Last year the collapse of Farepack wiped out the savings of 150,000 people. On average the loss was £400 per person, though some people had more than £2,000, that was put aside for Christmas, disappear overnight.
Victims of the Farepak debacle are yet to have their savings returned to them – just lately it has been said that it will not be possible to pay a dividend before the end of this year. Another Christmas spent in the shadow of debt.
Farepak went into administration last year as the company founds itself with a leg either side of an ever widening financial ravine. On one side were retailers like Sainsburys, Argos and Woolworths. On the other was the bank HBOS. Panicky stores demanded that the Christmas hamper company pay upfront for the ‘credit’ extended to customers, which did not have that kind of cash at its disposal. And HBOS would not extend them the credit needed to satisfy the high street.
As it happens Farepak wasn’t in the business of extending credit. It merely provided a saving scheme for people, largely on a low-incomes, to put safely away some money throughout the year, at 0% interest. Even when it was clear the game was up, the company continued to take in money for a month from unwitting customers, reducing their overdraft, with the complicity of HBOS, by £40million. As the news broke Chris Thompson, Chief Executive of European Home Retailers, of which Farepak was a division of, was reported holed up in a £2,500-a-night hotel room in Buenos Aires.
Of that £400 loss, claimants are expected to reap £20 – just 5p in the pound. Polly Toynbee of the Guardian asks “How come £18 billion or more was punted up pronto when politicians saw middle England savers queuing outside bank branches – yet there was no mere £38million for Farepak? These victims were silent, poor and scattered, with nowhere to queue for the cameras.”
That Christmas the city earned £8billion in bonuses. Administrating Farepak has already cost £2.7million. And now the company has announced it is to go into liquidation. By law, the Joint Liquidators do not have to report to Farepak’s creditors, including agents and customers, until the anniversary of their appointment – October 2008. The “unprecedented” number of claimants is blamed for causing the delay – despite the number of claimants being thousands less than the total number of victims of the collapse.
Lat year the supermarkets and high street stores saw one way of shifting the hamper stock that remained unclaimed. Out of the goodness of their profit margins they offered up discounts for victims of up to 25%, a reasonable sacrifice to make to squeeze out some kind of profit. These are the ladies and gentlemen responsible for the mess in the first place.
A report by Unison has suggested that low-paid women who suffered from the collapse were forced into a "cycle of debt". Capitalisms conscience it appears is quite detached from peoples welfare. Minor catastrophes like Farepak are absorbed by the system. But Northern Rock threatened to trigger off a systemic collapse. Individual companies can sink – that is the idea of the free market, an idea that was lacking when it came to Northern Rock. It goes to show that people don’t matter, profits do. And for the prophets of capitalism, subprime savers such as the Farepak victims are so much loose change.
Related article: Capitalism Steals Christmas 01.12.06