HC Deb 27 November 2001 vol 375 cc942-50

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stringer.]

10.40 pm
Miss Anne Begg (Aberdeen, South)

I suppose I should begin by explaining what the women empowering women scheme is. It is not, as the title suggests, an organisation that is aimed at helping women looking to climb the promotion ladder and hoping to break through the glass ceiling, nor is it a company offering assertivees training to women, nor is it the latest feminist craze. The name is very misleading. The scheme should not have been called women empowering women. If I were to call it women exploiting women, women defrauding women or even women setting out to con other women out of lots of money, the House would have a much better idea of what this so-called giving scheme is all about.

The scheme has been rampaging through the Aberdeen area since the summer, leaving behind large numbers of women who are now up to £3 000 in debt. That is why I was keen to secure an Adjournment debate to highlight just how insidious and invidious the scheme is and the dangers that it poses.

What is the scheme? Perhaps it would be easier to understand it if I described it as a pyramid selling scheme that does not involve any hard work such as selling anything. Women are enticed into the scheme with the promise that if they hand over £3,000, they could get £24,000 in return. The women enter at the giving level when they hand over the money and then move up the pyramid to the receiver level when they get the pay-out.

The women are told that they cannot lose, that everyone is a winner and that it would be foolish to give up such a chance to obtain some extra money. The groups meet in each other's houses and the excitement means that it is very difficult to resist the hype. There is always someone there who has already won lots of money. However, that can happen only if there is a ready supply of new people with £3,000 to enter the scheme.

It does not take long for the supply of victims in an area to dry up, leaving the vast majority of those who have entered with little or nothing. For every person who gets £24,000, there must be at least eight others who get nothing.

My attention was drawn to the scheme in July when the Aberdeen newspaper, the Evening Express, ran a large spread about the excitement that the scheme was generating and named some of the people involved. They included a local police woman. The newspaper pointed out the dangers of the scheme and showed graphically how it was impossible for everyone to be a winner and how quickly an area could be saturated.

I had believed that the scheme had run into the sand or had moved to another area, but it appears that it began in the Isle of Wight and has worked its way north. However, I was shocked to discover in late October, when The Press & Journal in Aberdeen ran another story, that the scheme was still running. I heard stories of men being recruited to the scheme—it had now changed its name to "friends empowering friends"—and I was given a leaflet that was delivered to doors in Aberdeen and Aberdeenshire and that encouraged women to part with £100 to get £800 back.

All that smacked of desperation. The people who had been suckered into the scheme were desperately trying to get their money back any way they could. That is why I raise the issue now. It is the lead-up to Christmas and many women, including single parents, are desperate for money. They are being conned into believing that if they get their money into the scheme now, they will have extra money for Christmas.

I am very concerned that women who are already in financial difficulties are still being sucked into the scheme. None of them can possibly be a winner at this late stage. The winners are long gone; they won back in the summer. Those who are entering the scheme now are at the bottom of the pyramid and will never get their money back, far less win. It is sad speaking to the women who have lost out. They swallowed wholesale the belief that they could not fail, that the scheme was well run and that there would be an endless supply of new people willing to "invest", as the schemes call it, their money.

What I have found most insidious about the scheme is that it is wrapped in the cloak of women helping each other by investing in each other. Many of the early participants were intelligent women with good jobs. They had to be because they had to be able to put £3,000 into the pot and be willing to take the risk of losing it all. For those women, it was more like a gamble: they accepted that they might lose, and presumably they could afford to. It was not, however, the early participants who lost, but the poorer women they tricked into following them who could not afford the stake money in the first place, far less afford to lose it.

1 also wonder about the morality of the so-called winners. They must know that in order for them to have won, a number of others must have lost. I wonder whether they have no conscience about exploiting others and possibly even their friends I do not suppose that they declared their unearned income to the tax man either.

One of the women I spoke to said that the heart group that she joined had changed the rules as it went along. She had received no money and was puzzled that it could be allowed to do that. It was difficult explaining to her that it was a con from the start: if no money was being created, it was bound to run out if people were winning. In the early days some women praised the scheme because in this cynical day and age it was wonderful that women were trusting strangers with large amounts of their money. The trust did not last long, and if only they had been a bit more cynical they may have recognised the scheme for what it was—a complete fraud.

The woman that I spoke to on GMTV had invested a total of £600 in two different schemes and is yet to win anything, but she still has faith that she will soon get more than £2,000 back. "I've made lots of new friends," she said, and I wondered how long they will last when she loses her money to them, or they lose to her.

Mr. Simon Thomas (Ceredigion)

I am sure the hon. Lady is aware that the scheme is nationwide. It is called the hearts scheme in my constituency where it has had a similar effect to the scheme in Aberdeenshire. Does she agree that the scam, which is in fact women impoverishing other women, is based on ignorance? Although the scheme is not illegal, and it remains to be seen whether the Government will make it illegal, it would be useful if local trading standards officers were given clear instructions on how to dissuade people from joining it. At the moment, the scam is feeding off the ignorance of women and some men, and surviving on the back of that. Perhaps we could do something to overcome that ignorance.

Miss Begg

I intend to ask the Minister whether the scheme is illegal under existing legislation, and I have several questions that I will pose later. The hon. Gentleman is right when he says that ignorance is the problem, but it is difficult to educate people about such schemes. No matter how much I said to the woman I met this morning about how the scheme cannot work, how it will run out and how there is no possibility of her winning, she did not believe me. It was difficult to persuade her that the arithmetic did not add up. Indeed, some areas are blaming the scheme's collapse on the bad publicity. They have not realised that it cannot succeed and cannot work.

I requested an Adjournment debate on the scheme for two reasons: to highlight the evil, as the hon. Gentleman said, and to generate more publicity to warn those who are contemplating getting involved of the dangers. I hope that trading standards officers in each area are doing that. Many local newspapers such as mine in Aberdeen have been useful and helpful in highlighting those dangers, although that has not always worked.

My second reason is that I want to ask the Government to ensure that there is effective legislation. I want such schemes outlawed. I know that the Government cannot legislate to stop people's greed, but many of the women now being drawn into the scheme are not greedy. Some just want to make a bit of extra cash so that they can get more for their kids this Christmas, and they are victims of a very clever con, which has fooled many intelligent people.

I know that the DTI has posted a warning about such schemes on its website, and although I am sure the website is extremely popular, it is not exactly a means of mass communication. Women in Aberdeen and the woman to whom I was talking this morning still have faith in the scheme simply continuing. They do not believe the warnings, but will always believe the hype. The Evening Express and The Press & Journal in Aberdeen have run a number of stories pointing out the dangers and giving dire warnings, but people are still joining the scheme in the north-east of Scotland. Education alone will not be enough, which is why we need to consider legislation.

I know that the Government outlawed the running of pyramid schemes in the Trading Schemes Act 1996, and, regulations under that Act came into effect in 1997. I know also that the Minister, in a previous guise as the Minister for Competition and Consumer Affairs, issued a press release on 15 February 1998 with the headline "Griffiths Warns Against Get-Rich-Quick Schemes". Although my hon. Friend now has a different remit, he is obviously still interested in the issue.

The regulations passed under the 1996 Act govern schemes involving the supply of goods and/or services. However, I understand that the intention of the Act was to outlaw money circulation schemes. That is borne out by an article in The Times of 6 February 1997, so this Government do not get the blame, but a previous one do. The article said: New regulations aimed at stamping out fraudulent 'money circulation' scams come into force today". If that was the intention of the 1996 Act, why has no case been brought against schemes such as "women empowering women"? Is the existing legislation defective in some way, or has it simply never been tested in court? If the Act does not apply, will the Government reform it to outlaw these odious schemes once and for all? The answer seems to hinge on the reference to providing goods and/or services.

It appears that some states of the USA have managed to legislate so that not only do those who originate or organise the schemes fall foul of the law, but it is illegal merely to participate in them. Under article 23 of the New York General Business Law, anyone participating in such a scheme can be charged with the commission of a crime and any money received by them can be confiscated. The Texas Deceptive Trade Practices Act defines an illegal pyramid promotion as a plan by which a person gives a consideration, usually money, for the opportunity to receive money that is derived primarily from a person's introduction of other persons to participate in the plan, rather than from the sale of a product. If the USA can do it, surely we can too. Perhaps we already have the legislation. I await the Minister's reply.

I appreciate that anything that the Government do will not change things overnight and it will not help those of my constituents who already face a bleak Christmas because they were duped into believing that they were investing in something that could not fail. Inevitably, it has failed, and badly. The experience of the hon. Member for Ceredigion (Mr. Thomas) suggests that it has failed all over the country. It has left behind far more losers than winners.

10.54 pm
The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)

I congratulate my hon. Friend on securing this debate, on her excellent research and on her clear presentation. The whole House understands the concerns that have led her to raise the matter. She speaks not only for her constituents but for the many people who may have been duped by such schemes.

The Government are certainly concerned about the risks inherent in gifting schemes such as "women empowering women". As my hon. Friend spelt out, the danger of such schemes is that they depend on each participant recruiting several more to the scheme. I pay tribute to David Perry and The Press & Journal for highlighting the problems of such schemes and alerting people in the area and throughout the UK to them. A network of participants cannot expand indefinitely and will eventually break down. Participants joining a scheme late in the day stand a good chance of losing their original contribution as well as any chance of a return. Even those who join early may lose out if those whom they recruit to the scheme fail to recruit further participants.

No doubt, some people go into such schemes in full knowledge of the risks, but the Government are concerned about those who participate unaware of the risks; those who are misled by others when invited to join; and those who risk money that they cannot afford to lose. Earlier this year, specific warnings about the scheme were issued by trading standards officers. My right hon. Friend the Secretary of State for Trade and Industry, who has ministerial responsibility for women, commended the Department of Trade and Industry for reinforcing that.

I want to reiterate the message that I gave three years ago in the House warning the public of joining any scheme that promises something for nothing. That message was recently reinforced by the Department and the media. Indeed, earlier this year, my right hon. Friend added to those warnings. Sadly, some people have ignored all the advice about schemes that promise something for nothing. My right hon. Friend said that the Government would consider avenues for protecting the public from such schemes.

The "women empowering women scheme" received a great deal of media attention earlier this year. It appears to have emerged first on the Isle of Wight, and spread to other parts of the United Kingdom. It claimed to be restricted to women participants and operated by participants making a gift of £3,000 to a member of the network; they handed over that money in the expectation of receiving multiples of that amount as others joined the network.

Against that background, my right hon. Friend asked the Secretary of State for Culture, Media and Sport to consider such schemes in the context of possible changes in the legislation in response to the review report. The Culture Secretary confirmed that the case for changes to current gambling legislation to act against schemes such as "women empowering women" would be considered in the context of the follow-up to the review of gambling legislation. Of course, any changes in that area are likely to require primary legislation. In the meantime, I join my hon. Friend the Member for Aberdeen, South in urging women to avoid participating in any scheme that appears to promise something for nothing.

I am aware that the media speculated on the number of women who joined the scheme, but accurate figures are hard to come by. The way in which the scheme operates, by means of separate and independent gifting groups, makes it impossible to make any realistic estimate of the numbers involved. In the summer, a survey revealed that local trading standards offices across the country had received about 170 inquiries or complaints about the scheme, but that provides no reliable basis for assessing the number of people who handed over £3,000 in anticipation of collecting a lot more in return for little or no effort.

The scheme has been referred to as a form of pyramid selling or a pyramid investment scheme. Both descriptions are inaccurate. The scheme was considered carefully by trading standards officers, the Financial Services Authority and the DTI. It did not purport either to trade in goods and services or to generate profit and income from investment.

The consensus of the enforcement officers, backed by legal opinion, is that the scheme operated as a form of chain letter and was outside the scope of legislation covering trading schemes, pyramid selling or investment services. The variety of descriptions highlights the difficulty of effectively defining a type of scheme that appears to be new to the UK and outwith the scope of current legislation.

Of course, all schemes where money changes hands are subject to the general criminal law on fraud, theft and deceit. Evidence of criminal behaviour is a matter for investigation by the police. In the case of the "women empowering women" scheme, promotional material has avoided using language capable of being interpreted as fraud or a definite promise of a return. So far as is known, no evidence justifying investigation by the police has been presented. None of the approaches to local trading standards offices included evidence of fraud, theft or deceit, and no satisfactory evidence has yet been produced.

It is apparent from the media coverage that many participants in the scheme acknowledged the risks inherent in it, but treated it as a form of gambling. Arguably, many participants saw no harm in taking such a gamble. Others may have seen no harm in making a gift—

Miss Begg

I accept that there are women who know that the scheme is a risk and a gamble, but there are others, particularly those who come in at the end of a scheme, who may not get the warnings or who, because the amount of money that they can invest has reduced to such an extent, think that the scheme is a sure-fire winner. Those are the most vulnerable women and probably the ones who have been most fraudulently treated.

Nigel Griffiths

My hon. Friend makes an entirely reasonable and cogent point. I can only hope, with her, that anyone who was on the dole, in stricken circumstances or on a very low income did not manage to gather the £3,000 to invest in the scheme and was, perhaps, exempt. Some, undoubtedly, were not.

Mr. Simon Thomas

The Minister is accurately setting out the problems posed by the scheme and how difficult it is to ascertain the extent of it, the involvement of individuals and how culpable they are when they join the scheme. Does he accept from me the point that was also made by the hon. Member for Aberdeen, South (Miss Begg)—that despite the difficulties, such schemes have been made illegal in several states such as New England? If the Government took account of that in their review of gambling law, it would send a clear message to back up the good advice already issued by the Government that people should not touch such schemes.

Nigel Griffiths

My hon. Friend asked me to make it clear that we will consider any prosecutions in New England and any changes in the law. I can give her a clear guarantee that we will do so. The point is well made. Our problem is framing the law to address such an alleged abuse.

The scheme, unfortunately, did not purport to trade in goods or services or to generate profit or income from investment. Someone has suggested uncharitably to me that there are a lot of mugs out there who will be suckered into such schemes—into giving up £3,000 for no promise of any return. I make no value judgment on how the scheme was sold and I condemn such opinions, but the consensus among enforcement officers, including trading standards officers and the like—this view is backed by legal opinion—is that the scheme operated as a form of chain letter and was therefore outside the scope of legislation covering trading schemes, pyramid selling or investment services. The variety of descriptions highlights the difficulty of effectively defining a type of scheme that appears to be new to the UK and outwith the scope of current legislation.

We know that there is a danger that, by changing or introducing legislation too quickly in response to a particular scheme in one form, we may open the door for some unscrupulous people to develop new variants that succeed in evading the law. In practice, it is not possible to introduce new legislation in response to every new scheme or variant of a scheme that comes along, so in the long term it is better to consider carefully whether legislation is the right approach and, if it is, what form it should take.

That is the approach that the Government are taking. We obviously want people to be protected against losing their money, but we do not want new situations to produce a bad effect. When my right hon. Friend the Minister with responsibility for women issued her warning about the scheme earlier this year, she explained that the Government would be considering very closely the avenues for tackling, schemes of this sort. We are looking at the approach that is likely to be adopted in other countries, specifically in Europe, and also, as has been mentioned, in the USA. The evidence gathered to date is not completely conclusive because of the differences between the legislation of member states and between federal and state legislation in the USA. There is evidence that some member states and some states in the USA would regard the "women empowering women" scheme as a form of gambling. The fact is, however, that some may not regard it as such.

As hon. Members will know, the review of current gambling legislation chaired by Sir Alan Budd presented its report during the summer. Schemes such as the "women empowering women" scheme did not fall within Sir Alan' remit and he made no specific recommendation about them. Such schemes may, however, be relevant in terms of the strong concerns that he noted about lottery and other scams to which people can fall prey, many of which originate outside the UK, as the "women empowering women" scheme appears to have done. Sir Alan recommended that lotteries should be for the exclusive purpose of good causes.

Against that background, my right hon. Friend the Minister with responsibility for women asked my right hon. Friend the Secretary of State for Culture, Media and Sport to consider such schemes in the context of possible changes to the legislation in response to the review report. The Secretary of State has confirmed that the case for changes to current gambling legislation to act against schemes such as WEW would be considered in the context of the follow-up to the review of gambling legislation. Of course, any changes in this area are likely to require primary legislation.

In the meantime, I join my hon. Friends and other hon. Members in urging people, and especially women, to avoid participating in any such scheme that appears to promise something for nothing. The Government are determined to take on board all the arguments that have been advanced in the debate and to take whatever actions are practicable and appropriate.

Question put and agreed to.

Adjourned accordingly at nine minutes past Eleven o'clock.