Cicero Policy Briefer

Issue 7, December 2006

The Bank that stole Christmas (allegedly):
a tale of the importance of public affairs

By Terry Paul

Many times, I have been asked: “What do you do for a living?”.

The questioner is usually taken on a voyage of discovery where I, like Superman, single-handedly save the corporate world from the worst excess of reputation damage. After a few minutes, the questioner’s eyes often glaze over and a quick dash is often made for the exit! (I exaggerate, of course.)

However, the recent, very public spat between HBOS, EHR and Members of Parliament over responsibility for the collapse of Farepak highlights the importance of monitoring Parliament and having a public affairs element to your corporate communications plan. For those of you who may have missed the story: in summary, 100,000 people lost savings in the region of £43 million 1, an average of £430 per person, just before Christmas. The media has been full of wide-eyed children, being told Santa Claus is not visiting.

In Parliament, Frank Field MP tabled an Early Day Motion (EDM) in early November on the collapse of Farepak and the alleged role of HBOS; it gathered 117 MP signatures and seemed to build momentum within Parliament for further action by providing a hook for the media. In addition, another EDM (tabled again by Frank Field) in late November called upon the Department of Trade and Industry (DTI) to hold an inquiry into HBOS’ actions. As I write this article, the DTI are preparing a ministerial statement.

Moreover, Anne Shelgrove MP has launched an effective radio campaign on behalf of some of her constituents caught up in the situation, highlighting with first-hand testimony the impact of losing Christmas savings. Lastly, to illustrate the willingness of MPs to involve themselves in this issue, a whole section on savings clubs was included at the last minute in the final drafting stages of the recent Treasury Select Committee report 2, making recommendations to Government, the Office of Fair Trading and the FSA on future regulation.

The Farepak incident highlights the importance of “joining the public affairs dots together”; that is to say, watching the media (both broadcast and print) listening to the public statements of MPs and their parliamentary actions, and reacting accordingly. The collapse of Farepak, far from being swept under the carpet, now has all the elements of growing into a major story with far-reaching consequences for those involved—and perhaps even for the nature of financial services regulation itself, especially since those who saved with Farepak seem to be the very demographic in which the Government hopes to increase financial capability and savings.

As I write, the Government has asked Brian Pomeroy, Chair of the Financial Inclusion Taskforce, to conduct a review into schemes like Farepak. The aim of the review, which will report back by Budget 2007, is to both increase understanding of who uses the schemes and why, and also consider how the saving needs of this group of consumers might be better met by mainstream financial services providers. This review will not consider the regulatory aspects of the issue, which are being covered by the Office of Fair Trading and the Department of Trade and Industry, in consultation with the Financial Services Authority (FSA).

Aside from reputation management issues, this story clearly has many facets to it; but with 2007 looming ahead, I believe there could be as yet unforeseen consequences. Certainly, the Farepak collapse provides a useful example with which to review one’s own corporate communications and/or public affairs plan—how would you have coped if your company had been mentioned in Parliament like HBOS? Would your plan have withstood the reputation onslaught? Ultimately, Superman is superfluous: salvation can only come from close engagement and carefully built relations with Parliamentarians.

1. House of Commons, Treasury Select Committee, Financial Inclusion: the role of the Government and the FSA, and Financial Capability, November 2006
2. Ibid

Terry Paul can be contacted on +44 (0)20 7665 9533 or click here to email.