It is a pleasure to be back here in Committee after Easter. I look forward to further consideration of the Bill today, and I am sure that we will make good progress.

The group of new clauses deals with some issues on which we feel we need further action to ensure that customers and consumers are protected. New clause 2 deals with protections for customers who buy vouchers. New clause 16 seeks a review into whether the Financial Services Compensation Scheme should do more to prop up small and medium-sized enterprises. New clause 21 deals with extending deposit insurance to cover accounts, the balances of which temporarily exceed £85,000. There are also issues regarding different banks having different brands in the banking family and ensuring that consumers receive more protection.

I will start with new clause 2. We know that the collapse of the Farepak scheme caused huge problems for many individuals and families. Many consumers believed that they were in a savings scheme and never questioned whether the funds that they put in were at risk. The money proved to be at risk and that caused real difficulty for people.

The reforms announced last year to enable the FSCS to protect Christmas clubs and other funds in some circumstances are helpful, particularly in cases where the financial institution holding the money fails, but the Christmas club provider continues to operate. All customer cash will now be kept in Financial Services Authority-authorised bank accounts. The reforms have taken place following talks with the Christmas Prepayment Association, the trade body that looks after that particular issue, and mean that up to £85,000 of an individual’s money will be protected by the FSCS if the bank or building society fails.

However, the reforms in themselves would not have saved the cash in Farepak, and they will not save cash held in another Christmas club should it fail in future. The new clause would require the head of the FSCS to publish a review of the current protections, to look at them right across the board, and potentially to consider reforms that would assist people who pay into customer savings schemes. We want the review to consider whether such payments should be regarded as preferential debts if a firm became insolvent.

I know that there are different views on that issue. Particularly, there have been concerns about whether, by making customers who pay into those schemes  preferential creditors, a firm might not be able to make redundancy payments or deal with staff. I understand the concerns about that, but the new clause does not specify what ought to happen; it seeks a review and some work on such issues. It states that there ought to be a review to look at the matter in more detail.

The need for the new clause arises from the difficulties caused by several high-profile collapses in the aftermath of Farepak. We saw the situation with HMV, where gift cards and vouchers worth millions of pounds were initially declared worthless when the chain collapsed earlier this year. That caused a real problem, because it appeared that HMV had continued to sell gift tokens and cards after warning investors last December that it had a problem. The issue was raised by Richard Lloyd, the executive director of Which?, who described the situation as “outrageous”, and said:

“We want the rules on gift vouchers and insolvency to be reviewed to ensure consumers are adequately protected in cases like this.”

There was a lot of public pressure at the time, as a result of which the company ultimately decided to honour the vouchers.

I have already mentioned Farepak and I do not want to go into all the details, but it is worth recalling that its collapse left more than 100,000 people with total losses of some £57 million. In an inquiry into the Farepak case, a High Court judge criticised HBOS, which is now part of Lloyds, for taking a “hardball” attitude in dealing with the company. Of course, Lloyds ultimately contributed £8 million to the Farepak compensation fund, but I know from my constituents—many hon. Members will know this—that the compensation paid to people who were affected, many of whom were on low incomes, went nowhere near the losses that they suffered.

Sadly, several major high street names, including Comet, Jessops, HMV, Blockbuster and Habitat, have had problems or collapsed during the past two years. Which? looked into the situation, and I recall reading a post on its website by someone who had received Habitat vouchers as a wedding gift and was unable to redeem them. Such problems affect a wide range of customers: not only those who have paid into savings schemes, but those who have received gift vouchers, and both buyers and recipients of vouchers are left out of pocket. Those firms got into difficulties for different reasons, but the fact that the firms failed underlines the uncertainty faced by customers, who expect to be able to redeem the value of gift cards or savings schemes.

Many people involved in savings schemes were trying to do the right thing. They were trying to save in advance for Christmas or for other events rather than taking on debt and paying it off afterwards. We must take care to ensure that customers in similar situations can recover their money if businesses go bust and cannot honour their commitments. Such customers should not be left at the end of the queue if a firm goes under. Many individuals and families who were affected by Farepak and similar schemes felt that everyone was ahead of them in the queue to get some sort of justice, which is why we have tabled the new clause. We have chosen our language carefully to address the concerns that have been expressed. We are not being prescriptive  or specifying exactly what should happen, but we are saying that the Government should consider treating people in such circumstances as preferred creditors. The new clause gives the Government the opportunity to take the matter away and look at it in more detail.

New clause 16 would require the Treasury to publish a review considering whether to extend depositor protection across all small and medium-sized enterprises. Under the current rules, the Financial Services Compensation Scheme generally protects the deposits and investment accounts of very small firms, although there is a cap on eligibility. A smaller company must meet two of the criteria set out in the Companies Act 2006, namely that the turnover must be

“not more than £6.5 million”,

the balance sheet total must be

“not more than £3.26 million” and the total number of employees must be not more than 50. Anybody who has experience or awareness of the SME sector will know that those criteria are quite restrictive, and they render many SMEs ineligible.

We are trying to emphasise the need to protect the people who have been trying to do the right thing. The owner of a medium-sized business could lose the proceeds of a life’s work in the event of a collapse of an institution that held their assets. People who have worked for years in the small business sector are the backbone of many local communities and, indeed, our economy. It is of concern to us that if SMEs lose confidence in the ability of the bank to hold their money, that not only has a knock-on effect on their circumstances, but could cause further instability.

When the Prime Minister launched the Conservative small business plan in 2008, before he was Prime Minister, he made the point that he wanted to ensure that the Government would be completely on the side of small businesses, and not kick them when they were down. In the Conservative manifesto, before the 2010 general election, he stated:

“small businesses are especially important to the UK’s economic recovery and to tackling unemployment.”

I do not often find myself agreeing with the Prime Minister. It is perhaps a dangerous precedent, even at this point, to say that I agree with him, but it is absolutely the case that—