I promised to keep this House informed of the Government’s progress to put in place measures to avoid a repetition of the devastating impact on Farepak customers caused by the demise of the company last autumn.

Upon the collapse of Farepak, the Government acted quickly to set up the Farepak Response Fund, which secured £8 million. Thereafter, the Government have sought to work with the industry in order to provide added protection for consumers. While the urgency of the situation which existed ahead of Christmas may have passed, I have remained as committed to this issue as I was when it first arose. Today, I am pleased to announce that discussions with the industry have led to an agreement between industry and Government which I am confident will lead to far greater consumer protection in the future.

Since the collapse of Farepak, the remaining hamper companies have been taking payments towards Christmas 2007. My immediate priority therefore has been to concentrate on securing early action to ensure that these payments are protected as far as possible to avoid a repetition of the situation where some of the poorest families in Britain, who had budgeted for Christmas, paid the price for the collapse of Farepak.

Since last autumn, the Government have been in discussions with the existing companies in this sector to develop an industry-led scheme to provide better safeguards for pre-payments through independently controlled, ring-fenced accounts, similar to the scheme that protects National Lottery prize money in the event of Camelot becoming insolvent. The purpose of these ring-fencing arrangements is to ensure customers’ money could only be credited to the customers and agents should the company go bust, thereby avoiding another situation like Farepak. The key points of the proposal are:

The customers' money would be placed in a separate account and held on behalf of the customers.

Control of this account would rest with independent trustees and not with the company.

The money would be released to the company by the trustees only to satisfy the customers’ orders, and not for other business activities or expenses of the business.

The arrangements would be formally defined as a trust deed and would be subject to trust law.

I am pleased to report that the industry have agreed to safeguard pre-payments through trust arrangements on these lines, thereby protecting the interests of consumers within the Hamper industry. The companies are now working to introduce these accounts over the coming weeks. We think that effective safeguards of this type will provide the reassurance consumers are looking for in this industry. We therefore strongly welcome this move.

To increase consumer confidence further, we are also working with the industry to ensure these arrangements are monitored by a new, strengthened trade association. We will be looking for the trade association to put in place effective procedures through a reinforced code of practice to monitor the companies and ensure these accounts are established and operated correctly.

The trade association will have a strong independent element—independent directors will have responsibility for ensuring compliance with the code of practice. In particular, the code will be monitored by an independent Director of Compliance, free from association with any hamper company. Consumer concerns and consumer rights will be monitored by an independent Director of Consumer Affairs. We expect the companies to make the appointments in the next few weeks.

We will continue to work with the industry to ensure these measures are put in place as quickly as possible.

I believe this move is an important step and welcome the commitment of the industry to seek to protect their customers.

In the longer term, the advice received from the Office of Fair Trading and the Financial Services Authority on a range of options to protect consumer interests in this industry will be considered alongside the findings of the two investigations into Farepak by the Administrators and DTI’s Companies Investigation Branch. I hope to come back to the House once we have had a chance to consider all these issues.

With respect to the ongoing investigation into the administration of Farepak, the Administrators have a statutory requirement to report to the Secretary of State within six months of their appointment. Their report is expected no later than 13 April 2007. The Insolvency Service will then consider the Administrators’ report and consider whether there are grounds for requiring further investigation - for example, with a view to bringing proceedings to disqualify the directors of Farepak Foods & Gifts Ltd. from acting as directors to any other company.

DTI’ss Companies Investigation Branch is continuing its wider confidential investigation into the circumstances surrounding the failure of Farepak. I do, of course, recognise the understandable desire for a speedy enquiry, but the investigation needs to be both thorough and fair, and it would not be appropriate to give an estimate for its conclusion. The victims of the collapse of Farepak have the right to expect that a comprehensive investigation has taken place.

I will provide further details to hon. Members in due course.