Farepak

Robert Buckland Excerpts

Wednesday 14th December 2011 Westminster Hall

[Jessica Morden]

I thank my hon. Friend for her intervention. I agree that the matter is downright wrong, and I hope that the Government will act.

I would like the Minister to say whether he believes that the insolvency process is fit for purpose in dealing with the aftermath of cases such as Farepak. Should there not be a limit on how much administrators can demand—perhaps a percentage of the total amount accrued? I have spoken to Farepak victims and agents, and the process is incomprehensible from the outside. Victims need to know what is going on, and why it is taking so long.

[Mr Robert Buckland (South Swindon) (Con)]

I am pleased that the hon. Lady secured this debate and that she raised the point about transparency, because there are real concerns about creditors’ representation, and precisely what is going on with BDO. There is a dearth of information, and it is not good enough to rely on civil proceedings as a cloak to prevent victims from being told what is going on.

[Jessica Morden]

The hon. Gentleman is exactly right. Although my constituent has been incredibly tenacious, from her point of view it has been very difficult to get any information out of the administrators, apart from messages posted on the website.

The average amount of time taken for a liquidation process to finish is about two and a half years, so we can completely understand the sheer anger, frustration and, frankly, scepticism of the ex-customers of Farepak over the administrator BDO and its motives. Could this ever happen again? Following the collapse of Farepak, the Christmas Prepayment Association was set up. On the face of it, the guidelines issued by the CPA seem to remedy many of the issues that arose. However, the association has a major flaw: it is self-regulating. Conceivably, a Christmas hamper company could be set up tomorrow and not be required to follow the CPA guidelines. This is surely not acceptable, given what has happened.

--- Later in debate ---

[Mr Buckland]

The hon. Lady has come to the fundamental point. Five years ago, a loophole was identified. Because of the nature of the business, unbeknown to all the clients and customers who took part in it, it is not in law a financial service. Why is that loophole still there five long years on?

[Jessica Morden]

I thank the hon. Gentleman for that intervention. He goes precisely to the crux of the issue: self-regulation is simply not acceptable. We need statutory guidance. We must compel companies to protect their customers’ money. Can the Minister assure us that the Government will do that? If not, can he explain the reasons why, especially as just today we have seen that banks are to be compelled to display prominent signs telling customers that their savings are protected up to £85,000. What should we do in this case?

--- Later in debate ---

[Mr Hayes]

That is a fair question, but since the matter is now part of a legal process it is difficult for me to give a definitive answer. It would not, however, be unreasonable for my hon. Friend the Member for Kingston and Surbiton (Mr Davey), who is the Minister responsible for such matters, to respond directly to the hon. Lady, and I will ask him to do just that. I am not the Minister responsible for this particular matter, although I am happy to act as a conduit to the person who is. On such occasions when I am standing in for a Minister, it is my habit to make it clear to them that they have a responsibility to hon. Members and to the Chamber. I am more than happy to pass on the fact that I would like my hon. Friend the Member for Kingston and Surbiton, in so far as he can, to answer that question.

[Mr Buckland]

In the spirit of that constructive approach, may I ask the Minister the question posited by the hon. Member for Workington (Tony Cunningham) about the criminal aspect of this case? Was a proper investigation ever carried out by the Serious Fraud Office or the Crown Prosecution Service into allegations of fraudulent trading? It certainly seems to me, and to many others, that that should have been looked into at the time. If it was not looked into, why was that?

[Mr Hayes]

I will try to deal in my remarks with some of the actions that were taken, and if I do not cover that point I will come back to my hon. Friend on the matter. I would like to make some progress to describe what actions have been taken, although I am mindful of that intervention and do not seek to avoid it. I will try to deal with it during my remarks, but if I cannot, I will subsequently reply to my hon. Friend directly.