Leading article: Prudence in an unfair world

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The Independent Online

The collapse of the Farepak Christmas hamper savings scheme has exposed, once again, the unacceptable face of capitalism. Some see the moral of this story as a simple "caveat emptor". But this is unfair. While many of those affected were financially unsophisticated, it is unreasonable to suggest they could have predicted what would happen here. Nothing about the scheme hinted at a potential risk. What makes this episode all the more unfortunate is that most of the 140,000 people who have lost money are not well off. Moreover, by saving up for Christmas, rather than getting into expensive debt, they were doing the "prudent" thing.

The picture of what happened is now coming into focus. Funds were apparently transferred from a healthy part of the business, Farepak, to the ailing parent company, European Home Retail. Alarmingly, this is perfectly legal. There is a parallel here with Robert Maxwell's raid on the Mirror Group pension scheme in 1991 to keep other parts of his empire afloat. In both cases the parent business went under, and those expecting a payout - a Christmas hamper, or a pension - were left with nothing.

Those caught up in the Farepak collapse have been betrayed - perhaps not in legal terms - but morally. The managers of the scheme should have had the decency to object to what was going on. And the banking group HBOS, which allowed the company to continue trading - and accepting weekly payments - for months after it first got into difficulties, must consider its reputation damaged.

But what of those whose Christmas could be ruined? The voluntary donations from MPs to a relief fund are a nice gesture. But this is essentially a token response. It also raises the question of why there are no parliamentary whip rounds for other, equally deserving, cases of people being penalised financially through no fault of their own.

Just as it took the Maxwell scandal for company saving funds to be ring-fenced by the 1995 Pensions Act it has taken Farepak to alert ministers to the dangers of such saving schemes. The Secretary of State for Trade and Industry , Alistair Darling, is looking into regulation. This obviously seems like shutting the door after the horse has bolted. But for the sake of those who could fall victim to such injustices in future, ministers have an urgent duty to close this cruel loophole.