Line 2 baking trays with non-stick baking paper. Separate the lollies into different colours in separate sealable plastic bags.Wrap a tea towel around 1 bag several times. Use a hammer or meat mallet to pound lollies until finely crushed. Repeat with remaining bags.
Use an electric beater to beat the butter and sugar in a bowl until pale and creamy. Add the honey and beat until well combined.
Add the flour and use a round-bladed knife in a cutting motion to mix until just combined. Use your hands to bring the dough together.Turn onto a well-floured surface and knead lightly until smooth. Divide into 2 portions. Cover and place in the fridge for 30 minutes to rest.
Preheat oven to 180°C. Use a lightly floured rolling pin to roll out 1 portion of dough until 4mm thick. Use a 9cm star-shaped biscuit cutter to cut stars from the dough. Place on prepared trays. Use a 4cm star-shaped cutter to cut the centre from each biscuit. Use a thin drinking straw to cut a small hole in the top corner of each biscuit. Continue cutting biscuits from the dough, re-rolling as necessary.
Bake for 6 minutes. Spread crushed lollies into the star-shaped hole in each biscuit, using 1 colour for each. Bake for a further 6 minutes or until the biscuits are golden and the lollies have melted. Set aside to cool slightly.Transfer to a wire rack to cool completely. Repeat with remaining dough portion and lollies.
Thread ribbon through the hole in each biscuit and secure with a knot.
