and the families, friends and workplace colleagues of agents through the crisis and ensure that we bring them some Christmas cheer.
I welcome the opportunity to discuss the fund for Farepak victims and congratulate Elaine Murray on securing a debate on such an important issue.
Farepak Food and Gifts ceased trading on 11 October; administrators were appointed two days later. As a result of the company ceasing to trade, hundreds of families and individuals throughout Scotland—not only in Dumfries, but in central Scotland and East Dunbartonshire and in Coatbridge, Airdrie, Hamilton, East Kilbride, Motherwell, Wishaw, Shotts, Falkirk and Kilmarnock—discovered that their savings had been lost and that they faced a bleak Christmas. The victims had one thing in common—rather than choosing to borrow and enter a spiral of debt, they had acted responsibly by planning ahead and making provision for the financial demands of the festive season.
Farepak, which was established in 1969, had a well-tested track record. Many self-employed agents, who encouraged friends and families to save, had been with the company for more than 20 years and were savers themselves. Some people—including employees in private firms and local authorities—saved with agents through work connections. There was no reason to doubt the company's viability.
However, there was a very different story behind the scenes. Farepak's parent company, European Home Retail, which is a listed company, took decisions that meant that its liabilities exceeded its assets for more than two years. A time bomb was waiting to explode; it finally exploded when Farepak and EHR called in the administrators, which left the victims—among them some of the poorest and most vulnerable families in Scotland—devastated.
As Elaine Murray pointed out, some people have been quick to point the finger at HBOS following the collapse of Farepak. However, doing so is unjust. The bankers tried to support the struggling company for as long as they could, but they could not support it indefinitely. Like Elaine Murray, I have absolutely no doubts about who the real culprits are. The blame lies firmly on EHR's directors, managers and family shareholders, who tried to trade their way out of trouble rather than consolidate before things got totally out of control.
The setting up of the Department of Trade and Industry fund to help victims is welcome. Any contributions must be voluntary, and people should not be too prescriptive. As Elaine Murray said, numerous companies and individuals have already contributed to it, and I hope that others will be encouraged to do so. I would certainly welcome Scotland's local authorities being encouraged to spread some Christmas cheer by donating the revenues that they receive from a week's parking fines. If they did so, they might even make people feel good for once about getting one of the dreaded parking tickets that local councils and the blue meanies diligently deliver.
Elaine Murray is to be thanked for bringing the debate to the Parliament and giving us the opportunity to air the many disturbing issues behind the collapse of Farepak.
Next week, the Parliament will debate stage 3 of the Bankruptcy and Diligence etc (Scotland) Bill. In the evidence that was gathered by the Enterprise and Culture Committee, real concern was expressed about the level of individual debt, which is now estimated to be £10,000 on average. I was particularly concerned when I heard evidence from a witness who suggested that the mantra for many is, "Buy now, file later." That underlines the saddest part of this collapse, which is that it has affected so many people who are struggling on low incomes but who had the sense not to go down the debt route. They thought that they were doing their best for their families by saving throughout the year for Christmas. What sort of message is being sent out now?
Those people losing so much in doing what they thought was the responsible thing contrasts markedly with the totally irresponsible actions of the chairman and board of Farepak's parent company, EHR. They took in the weekly contributions under a scheme in which they could use the money for their own purposes without even offering interest to their savers. In the process, therefore, they did not come under the regulation of the Financial Services Authority.
Such unregulated banking must not be allowed to continue, especially when we have a much more acceptable method of saving in credit unions. Credit unions provide easy and safe savings routes for people. Crucially, all the money that is saved in credit unions is protected by the Financial Services Compensation Scheme and, as financial co-operatives, credit unions exist only to serve their members. That is the clear message that must be sent out if we are to continue to encourage saving.
The motion, however, is more about the fund that has been established to support those who have lost so much. I heard today that HBOS—the banker for the parent company—has been able to recoup £28 million from the company's total debt of £31 million. That means that it is receiving 90p in the pound. The investors, who have lost so much more in relative terms, will be lucky to get 4p in the pound. There is no equity or fairness in that.
According to Polly Toynbee, in an article in The Guardian of 14 November, the Farepak chairman, Sir Clive Thompson, was taking £100,000 a year for his part-time job while earning £894,000—sorry. I beg your pardon; I am losing my noughts—£894,000 is right. Sorry. I have been sitting in the chamber too long. He was also taking £894,000 as the deputy chairman of an investment company. Meanwhile, one of the directors, Nick Gilodi-Johnson, the son of Farepak's owner, had an estimated share dividend from EHR of £445,000 on top of his pay—no, £44,500. Sorry. It was £445,000. The figures are so amazing, it is hard to get one's head round them. Anyway, he also stands to inherit £75 million. As Polly Toynbee pointed out, if he is as gutted as he says, the family has the money to repay the savers. So does HBOS, which cannot absolve itself of its corporate social responsibility towards those thrifty savers. At least HBOS has given £2 million to the fund. Has NatWest, the banker for Farepak?
It is to be welcomed that individuals are willing to give voluntarily to the fund, but the ultimate responsibility must remain with those who misused the funds for their own ends. It remains their shame, although that is little comfort to those who trusted them. Nevertheless, they have time to make amends and to right this unacceptable wrong. I hope that they do.
It is appropriate that this debate should take place on the same day that the Parliament has recognised the special nature of Christmas in our society. Of course, much of the legislation that governs the regulation of companies is reserved to Westminster, and I welcome the contribution that MPs have made in raising the issues relating to Farepak at Westminster. However, it is important that the Scottish Parliament lends its voice in support of the many families—our constituents—who have been hurt by the collapse of Farepak, and that we look to ourselves to see what we can do to alleviate that hurt and avoid it happening again in the future.
I pay tribute to the many Farepak agents and customers who have come together in a determined and dignified manner to campaign to ensure that they are recompensed for the losses that they have suffered, and for action to be taken to ensure that such a scandal is never allowed to happen again. In particular, I praise the work of Suzy Hall, who has been ably leading the campaign in Scotland. A number of the campaigners are here in the gallery; I welcome them to the Scottish Parliament.
I will address two main points. First, what can we do about this Christmas? Elaine Murray's motion welcomes the establishment of the fund to recompense Farepak customers and calls for contributions to the fund from MPs and MSPs among others. I agree with that call and hope that we respond to it. I urge any individual outwith the Parliament who can afford to do so to make a donation to the fund.
Although individuals can make an impact by donating to the fund—symbolic though that impact might be—the only thing that would make a substantial difference to the families that have been affected by the Farepak collapse would be if many of the major, highly profitable companies in Scotland, such as the banks and major retailers, made substantial donations.
Many references have been made to HBOS and time will tell about the extent of its culpability. I urge HBOS to use some of the massive profits that it enjoys, as outlined by Elaine Murray, to increase substantially its donation of £2 million. I echo other members' calls for other major clearing banks and financial institutions that enjoy healthy profits in Scotland to look to their consciences and donate as a matter of good will.
Will the member join me in condemning Lloyds TSB, which has reneged on its decision to refund any contributions made by Farepak customers who went into the bank's premises to make payments using their debit cards? The bank believes that it has nothing to do with the problem.
I agree with Margaret Jamieson absolutely. Some customers have managed to get some of their money back because they used credit and debit cards to make their payments, and I urge all banks, including Lloyds TSB, to fulfil their obligations to their customers.
Beyond the banks, the major retailers should be looking to make substantial goodwill donations. Many retailers have benefited from the vouchers that Farepak customers have saved up for. Retailers make substantial profits out of people all year round, but most of all in the run-up to Christmas. Again, I urge every major retailer on the high streets of Scotland to make a contribution.
My second and final point concerns the future. I would like the role of credit unions to be improved in Scotland. The people who saved with Farepak have proved that they can save to plan for Christmas. They are reliable savers, so for the future, we should try to ensure that Farepak customers and others who want to save—for Christmas or for other purposes—are aware of credit unions and are encouraged to join a safe, reliable and regulated means of saving. If we can do that, hopefully people will have their money at Christmas.
The most important thing that we can do now is help families to have a good Christmas this year. I therefore urge individuals and companies in Scotland to give generously to the fund.
I congratulate Elaine Murray on introducing this topic for debate, and on the forceful and fluent way in which she opened the debate. She expressed the anger that I am sure we all feel about what this company and the company that stands behind it are responsible for.
Farepak appears to have been operating as a form of bank—although obviously not a comprehensive one—by collecting money from people, holding it for them and then giving them vouchers at the end of the year. It strikes me that that is a pretty good business for the company. As I understand it, the company pays no interest.
Also as I understand it, the customers are very restricted in what they can buy with their vouchers. They lose the opportunity to scout around for good competitive prices as the rest of us who deal in cash can do. Why would anybody put themselves into that position? I think that Elaine Murray gave the answer. By and large, the people who have dealt with Farepak are people whose circumstances are such that they cannot trust themselves not to touch the money during the year. It can be hard for us to understand that; we all command good salaries and cannot imagine ourselves in such circumstances. However, if we start from that understanding, we can gain some sense of the depth of the injustice and the wrong that has been done to people. Those people had little choice but to put themselves in a position where they were vulnerable to such exploitation. Farepak and its parent company have exploited them.
As Bristow Muldoon said, there will be an investigation into what has happened, and the culpability of other parties—particularly HBOS—will be looked into as well. Briefing material that we have received this week suggests that the parent company has been struggling in some ways for a number of years. Questions may have to be asked about that.
I do not know the answer to those questions, but I suspect that the legal position will be that HBOS had little option because of the duties of its directors but to recover the money. However, I suspect that the directors had the option of being rather more generous than they have been in the way in which they can disburse the moneys that they have at their disposal. They could dig deeper into their pockets and I hope that they will.
We should all contribute to the fund, but the principal lessons must be for Westminster. I agree with what has been said about credit unions but, although credit unions offer better protection for funds, they will not be in a position to say to people in September, "No, we are not going to give you your money back even though you say you need it." Credit unions would have to give people the money. Therefore, there is still a market for the Farepaks of this world.
The answer has to lie in some form of regulation. Whatever the definition or the category used, the people who regulate banks and banking activities have to acknowledge what has happened. There is a loophole. A company has slipped through the net and the regulatory regime must ensure that that kind of thing can never happen again. If the regime can do that, it will allow people to save for Christmas in the knowledge that they cannot touch their money before December, that they will definitely get their money, and that they will get a fair return for the money that they have put away during the year.
Evil has been done and—morally at least—a crime has been committed, but I hope that in the long run the reactions at political, parliamentary and governmental level will ensure that people who need this kind of service will know that it is being better regulated to give them the protection that they deserve.
I am minded to accept a motion without notice for an extension of up to 15 minutes.
Motion moved,
That, under Rule 8.14.3, the debate be extended until 6.11 pm.—[Dr Elaine Murray.]
Motion agreed to.
I congratulate Elaine Murray on securing the debate, which gives us all an opportunity to reflect on an issue that has affected many of our constituents. Like other members, I have been approached by constituents who to a man—or, should I say, to a woman—are all from low-income families.
The tragedy is that people on low incomes have taken what they thought were responsible decisions to safeguard the money that they were saving, each week or each month, for Christmas. The impact of what has happened to those families is very serious—not just because of their loss just now, but because of the grave financial peril that some of them have since got into in their desperation to ensure that their children have a memorable Christmas.
Bristow Muldoon and others have said a lot about credit unions, which are excellent institutions. However, there are some rogues out there who would happily cause a great deal of misery for people who are trying to get out of the financial situations they find themselves in. I hope that the minister is able to say some more about how the Executive can support the delivery of good financial advice to individuals who find themselves in this situation.
When a person makes a contribution to a bank—Murray Tosh made a very apposite point in this respect—they are entitled to depend on certain constraints, rules, regulations and commitments. For example, if they put £5 into a deposit account, they should be able to get that £5 out whenever they want to. Similarly, the people who invested with Farepak felt that, after putting money in during the year, they should be able to get it back at the end.
The tragedy is that the regulatory framework has simply not protected the investment that was made by low-income families in Scotland and the rest of the UK. Indeed, their money has, in effect, been used as a cash cow for a series of failing businesses within the European Home Retail group. I hope that the UK Government's investigation will carefully consider that matter. After all, if people are to have confidence in such savings schemes, such a loophole must be closed.
This issue will affect a large number of low-income families and it is incumbent on everyone to do what they can to help out. Individuals have contributed to the fund; some corporate entities have made substantial contributions; and various private sector operators have contributed to the debate and proposed solutions. However, I feel that everyone could do a little bit more. If people are willing to ensure that this fund is of a reasonable size, we might be able to find a way not only of giving people some money to fund their Christmas activities and support their families at that time of year but of helping a lot more people to avoid getting into financial peril in the months and years to come.
I, too, congratulate Elaine Murray on securing this very timely debate.
The latest figures that I have for the Scottish Borders show that, as a result of Farepak's collapse, at least 378 people have lost a total of just under £100,000. Those figures have been collated from correspondence sent and questionnaires returned to my colleague Michael Moore MP following his special Farepak surgery last week in Melrose and from prior contact that he and I had with Farepak agents and customers. Indeed, Michael Moore said recently in the local press:
"These figures reveal the stark reality that huge sums of money have been lost by people in the Borders."
Obviously, the same is true elsewhere in Scotland and the UK.
Because Farepak's business was based on networks of local agents, close-knit towns and villages in my part of the world have been hit massively. In some cases, a number of people living in the same street have lost hundreds of pounds. As Elaine Murray said, agents and customers were doing all the right things to cover the expense of Christmas.
Apart from the misery that it has inflicted on families, the collapse has a broader economic impact. For example, some of our shop local initiatives for Christmas have been severely blunted because of the loss of spending power in the local economy.
I want to quote from a letter that is representative of the correspondence that I have received on this matter. The lady in question said:
"This year I served a total of 19 customers and placed a total order of £5880. Farepak had taken payments totalling £5287.57. This order was all for vouchers.
I personally have lost a total of £450 worth of vouchers, and also the commission of £204 that I would have earned. Being on my own with a 6 yr old son, Christmas will be a real struggle this year.
I only wrote to you to … add my figures to the rest. Hopefully something positive will come out of this in the end. I doubt very much though that any of us will receive any compensation from the administrators."
I will not repeat the many points that colleagues throughout the chamber made eloquently, but I agree that the banks could and should do more to help. The Government's investigations must identify where the fault lies so that, if at all possible, there is no repetition.
The joint administrators, who say that 4p to 5p in the pound might be available, have highlighted an important point. Ian McCartney, the Minister of State for Trade, Investment and Foreign Affairs at the Department of Trade and Industry, ought carefully to examine the preferential creditors' take from Farepak's assets and consider whether it can be moderated to some extent.
Like other members, I congratulate Elaine Murray on securing this important debate. It is a measure of the disgust that is felt throughout the Parliament that this is a relatively well-attended members' business debate, although I know that some members have had to leave. Given the strength of feeling on the matter, the Deputy Minister for Enterprise and Lifelong Learning and the Executive might want to consider raising it in a debate in normal time, so to speak.
Anyone who looks at the issue will be struck by the miserable situation that Farepak customers and agents find themselves in through no fault of their own. We all share the sense of shame—that word is not sufficiently strong—when we see the owner of Farepak, European Home Retail, walking away with £75 million of people's money. Shiona Baird mentioned Nicholas Gilodi-Johnson. We also see Sir Clive Thompson jetting off to a holiday in South America this winter. That is in stark contrast to the customers Farepak was supposed to serve, who have lost everything. The public feel so angry because, in essence, business has ripped off honest, hard-working people—men and women in the street—yet again.
When the situation was drawn to my attention, I could scarcely believe that a company such as Farepak could lose money. The business was almost a licence to make money. People paid into a savings scheme for 10 months, after which they got either a hamper or vouchers for high street stores to the value of what they paid in. No interest was paid on their money and no discount was given through the vouchers, despite the fact that Farepak clearly got a discount from Marks and Spencer, HMV, Woolworths and so on. How could a company like that fail? The situation strikes me as absurd.
Of course, it failed because the big high street retailers demanded that Christmas clubs paid the money up front before they got the vouchers. Farepak also failed because the bank foreclosed on its outstanding loans—not those of Farepak, which was profitable, but those of its parent company, European Home Retail. Frankly, this is the unacceptable face of big business. I have seen various estimates, but if there were 150,000 customers, and if we take all those customers' families into consideration, the company's failure might impact on 1 million people. It is a shocking scandal of enormous magnitude. Those affected include workers in the national health service, factories, offices and clubs throughout the country. People clubbed together, but they lost the lot.
Who is to be held to account? I am sure that all members agree that Farepak's 150,000 customers are entitled to more than crocodile tears. We have all been contacted by people who are affected. When there were similar collapses of holiday companies, the Association of British Travel Agents bond was set up so that compensation could be made available to people. As the minister knows, I wrote to him and asked him to approach the DTI and the Office of Fair Trading to examine whether the bond route could be considered for Christmas clubs, although clearly that would be after the event.
What about the here and now? I believe that Farepak's customers and agents are entitled to full compensation, but the question is, from whom? I have nothing against the idea that MSPs, MPs and the public should make donations, but surely we have to ask why the guilty get to walk away scot free. It was HBOS that foreclosed on the loans and took £40 million of the money that customers paid in. We should remember that HBOS is a corporation that has made between £5 billion and £8 billion in profits this year.
Like other members, I am attracted to the credit union route, which I hope people are encouraged to go down. However, we have to ask ourselves why Farepak customers did not go to a bank in the first place. It is because the banks are talking about charging people £10 a month for a current account unless £1,500 a month is paid into it. How many Farepak customers have £1,500 a month going into their current account? The same banks charge people £30 if they are a penny overdrawn. That is why Farepak customers do not go to high street banks in the first place.
I know that Elaine Murray has been under pressure from HBOS not to call for a boycott of its accounts. That is her concern, but I agree with Jim Devine, Mick Connarty and others that a protest should be made. We should all be outside HBOS on the Mound on 11 December. Should it be having a champagne reception when it has taken £40 million from perhaps 150,000 families? Not in this city, not this Christmas and not at any time. I hope that everybody will go along. I certainly intend to be there and I encourage others to come along.
Like Bristow Muldoon, I pay tribute to Suzy Hall and all the unfairpak campaigners. I know that some of them are in the public gallery. They are entitled to enormous credit, because they have kept the issue in the news when it threatened to go away. One of them said to me that in America people could go to jail over what has happened. In Britain, people should be going to jail over what has happened. They should be held to account for letting down so many people in this scandalous situation.
I congratulate Elaine Murray on securing this important debate. I also take the opportunity to congratulate the individuals and groups in communities throughout Scotland on their strong response and on the organisation that they have put in place to keep the issue in the news. Like other members, I pay tribute to Suzy Hall. She has kept in touch with MSPs by e-mail about what has been happening and has helped to publicise the issue.
On Monday 15 October, I was contacted by constituents in New Cumnock. I went over there and met a group of people who were devastated at the news that they had read in the Sunday papers. That was their first inkling that the money for Christmas that they had been saving all year was gone. They were stunned and shocked. The agent was afraid to leave her house, because she felt that people would blame her. Of course, everyone understood the circumstances and no one blamed her, but she was initially terrified to leave her house, because she felt so responsible. She had banked money on the Friday and it had been accepted. That is outrageous.
It is a terrible situation, but the people in New Cumnock got themselves organised, as many people have done in communities throughout Scotland. I will read to members a notice that they put out and the response that they received. The title of the notice is "Un-Farepak" and it states:
"Last Sunday, many people within our village lost a great deal of hard saved money. Sir Clive Thompson's company called ‘Farepak' went bust and in turn robbed 174,000 citizens in the U.K. of approximately £68,400,000. All those affected by the actions of the multi-millionaire should have instructed their agent to make contact with the administrators to register their loss. This is all that can be done at present—or is it?"
The notice goes on to say that people can do nothing or "Try to achieve something".
They chose to try to achieve something. They have achieved an agreement with a credit union to provide loans, which does not help in the long term but it helps in the short term. I encourage people to consider and get involved with credit unions. We have a responsibility to encourage people in all our communities to get into credit unions and to ensure that they are accessible to everybody. That is important.
Shiona Baird and others are right to say that HBOS has a responsibility and that it should be inputting more to the fund. I say that we—or Westminster—should also be making moves to secure the funds from Sir Clive Thompson and others by seizing their assets. Why should they be sitting in their multimillion pound mansions while others are sitting at Christmas with nothing?
I will again quote from the notice, which tells us a little bit about Sir Clive Thompson, the owner of Farepak:
"When he was chief executive director of Rentokil he was earning approx ~ £589.00 per hour: 24hrs per day: 7 days per week, while the workers at his factory earned under £3.00 per hour. He lives in a £2,000,000, 8 bedroom mansion and recently received a £13,000,000 pension payout."
That is the reputation of the man who owned and ran Farepak. I have another comment about him, which I hope is correct. According to the leaflet, he said that he loved dealing with trade unionists because they were like parasites. That is the kind of man we are dealing with. He should be brought to account and made to pay for the damage that he has done to the affected people and communities.
You should be finishing now.
We can encourage businesses to raise money and we can contribute money but, at the end of the day, the directors of Farepak are responsible and should be made to pay.
I, too, congratulate Elaine Murray on giving us the opportunity to debate Farepak and the aftermath of its collapse. The extensive coverage of those events leaves a question hanging in the air. With a few honourable exceptions, the totally unregulated nature of Farepak and similar businesses has gone completely unreported and unrecognised. Treatment of the subject has been confined largely to columns in the business and financial pages of the papers, such as Lesley Campbell's in the Daily Record. In fairness, we should acknowledge that she had been writing about the issue long before October. I concede that the form of saving in question was largely unknown to me. As we say in Scotland, "Ah ken noo." All of us have learned a lesson about what families have to cope with in their lives.
I have no doubt that the regulation issues will be closely scrutinised at Westminster. Cries of "Too much red tape!" usually emanate from certain business quarters, but it is a fair bet that most of them will keep quiet this time. Sooner or later, legislation will be introduced to bring such firms under a regulatory umbrella and the DTI will no doubt proceed with its investigation. I find it unbelievable that people in my constituency were allowed to make payments to Farepak on Friday 13 October.
None of that will help people who are out of pocket. I have already heard of people who have resorted to moneylenders to get them through the next few months; I feared as much. The discussion of a charitable fund reminds us of the impact that the collapse must be having right now. Investigations and possible future regulation are all very well, but they will not help the people who are struggling in the run-up to Christmas. Regardless of how generous the public are—I note in passing that Sir Clive Thompson has shown no generosity so far or, for that matter, any evidence of shame—we know that many families face an extremely bleak Christmas. As I have said, some people have already resorted to using moneylenders. It is a disaster waiting to happen.
As I made clear recently at First Minister's questions, I have major concerns about the response of various public bodies to what is an all-too-predictable outcome for many people. Today, I have written to all the housing bodies that operate in my constituency to ask them what action they can take to identify people who have lost money because of Farepak and whether they can provide any form of support that will help to ensure that their tenants do not get into even worse financial difficulties than they are in at present. Early intervention can help to prevent financial problems from spiralling out of control. I very much hope that organisations will adopt a proactive stance to help their tenants avoid such problems.
Along with other members, I met representatives of HBOS today to discuss their part in the debacle. I am sure that the DTI investigation will come to a view on that company's actions, but in the meantime I have some advice for it: any planned so-called champagne reception at Edinburgh Castle in December should be cancelled. At the very least, HBOS should increase its £2 million contribution to the charitable fund by however much that reception would have cost.
A constituent's e-mail to me begins:
"Jamie, The recent collapse of the Farepak Christmas Hamper Club has caused a lot of distress among ordinary working class people. My wife … had been an agent for the last six years and to be fair never had any trouble with the organisation. To cut a long story short over five thousand pounds went down the drain this money belonged to family, friends and work colleagues The people themselves have actually been brilliant as they understand that"
my constituent's wife
"had nothing to do with this, but the damage that has been done to"
her
"is tragic she is a different person and takes personal responsibility for the loss of the money. We will survive as we are working but what about the other people throughout the country the Pensioners, single parents, low income families How will they survive when they have nobody to help them".
I am talking about people who live in Caithness, in the very far north of our country.
I will be brief because the minister and colleagues have waited long enough.
Sir Clive Thompson has been mentioned. If a board of directors that has been given certain responsibilities trades when it knows that its assets do not meet its liabilities, it is in breach of the United Kingdom Companies Act 1985. As I understand it, that is the law of the land. I sincerely hope that the investigation will get to the heart of the matter. If a board trades when its assets do not meet its liabilities, that is nothing short of fraud. In this case, the highest penalties should be imposed. I do not know whether those penalties can be directed at the people who have lost, but one hopes that they can.
As others have said more eloquently than I can, this is a tragedy for people in the poorest situations in life. It is a self-evident truth that it is hardest to save when one is poorest. However, these people have not peed it against the wall—to be blunt—but have put money aside for their bairns for Christmas. That money is gone. Besides being a tragedy for them, that is corrosive of the notion of saving. As others have said more eloquently than I can, there remains a test for us as a society. Surely one of the greatest things about our society in the past was that those who were wealthiest gave to those who were poorest; I hope that that is still the case. The test is, can we as a society—MSPs, MPs, companies, corporations and everyone else—pay off the debt in full, as nothing less will do? What is £45 million in the greater scheme of things, against the entire Scottish Executive budget? What is it against the cost of many of our services, Scottish and national?
If we fail the test, we will undermine the notion of saving, of thinking of the future and of trying to make a better life for our children and giving them memories that they will treasure for the rest of their lives. I whole-heartedly commend Elaine Murray for bringing this debate to the Parliament. I hope that in our small way we can set an example to other people. Let us hope that the banks will put their hands far deeper into their pockets and that every other business in Scotland and the UK, as well as some of our wealthy friends in the Scottish diaspora across the world, will look into their hearts and help some of the poorest people in our society.
Ordinarily I would apologise for repeating what has been said in the chamber, but it is important for me to put on record the fact that the Scottish Executive shares the sentiments that members of all political parties represented here have expressed. I congratulate Elaine Murray on giving us the opportunity to debate this important issue. On members' behalf, I pay tribute to Suzy Hall and the other former customers of Farepak who have spearheaded the campaign for their fellow savers. Their determination and energy are inspirational, and I am glad that some of them are able to join us for today's debate and for the meeting that will be held afterwards with representatives of the Family Fund.
I want to issue two clear calls to action around which the chamber can unite, which I hope will be picked up by the news media outlets. Journalists from the Daily Record were here earlier and others will be watching the debate remotely. First, I call on those individuals who have lost out through Farepak but have not yet come forward to register a claim with the administrators BDO Stoy Hayward to do so. Secondly, I call on companies and individuals who want to help those who have lost out but have not yet pledged a contribution to do so before the extended deadline of 6 pm next Wednesday. The deadline has been extended to accommodate an encouraging last-minute surge in donations.
Much reference has been made to the media stories that we have all seen about what happened and who is to blame, and to comments about the directors, but we can be clear about one thing—the facts have still to be established. It would be inappropriate for me to speculate today on the reasons for the collapse of Farepak. The administrators are still investigating the circumstances of the collapse and, unfortunately, that process will take time. They have established a dedicated call centre to handle customer enquiries and have taken more than 24,800 calls so far. In addition, they are dealing with substantial volumes of post—in excess of 35,000 pages so far. They are receiving 80 faxes a day and have received more than 33,000 e-mails.
More important—as has been mentioned, most recently by Jamie Stone—the DTI's companies investigation branch is conducting an investigation into the company under section 447 of the Companies Act 1985. That report will go to ministers and potentially to the regulators and prosecuting authorities.
Agents in my constituency tell me that although the administrators promised them, through the media, an update on the situation, as of yesterday they still had not heard from them. Clearly, they need those updates as soon as possible. Will the minister look into that?
I would be pleased to look into that for the member, and indeed for the agents and their representatives.
I have been in contact with the DTI. Colin Fox said that, for well-documented reasons, getting concrete evidence from the remnants of the collapse is difficult. However, we should do all that we can to ensure that we are as well informed as possible about the scale of the collapse and the necessary response. I would be pleased to do anything I can to assist that. Once the investigations have been completed, we will have a much clearer picture of what happened. It will be for the DTI to act on the findings and, at the request of the First Minister, my officials and I have been in contact with the DTI.
The calls, repeated this evening by Murray Tosh and others, for greater regulation of this type of business are under consideration by the Minister of State for Trade, Investment and Foreign Affairs, who has met John Fingleton, chief executive of the Office of Fair Trading, and asked that the OFT work with the DTI and the Financial Services Authority to consider the regulatory framework in which Farepak operated and options to address any issues raised.
Given the unsuccessful attempt to engage the British Retail Consortium—I sought to engage the Scottish Retail Consortium—I welcome the fact that the DTI has secured the assistance of the Family Fund, a registered charity with 30 years' experience of grant making and providing assistance to families, including the large-scale distribution of vouchers.
I welcome what the minister is saying. I wonder whether, in addition to establishing a regulatory regime, it would be possible to consider the value-for-money aspect of companies working in this sector. There are suspicions that Farepak was a bit of a money-making machine, which did not give its customers a fair return on their investments throughout the year.
I wholly share those views. In fact, I did not come to this issue late. As a union organiser in hospitals, I had seen the scheme operating and, like Murray Tosh, had misgivings over a period about the potential return to the so-called savers who participated in it. I whole-heartedly subscribe to Mr Tosh's view and will make representations to that effect to the DTI.
As Elaine Murray mentioned, the Family Fund is working closely with the administrators. The DTI has set up the Farepak response fund, which will operate temporarily and distribute goodwill payments in the form of vouchers directly to the agents. Importantly, it will be independent of all agencies and will accept donations from all sectors. It is important that the fund is able to distribute vouchers to those affected prior to the festive season so, as I mentioned, it will close next week. I am pleased to note that there have been some sizeable donations, but we would like a lot more to be made. I agree with colleagues who have encouraged companies that had a relationship with Farepak and its customers to set a particular example by making an appropriate contribution. MPs were called upon to contribute a day's wages. It is for individual members of this Parliament to decide whether they would like to follow suit, but I will be doing so and I believe that the First Minister has already done so. Everyone who is in a position to contribute should do so.
Looking to the future, I recognise—as Bristow Muldoon said—that there will always be people who want to put away a little money regularly for a special occasion such as Christmas, but who do not have a bank account. Credit unions, which many members have mentioned, provide a safe way to save. Traditionally, they provide their members with access to low-cost loans, based on savings built up over a number of weeks. Like other members, I commend them. Credit unions are also diversifying into new products that offer more options for members: savings accounts; budgeting accounts; and flexible credit. All of those offer options for the future.
Although I am happy to promote the role and use of credit unions, I am aware that they are not necessarily the right solution for everyone. We have a thriving financial services sector with a wide range of savings products.
The most fundamental point is that, as Farepak customers are examples of good financial practice in saving and not borrowing beyond their means for future expenditure—as several members have said—it is surely the ultimate condemnation of the company that those people should be penalised rather than reimbursed for following the accepted fiscal rules. Like Murray Tosh, I would like a low-income saver scheme that provides real and tangible benefits to savers to arise out of the ashes of the Farepak fiasco, so that there is no recurrence of the tragedy and so that future savers are rewarded for their prudence as well as protected.
I reiterate that it is important that individuals who have lost out through Farepak but who have not yet come forward, do so and register a claim with the administrators. It is also important that companies and individuals who want to help people who have lost out but have not yet pledged a contribution should do so before the deadline of 6 pm on Wednesday 29 November.
Last, but by no means least, it is important that the Parliament acknowledges the hard work and determination of the representatives of those who have lost out and wishes them every success in their campaign.
Meeting closed at 18:11.