SNOWBALL TRADING. (Hansard, 22 December 1937)

§ Mr. A. Edwards

I beg to move, That leave be given to bring in a Bill to prohibit the form of trading or investment known as snowball trading. Hon. Members have become familiar with the form of trading covered by the term used in the title of the proposed Bill. I would like to describe one or two of the more obnoxious forms of trading operating in the North of England at the present time. The term covers a multitude of things and a great many sins. Unfortunately, it is at the present time a form of legalised fraud. In my constituency there is an illiterate woman whose husband has been out of work for a considerable time. She discovered that she can mislead innocent people into investing money on the pretence that they can get several times the amount of money they invest with her. I will take one case, in which people are asked to invest the sum of £5 and are promised that six months later they will receive £30. I have tried to get the assistance of the Board of Trade in this matter, but they are helpless, I understand. This legalised fraud must continue until some change is made in the law.

1981 The Department tells me that it is no business of theirs to prevent fools from parting with their money, but all the people who have parted with their money are not fools. They are innocent people. They see so many examples of getting money for nothing that they think this is a practicable scheme. I present this Motion to the House because I hope to get support for the Bill to bring this very fraudulent method of trading to an end. An unemployed man who is able to borrow £5 a week to invest with this woman for six months finds it possible after that to have a net income of £25 per week. When one or two people have begun to do that and to get their money, everybody else thinks it is some new invention and some new method of business, and they all rush in to make their investments.

At the present time, thousands of people have invested, and some of them are getting their money back with this enormous interest, but every week more and more people have come into the scheme—hon. Members will understand that there has to be an ever increasing number—and at the end there will be a vast number of people losing from £1 to £10 which they can ill afford. The term "snowball trading" is very apt, because the income increases very rapidly, as a snowball does; it is also apt in the sense that it melts very rapidly. The people who run these schemes will melt away at the psychological moment, and perhaps have a holiday abroad, unless His Majesty's Government step in and give them a holiday at home.

To show how ridiculous it is, I mention the illustration of a man who invests £5 and who, as soon as five other people come into the scheme, is safe for his £30. The early bird catches the worm in this scheme and the late comers get nothing. The five people who come in to make the first investor safe must each find five others to make them safe. That means you need 25 people at the second stage and 125 people at the third stage. I have worked out how long it would take for the entire population to be absorbed in this scheme. Hon. Members may be interested to know that when you get to the twelfth stage you have involved 48,000,000 people, although there are only 45,000,000 people in the whole of Great Britain. It is about time that these innocent people 1982 were given to understand that the scheme is entirely fraudulent and that the time will come, although those who were in very early have got their money, when their fellows will lose everything.

Another important factor is the interference which is brought about with legitimate trading in a town and district. The better class of tradesman refuses to have anything to do with the scheme, but it is very difficult for a tradesman, when someone walks into his shop and offers to pay £300 a week—as in one case that I know—and cash in advance, to see why he should refuse. As this is ultimately a very fraudulent scheme it should be stopped, and it should be stopped legally. I hope that the House will support the Motion. If the Government will not take action to render the scheme illegal, I commend the scheme to the Chancellor of the Exchequer. I see no sense in our paying £300,000,000 a year for re-armament when it can be financed by means of this scheme, and if the Chancellor of the Exchequer would sit down with me for two or three minutes I would show him how rapidly he could pay off the National Debt. I appeal to the Government to support this Motion in order to bring to an end this abominable, shameful, fraudulent and dishonest scheme of trading.