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Volume 687: debated on Thursday 30 November 2006

My right honourable friend the Minister of State (Ian McCartney) has made the following Written Ministerial Statement.

At DTI Questions on 17 October and during the Westminster Hall debate on 7 November, I undertook to come back to the House, at each stage, in an appropriate forum to keep honourable Members up to date. This is an appropriate moment, since the Farepak Response Fund closed yesterday.

I think every Member of the House will be aware of the collapse of this company; that a large number of people who were customers have lost the money they had intended to put by for the festive season. I have heard stories from honourable Members about whole families in their constituencies who have lost out. They were not investing their money hoping to make a profit or receive interest, but they were expecting that they would get their money back in the form of vouchers. Many had also ordered hampers of food and confectionery for the Christmas festivities. Many of the poor families now face a very bleak Christmas.

The need to take action

The urgent need in this situation was and is to find a means by which some measure of practical assistance can be delivered, in time for Christmas, to those who have lost so much in this collapse. When I heard of the Farepak administration, I immediately contacted the administrators, BDO Stoy Hayward and the British Retail Consortium, to assess the level of the problem caused by the company going into administration, and to seek a way forward. I had talks with them on Saturday 21 October. Both were very helpful and the BRC expressed its willingness to consider—given the exceptional circumstances—putting together a goodwill gesture made up from donations of its member businesses. However, they subsequently came to the view that there were serious practical difficulties in the way of their organising a workable and timely form of assistance. But the consortium, and individual retailers, indicated their willingness to support any workable alternative means of delivering assistance that could be mobilised in time.

I therefore took the responsibility of finding a way through the practical difficulties. In the course of the Westminster Hall debate on 7 November, I was able to inform the House that after talks with the Family Fund, a registered charity with 30 years of experience in helping disadvantaged families, it was setting up a dedicated voucher fund: the Farepak Response Fund. To be clear to the House, the response fund is not a compensation scheme; it is an attempt to make things a little easier for these families.

In the past three weeks the Family Fund and my office have worked tirelessly to establish a fund, sort out a legal basis for the charity and for the data transfer, and establish a call centre, website and media operation. They also contacted businesses and other organisations to seek support in cash or in kind and work with the administrators and others to establish the details of agents. This has been huge logistical task.

The fund has been accepting donations from all quarters since then, with the intention of sending as much as can be raised, as a goodwill gesture, to help those affected. It was, of course, necessary to set a deadline for receipt of donations in order that the goodwill gesture can be distributed in time for Christmas. That deadline was 6 pm yesterday. I am pleased to be able to announce that the fund has received donations amounting to more than £6.3 million. This could increase further as some banking transactions are still being processed. Of this total, some £340,000 represents individual donations; a substantial number were also providing gift aid. That so much has been raised in a very short time, and for an unprecedented need, is very impressive. I am most grateful to the individuals, firms and other organisations who have responded so generously—and equally to the Family Fund, for providing the skills, experience and dedication to make this possible.

Government—Gift Aid

The value of the individual donations to the fund has been supplemented by the Government. Through Gift Aid, this will be in excess of £30,000. The Government will also meet Farepak employees’ entitlement to statutory redundancy pay, and any arrears of pay, holiday pay and money in lieu of notice, within the statutory limits.

The House will recognise that the donations made by the many individuals and companies who have contributed are indeed a goodwill gesture, and in no way a recompense for the losses which have been suffered by so many people. But the generosity which has been shown will at least ensure that those who might otherwise have missed out completely at Christmas will have something to help them through the festive season. In addition to money given to the response fund, some money has already been returned and continues to be returned to agents and customers of Farepak by the administrators and, under the Consumer Credit Act, by the banks.


We have agreed, in principle, with the administrator to secure a large number of hampers with a substantial market value but we need help to get them distributed. We are speaking to some logistical companies about this but any offers of help would be welcome. We hope, therefore, that most people who ordered a hamper will receive a hamper. However, this can happen only if we get help with distribution, as the costs involved in using couriers are prohibitive.

Administrators’ refunds

Farepak went into administration on 13 October. The company worked through a network of agents and money received from the company's agents since that date will be returned by the administrators. Some has already been returned. The administrators are hoping to return this before Christmas.

Consumer Credit Act

Following discussions with the banks, agents and customers who had paid by credit card have been able to reclaim their payment from the card issuer under the provisions of Section 75 of the Consumer Credit Act 1974. In addition, agents and customers who paid by visa debit card have been able to obtain refunds for payments made on debit cards, though this is not a legal entitlement. From the information currently available, the administrators and HSBC—the bank which handled Farepak's credit card transactions—estimate that these repayments may amount to around £4 million, of which more than £2 million has already been refunded to over 1,500 agents and customers with more to come.

Help in kind

There are many other ways in which assistance of one kind or another has been or is being provided: help in kind, such as the assistance the Park Group and Findel Plc have provided—with logistical and data facilities to support the distribution of vouchers; and other organisations supplying services at cost only or at substantial discount and staff at the Family Fund donating their time.

Employers’ help to their staff

Some businesses, such as Marks and Spencer, are making good the money owed to members of their staff and the Co-op is also proving assistance to members of its workforce who have lost money due to the Farepak collapse.

Not all of these forms of assistance are financial, but it is clear that the value of all these contributions together will add up in total to something substantially in excess of £10 million.

Local Initiatives

There are also many local initiatives such as the fund my honourable friend the Member for Workington has established in his own constituency where he has raised more than £50,000. This is quite separate from the national fund and is supported by smaller local businesses and members of the community. Perhaps the most memorable idea came from a group of victims of the Farepak collapse. Some have got together and made a nude calendar to raise funds in their area. There are many other local initiatives. I gratefully acknowledge all the efforts of so many people to provide help in these difficult circumstances.

The Goodwill Gesture

The Farepak Response Fund will now put in hand the distribution of the goodwill gesture, in the form of vouchers. As Farepak worked through agents, it did not hold any reliable or comprehensive information on its customers. As a result, the fund will necessarily send the vouchers to the agents. Each will receive a package of vouchers, broadly speaking in proportion to the total paid. This will be in the region of 15 per cent of the amount they lost. To be clear, this is in addition to any money they may receive from the administration. We are asking agents to distribute the vouchers in broad proportion to the payments known to have been made by each customer. So far as the fund is able to establish which agents have been fortunate enough to receive a refund for a credit or debit card payment, they will of course not include them in the distribution of vouchers.

The fund will be putting its instruction file in the hands of the distributors, Park Group, within the next few days. Park Group will start to post the vouchers to the agents early next week. It is, of course, their intention that the distribution should be completed as soon as possible, and in any case by 18 December. There is no need for agents or customers to contact the fund. However, agents should be aware that the administrators have written this week to all agents recorded in Farepak's database, asking for information on their customers. Anyone who had acted as an agent of Farepak and had sent it any payment in 2006, but has not received this letter by Monday 4 December, should contact the administrators as soon as possible, via the website (, fax (01793 606057) or phone (0870 066 9826).

Administration of Farepak

On the process of the administration, the administrators have, as I have noted, recently written to all those appearing in Farepak's database as agents. The reason for this is that they believe that not all customers have yet registered a claim. They are accordingly asking all agents to confirm who their customers are, to fill in the gaps in their information. It is important that all those who were customers and the extent of their claim should be registered with the administrators. I would encourage all agents to respond promptly to this letter and I would encourage all customers who have not yet registered a claim to do so.

The administrators have confirmed that they will seek to recover as much as they can, and will conduct the administration as efficiently and economically as possible, so that as much as possible can be returned to creditors. As I indicated on 7 November, this can at best be only a small return. The administrators’ current estimate is that customers could expect to receive just four pence in the pound.

In the circumstances of an administration where there are an unusually large number of creditors, the court has agreed that the administrators should put their proposals for the administration to the creditors by post. This is to be done by 19 January 2007 and the creditors will have until 16 February 2007 to respond. I repeat that all customers who have not yet registered a claim with the administrators should do so as soon as possible so that they can be included in this process.

I will come back to the House with further details surrounding the review by the OFT and of the administration as and when appropriate.

Finally, I should like once more to express my thanks to all those who have done so much to make this gesture of good will possible and to help it happen in time. While it would be impractical to name them all, I would particularly like to thank the honourable Member for South Swindon for doing so much to put the issue in the public eye. I would like to thank the media, which have helpfully brought out the personal dimension by showing how this collapse is impacting on individuals and particular families and for publicising the response fund and contact information to help their readers, listeners and viewers to make donations. Above all, I should like to thank all those who have contributed so generously to the fund. I should like to thank my private office for all their hard work; the administrators, Shagun Dubey and Martha Thomson of BDO Stoy Haywood for their invaluable help; the Park Group and Findel Plc, both for contributing to the fund and for providing their facilities to support the distribution of vouchers; and of course the Family Fund for organising it all and ensuring that the Farepak families who a few weeks ago looked to have lost everything will now at least have a little something.