HM TREASURY News
Release (38/07) issued by The Government News Network on 28 March 2007
Today the Economic
Secretary, Ed Balls, and Consumer Minister, Ian McCartney,
responded to the Pomeroy Review on Farepak. The Pomeroy Review was
set up by the Government to look at Christmas hamper savings
schemes following the collapse of Farepak and the financial losses
suffered by its customers.
Ed Balls, Economic Secretary, also published today Financial
inclusion: the way forward setting out the next steps for the
Government's work to tackle financial exclusion. Events such
as Farepak can only be prevented in the longer term by achieving
much greater financial inclusion in our society.
Responding to the Pomeroy Review, the Government has announced today:
* it has secured agreement from the hamper industry to establish
an industry-led scheme to ensure that consumers' interests
are fully protected through the establishment of secure,
ring-fenced accounts;
* £1 million funding for the Office of Fair Trading to conduct a
consumer awareness campaign in the coming months on Christmas
saving schemes and mainstream alternatives;
* the OFT has agreed to investigate the findings of the Pomeroy
review in full, and whether a further inquiry into competition in
the market for Christmas saving schemes is needed, following
preliminary analysis on competition as part of its work for the
DTI on Christmas saving schemes;
* that following encouragement from the Government, and support
from the Growth Fund, credit unions are now offering Christmas
saving accounts with a lock-in. The Post Office also has plans to
launch a Christmas saving account. The Government has asked the
Financial Inclusion Taskforce to monitor developments, and
consider what further detailed actions are needed to expand
community-based provision of saving;
* the Thoresen review will consider how to provide better generic
advice on informal saving;
* the financial inclusion campaign, "now let's talk
money", is working with local charities and community
organisations to promote credit unions as an alternative to hamper schemes;
* the FSA will enhance the saving information on its
MoneyMadeClear website by including information about Christmas
hamper schemes; and
* the new Wealth and Assets Survey will collect information on
informal saving. The Government will use the first results of the
survey, due by the end of the year, to inform any further data gathering.
Ed Balls said:
"I'm very happy that my Ministerial colleague has
agreed with the Christmas hamper industry a scheme that will
protect customers from financial loss in the future. To ensure
that customers are fully aware of their saving choices I have
today asked the OFT to conduct a £1 million awareness campaign.
Nobody in the future should suffer the hardship that Farepak
customers endured last Christmas."
Ian McCartney said:
"We have been working with Christmas savings firms to
develop an industry-led scheme to ring-fence money they collect
from families so it can't be swallowed up among other debts
if a company or its parent firm collapses. The collapse of Farepak
caused untold stress and financial worry for thousands of families
in the lead up to Christmas. Many of these people were among the
most vulnerable consumers, and I am determined that they must
never be left unprotected again.
Ring-fencing contributions will ensure that customers' money
can only be returned to customers and agents should the company go
bust. Families will then be able to put something aside for
Christmas in the confidence that their money is safe and there
will never be another Farepak. I am delighted the companies have
agreed to put these measures in place to protect their customers."
Financial inclusion: the way forward sets out the
Government's goals for financial inclusion policy. Building
on the Economic Secretary's announcement before the Budget,
that there will be a new Financial Inclusion Fund for the next
spending period, which will maintain the current level of
intensity of action to promote financial inclusion, the document
also highlights progress being made with the Government's
strategy. According to the latest data, the number of adults
living without access to a bank account had fallen in 2005-06 to 2
million, down from 2.8 million in 2002-03, demonstrating that
progress is being made with the Government's goal, shared
with the banks, to reduce the number by half.
The document also announces immediate new action to promote
financial inclusion, including £6 million to further support the
valuable work of credit unions and community development finance
institutions in making affordable credit and banking services
available to the excluded.
Ed Balls, commenting on Financial Inclusion, said: "We have
made real progress on financial inclusion but there is still a lot
more to do. Tackling financial exclusion is essential for both our
economic prosperity and for social justice. It is good for
individuals, for society and the economy as a whole. I look
forward to working with everyone to drive this agenda forwards in
the coming months."
NOTES FOR EDITORS
1. Ed Balls, Ian McCartney and Brian Pomeroy launched Financial
inclusion: the way forward and the Pomeroy Review at the DTI
Conference Centre in London.
2. The Pomeroy Review was set up by Ed Balls to look at the
Christmas hamper savings schemes following the collapse of
Farepak. The Economic Secretary asked Brian Pomeroy, Chairman of
the Financial Inclusion Task Force, to conduct the Review.
3. Financial inclusion: the way forward is available at http://www.hm-treasury.gov.uk/documents/financial_services/financial_inclusion/financial_inclusion_wayforward.cfm,
the Pomeroy Review is available at http://www.hm-treasury.gov.uk/independent_reviews/pomeroy_review/pomeroy_index.cfm,
The family resource survey is available at http://www.dwp.gov.uk/asd/frs/2005_06/index.asp.
4. Today's announcements build upon Ed Balls' speech to
the Resolution Foundation Conference on 14 March, where he
sketched the Government's new agenda on financial inclusion.
5. The current Government strategy, Promoting Financial
Inclusion, was published in December 2004. This included a
Financial Inclusion Fund of £120 million to support initiatives to
tackle financial exclusion, and a Financial Inclusion Taskforce
created to evaluate these projects and make recommendations to
Government on what more can be done.
6. A substantial portion of the current fund has been used to
support access to free face-to-face money advice and affordable
credit. The DTI is administering a £47.5 million fund, which will
train and recruit over 500 new money advisers by the end of April.
The DWP is running a £36 million Growth Fund to enable third
sector lenders - credit unions and community development finance
institutions - to expand their lending service to target
financially excluded people unable to access mainstream credit.
The Financial Inclusion Fund is also supporting a nationwide
rollout of projects to tackle illegal lending by loan sharks and
provide support for victims.
7. Under the industry-run hamper scheme, pre-payments will have
to be held in independently controlled ring-fenced trust accounts,
similar to the scheme that protects National Lottery prize money
in the event of Camelot becoming insolvent.
8. The Department of Trade and Industry is working with the
industry to ensure these arrangements are monitored by a new,
strengthened trade association with a reinforced code of practice
to monitor companies and ensure the trust accounts are established
and operated effectively.
9. Press notices are available at http://www.dti.gov.uk/
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