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Jim Fitzpatrick (Poplar and Limehouse) (Lab)
On a point of order, Mr Williams. Before you start proceedings, can I raise a couple of questions? I am not sure what we do in the event of not everybody who indicated that they wanted to speak in this debate turning up. The Select Committee on Transport has scheduled two important debates for this afternoon. Does the Chair have any discretion to delay the start of proceedings to ensure that those who want and are expected to participate have the opportunity to do so? Previously, when I was a Minister, if I had been at a debate and there was nobody in attendance, or if someone to whom I had spoken in the Lobby and who had indicated that they wanted to speak was not there, I would obviously have wanted to ensure that they had a chance to speak.
What are the rules and protocols of the House in the Standing Orders? We would not want anyone to miss the opening speech from the distinguished Chair of the Transport Committee, my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), ably supported by the hon. Member for Milton Keynes South (Iain Stewart). The Transport Committee has spent a lot of time on the two reports. I know that my hon. Friend the Member for Edinburgh, Leith and Pentland—or is it just Edinburgh and Leith?
Jim Fitzpatrick
My apologies. My hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) clearly has something to say in the debate, and it is important that everybody who wants to speak has the chance to listen to the opening speeches. Without an opening speech from the Transport Committee Chair to set the context for this debate—the Opposition have a few things that we would like to say, although the reports deal comprehensively with the issues, and the Government’s response is equally detailed—it would be helpful if you could advise us, Mr Williams, how we might proceed so that everybody who wants to participate can do so.
Hywel Williams (in the Chair)
Thank you for that point of order, Mr Fitzpatrick. I think we have shown a degree of forbearance. It puts us in a difficult position if we have neither a Whip nor a Minister, but I am advised that we may proceed, and I think that we had better, given that we have hon. Members here who are anxious to contribute to the debate. I will take advice during the debate, and if we can start, we will see how we might stop as well, which might be something of a problem. I call Mrs Ellman.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Mr Williams. I am pleased to present two Transport Committee reports for debate. Both are on aviation, and although they deal with complicated matters, they are vital to the public. The first debate is on the reform of Air Travel Organisers’ Licensing, or ATOL.
Mark Lazarowicz
Before my hon. Friend proceeds, does she agree that, although we are discussing the first report, it is particularly important that we have a Minister here to hear what is said about the second report? Important negotiations are going on in Europe about flight times, and many of us have constituents working in the industry who have contacted us about the matter. It would be amazing if we did not have the opportunity for a Government response on this important topic.
Mrs Ellman
I agree with my hon. Friend. I certainly wish Ministers to listen to what I have to say, and I have numerous questions to pose to them, but the proceedings have started, so I must continue. I hope that the Minister will arrive before I have proceeded much further.
The ATOL scheme was introduced in the 1970s, a decade in which there was a dramatic increase in the number of people travelling abroad on package holidays. ATOL is a Government-backed insurance scheme that protects holidaymakers flying abroad from the effects if travel firms go bankrupt. Holidaymakers can be reimbursed for the cost of holidays and repatriated where necessary. Over the past three years, 250,000 people have received refunds as part of the scheme and 100,000 have been repatriated.
Firms covered by the ATOL scheme charge each passenger £2.50 to cover the cost of ATOL. However, at the time of our inquiry, the Air Travel Trust Fund from which payments are drawn was in deficit to the tune of £42 million. That deficit is now decreasing. I would be grateful if the Minister could tell us the latest figure, as it is important to have. The deficit is falling because the charge per passenger was recently increased from £1 to £2.50, but the scheme remains controversial. Currently, only about half of holiday bookings are covered, an issue at the heart of ATOL reform.
The situation is complicated. Traditional package holidays sold by travel agents and tour operators are covered by ATOL. Holidays sold by agents or firms defined as acting as agents for the consumer, particularly online, are not. Firms selling holidays not covered by the scheme have a competitive advantage, because they do not have to charge for ATOL cover. However, it is not clear whether consumers are aware of that difference. There is also the problem of who pays for repatriating travellers stranded abroad by the bankruptcy of an airline or agent not covered by the scheme.
The Government are in the process of changing ATOL. Two reforms have already been made. First, “flight-plus” holidays—in which a flight plus another part of the holiday, such as a hotel booking or car hire, is bought within a 48-hour window—sold by existing ATOL operators are now covered. Secondly, customers buying holiday packages covered by ATOL must now be issued with a certificate telling them that that is the case. Those two changes are an advance.
The extension of ATOL to certain flight-plus holidays is estimated to bring some 6 million additional holidays into the scheme, ensuring that 60% of holidaymakers are covered. The extra revenue brought into the scheme by those extra travellers should help reduce the charge per passenger, but operators have challenged the Government’s figures, claiming that the travel industry will find ways around the new regulations.
Jim Fitzpatrick
My hon. Friend is outlining clearly the background to the ATOL scheme and illustrating the details. She mentioned the changes. On Tuesday, we had the opportunity to debate in the Chamber the Lords amendments to the Civil Aviation Bill, and the Minister moved amendments to improve the ATOL scheme. Will she be referring in her remarks to how those amendments improve the scheme? They relate to what she is discussing, and they go part of the way towards what she wants addressed, which is the 21st-century way of booking holidays.
Mrs Ellman
Yes, I will be referring to that point. I would like some information from the Minister on what has happened in practice since the scheme was changed in April.
Our other concern about the extension of ATOL involved the lack of consumer input into the changes. The Government’s consultation on the change attracted just four responses from consumer groups, which I find pretty amazing, because I have had responses from constituents concerned about the scheme as it was operating. The responses from those four consumer groups hardly seemed to feature in the Government’s analysis. Only one consumer group, Holiday Travel Watch, submitted evidence to our inquiry, opposing the extension of ATOL to flight-plus holidays.
The Committee was concerned, as was I, about the minimal consumer response. We need to know what consumers think about the proposed changes and how they are working, and what further changes consumers want.
Jim Fitzpatrick
Having read the recommendations from my hon. Friend’s Committee and the Government response, one of the questions that I will be asking the Minister later—reinforcing what she is asking at the moment—is about the Government’s saying that the responsibility for ensuring protection against the collapse of a holiday lies with the consumer. Part of the great difficulty is that consumers do not pay enough attention to whether they are insured and, if they get stranded, the taxpayer picks up the bill.
Mrs Ellman
My hon. Friend’s comments reflect views that the Committee has heard over a long period—we have been looking at the issue for a number of years. Particularly when people are stranded on holiday and have problems, we realise that those consumers simply did not know what they were covered for or indeed whether they were covered. That has to be a key issue for the Government. They have partially addressed it, but I will say later how I think that that is proceeding.
The Government were well placed to overcome the problem of that relative lack of formal reaction from consumers and consumer groups by commissioning their own research into whether consumers understood the concept of ATOL cover and whether they wanted it to apply to packages that they assemble themselves online. We must remember the changing nature of the way in which people organise their holidays, because individual consumers organising their own holidays and assembling packages online is a growing trend, so it is important for us to know what consumer views are and about the type of insurance that they think most appropriate. Up until now, however, the Government have not done that. The extension of the scheme has not been based on explicit consumer research, and I want the Minister to tell us why the Government did not do more to find out specifically what consumers want.
The Committee welcomed the introduction of the ATOL certificate, which will increase clarity for consumers about their cover. We have found a consistent issue over the years to be that passengers and holidaymakers simply do not know what they are covered for. There is a risk, however, that consumers who buy holidays that are not ATOL protected will not realise that. Owing to the Government’s positive action, the people who are now ATOL protected will know that they are covered, but the ones who are not covered will not know, because they will not have a certificate. Do the people without a certificate realise that that means they are not covered by ATOL? We simply do not know.
More could be done to inform consumers not covered by scheme of their position and options. The Government agreed to consider our suggestion, perhaps by introducing a voluntary scheme for airlines to inform customers of their protection—or lack of it—when buying a flight. Can the Minister tell me what progress has been made in taking that suggestion forward?
Mark Lazarowicz
That is important because, as my hon. Friend said, normal people make their holiday arrangements, effectively, by putting together their own packages, which raises the issue of what cover there should be in the event of an airline-only arrangement falling through if the airline goes out of business. There are clear difficulties with doing something at UK level only, as well as issues of practicality, but the report highlights the importance of voluntary agreements and discussion in the industry up to a European level. Does she think as I do, it important for the Government to be able to show that they are actively pursuing the possibility at European level? That is another point to which the Minister needs to respond when we reach the appropriate point in the proceedings.
Mrs Ellman
I agree with my hon. Friend that the matter needs to be pursued in the European arena, because the nature of air travel is such that it is likely to involve travel outside this country. We need to know from the Minister exactly what is happening and what progress, if any, has been made.
As my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) mentioned, the Civil Aviation Bill includes clauses that will make more fundamental change possible. Such changes will be implemented, we are told, at a future date. Will the Minister say what the timetable for that implementation is? As my hon. Friend said, there was a debate on the subject yesterday, and amendments to the Bill were discussed, but we need to know the timetable so that we can monitor progress. During the Select Committee inquiry, the then Minister was asked how the Civil Aviation Bill would affect holiday insurance cover, and it was clear that there would be major changes. We need to know the detail of such changes, as well as the timetable for implementation of the Bill.
In future, packages sold by airlines and by those designated as agents for the consumer, will be included in ATOL. The Committee supports that change, because it is an anomaly that a holiday package sold by a travel agent has ATOL protection while the same package sold online by a firm operating as an agent for the consumer—for which there is a specific definition—is not covered. That is extremely confusing for the consumer, and one reason for the reform is to provide greater clarity for the consumer, as well as more comprehensive cover, and to create a more even playing field in the industry. When we conducted our inquiry, we spoke to a range of people, including those from the travel industry and its different sectors. One point made forcefully to us was that different parts of the industry would be affected in different ways, and a strong view from some was that there should be an even playing field for the travel industry itself. The Government are addressing that situation, but we need to know how the proposals will change it. We need to know what progress has been made on providing appropriate cover, clarity and even-handedness for the consumer, and on creating a more equal playing field in the travel sector.
There have been calls for the Government to go further than they propose and to bring all international flights within ATOL, providing passengers with protection from airline insolvency. In our inquiry, we found different views in different parts of the travel sector. ABTA, the Association of British Travel Agents, has argued strongly for that, pointing out that tour operators often fail because airlines have run into financial difficulties. On the whole, the airlines oppose such calls, arguing that there is a significant difference between a holiday package and a flight. They suspect that the change would mean their being asked to bail out the air travel trust fund, which, they argue, has been emptied because of what they allege to be badly managed tour operators going bust. Those were the points made to us in our inquiry, although we did not get a unanimous view from those who came to speak to us.
On balance, it would be helpful to see international flights covered by ATOL. The additional cost per ticket would be small, consumers could be confident of repatriation in the event of an airline becoming insolvent, and the scope for operators to find loopholes in the ATOL rules would be reduced; quite a number of the witnesses to our inquiry felt that if a scheme for partial cover was proposed, part of the industry would find loopholes to get around the new regulations. The European Commission is looking hard at the question, and my hon. Friend the Member for Edinburgh North and Leith was right about the importance of looking at the issue across Europe. When a decision is taken in Europe, it is not taken just by another body with no reference to the United Kingdom Government. There is a process, and the Government and specifically the Department for Transport in this instance have a way of influencing what happens, and should advocate what they believe is best for our travel industry. Will the Minister update us on what is being discussed at European Union level, and on the Government’s view on the matter? It is important to know what the Government, through the Department for Transport or any other appropriate part of Government, are doing to pursue what they believe is the right way to proceed on travel insurance, and getting the best deal for British consumers.
Mark Lazarowicz
That is particularly important because in the few instances of airlines going out of business in recent years, most have been pretty small, and passengers have been picked up by other, larger airlines. However, low-cost budget airlines are now operating throughout the European Union, and many are based in other countries where a UK operator might not feel inclined to offer a replacement flight if it had no connection with the UK. Is that not an important reason for addressing the matter at European level, and why the Government must show that they are actively pursuing the issue to try to get an appropriate solution for consumers?
Mrs Ellman
My hon. Friend makes an important point. One issue raised during our inquiry was that the European travel package regulations are being renegotiated, which may take some time. That makes it particularly important that our Government, through the Department for Transport or whatever part of the Government is thought to be correct, advocate during the long-drawn-out discussions on that package, what is correct for UK consumers. It is an ongoing process, and it would be helpful to know what the Department is pursuing in this area at European level, what stage those discussions have reached, and how it will be involved as they proceed and before the extensive European travel package regulations are finalised.
The charge of £2.50 per passenger to pay for ATOL is unfair, because it is not linked to the value of the holiday booking or any assessment of risk. Someone booking a cheap package deal with an established operator pays the same for protection as someone buying a luxury trip to a far-flung country with a niche provider. That is unfair, and the situation would be even worse if flight-only bookings were included, because the ATOL charge could be a high proportion of the cost of a cheap flight. The Government have agreed to re-evaluate the level and the basis of the charge. Will the Minister say what progress is being made with the review?
On the long-term options for ATOL, we considered whether it should be scrapped altogether and replaced with private insurance. We concluded that that was not possible. Few insurance policies are available to provide the same level of protection, and the Government cannot avoid their responsibility swiftly to repatriate people stranded abroad because a travel firm has failed. The EU package travel directive requires the UK to provide a financial protection scheme for holidaymakers.
Nevertheless, there is scope for further reform, particularly when the scheme’s deficit has been cleared. In the Committee’s view, a reformed scheme must distinguish clearly between financial protection for consumers, which might sometimes be covered by private insurance, and repatriation, which is unavoidably an issue for the Government. The scheme should be industry funded, not reliant on Government guarantees as at present, and perhaps it should be managed by the industry. Consumers should have a greater say in deciding what is covered, and there should be more research on what consumers want. There must be more clarity and more public information, so that consumers are clear about when they are covered and when they are not. The Committee would like the cost per booking to come down, and be proportionate to the price of the package. If that were done, much of the controversy about the scheme might fade away.
In recent years, the internet has enabled some people to bypass travel agents and tour operators, and to put together their own package holidays. The ATOL scheme has not kept pace with that development. It has run into financial difficulties, and there is now confusion about who is covered by the scheme and who is not. The Committee welcomes the Government’s steps for reform, but there is much more to be done. I look forward to hearing about further proposals for change.
The nature of the leisure industry and holiday bookings has changed. Travel protection needs to reflect those changes and consumers’ needs. The Department has started to address that, but a great deal more needs to be done, and I look forward to hearing from the Minister what steps are being taken, and what the Government’s plans are.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
I am sorry, Mr Williams, as that comes as a bit of a surprise in that I was anticipating other colleagues to be called to speak before me. However, I am grateful for the opportunity.
Iain Stewart (Milton Keynes South) (Con)
In the interests of clarity, I should say that my ambition is to speak in the second debate. I hope that this brief interruption gives the hon. Gentleman time to get his paperwork in order.
Jim Fitzpatrick
Given the number of colleagues who have been able to attend, and given other business in the House, I would have thought that the hon. Gentleman will have ample opportunity to make a substantial contribution to the second debate, given that we have three hours in which to discuss both reports.
Welcome to the Chair, Mr Williams. It is a pleasure to see you presiding over our business. I also welcome the 17th report from the Select Committee on Transport, “Air Travel Organisers’ Licensing (ATOL) Reform”. As my hon. Friend the Member for Liverpool, Riverside (Mrs Ellman), the Chairman of the Committee, eloquently outlined in introducing the report, the air travel trust fund has its origins in the 1970s, but in March 2012 it registered a deficit of some £18.5 million. She mentioned the fact that in 1992, 98% of holidays were covered by ATOL, but in recent times the figure for the market in package holidays, which were the original target for the protection scheme, has fallen way below 40%.
As my hon. Friend also outlined, protection is not just good; it is essential. When companies fail, citizens may be abandoned, and certainly distressed. Responsibility is then on the Government to rescue them, and ultimately the taxpayer must foot the bill. That cannot be right. If people are able to enjoy holidays abroad, there must be some responsibility on them, as well as the organisations that get them to their destination, to ensure that they are covered for returning home. The previous Government were addressing the need for reform, and this Government have carried that on, as well as the need to close the deficit, balance the fund and provide future protection in the light of how bookings are made in the 21st century.
A helpful briefing from the Association of British Travel Agents says in respect of the modern way that people book holidays that
“robust evidence exists to prove that airlines can and do fail financially. Since 2000, 46% of monies paid out from the ATTF on failed ATOL holders can be attributed to the knock-on effects of airline insolvencies.”
It continues:
“In the last three years alone, 51% of all claims on the ATTF can be attributed to monies paid out following failures of ATOL holders as a direct result of airline insolvencies”.
That reinforces my hon. Friend’s point about the modern way of booking holidays.
I shall refer to some of the recommendations in the Committee’s reports, and to the Government response, to reinforce what my hon. Friend said. Recommendation 2 says that additional consumer protection is needed, and in respect of consumers the Government responded
“so they can make alternative arrangements for financial protection, if desired.”
The essential question here relates to many of the points made by my hon. Friend and to the Committee’s recommendations. As she said, only four consumers responded to the report. We had an exchange about consumer awareness of whether they are protected. People want to book the best holiday at the cheapest price, and they may not recognise whether those holidays are ATOL protected. Therefore, the Government’s comment in response to recommendation 2—that consumers
“can make alternative arrangements for financial protection, if desired”—
is somewhat inadequate. We do not want people to want to be rescued; we want them to help to pay for the cost of being rescued, because if they do not, the rescue is down to the Government and the taxpayer foots the bill.
That theme is continued in recommendation 7. The Government responded:
“When a consumer does not receive a Certificate, they will know that they will not be covered by the ATOL scheme”.
However, I am not sure that the consumer will know about that if they do not receive a certificate. It is clear that a lot of people, over recent years and decades, have been stranded, thinking that they were covered, without realising that they were not, because they did not understand the scheme.
Subsequently, the Government say that they
“will consider with the CAA… suggesting information that should be provided to consumers about financial protection every time that a flight is purchased.”
Our point of view, and the theme of the Committee’s report, is that everybody should be protected, and a way must be found to ensure that that protection is included in the price of the holiday.
Finally, the Government’s response to recommendations 5 and 9 states:
“The requirement that those organising and selling package holidays should have in place provision for refunds or repatriation in the event of organiser insolvency comes from the PTD.”
In our view, the position is straightforward: the Government need to ensure that consumers are protected, even against themselves.
Competition within the travel industry is fierce, with many great holidays on offer from airlines, travel companies, package holiday companies, and all manner of individual organisations and collectives, and the Committee is asking a number of questions that the Government need to address. My hon. Friend detailed those issues in her opening remarks, covering the scheme’s history and asking the Minister a number of questions that I know he will respond to in due course, because they are outstanding from the Committee’s report. I have reinforced some of those questions, because they are fundamental to the well-being of the scheme.
The scheme has been reformed in recent years, and that continues with the amendments to the Civil Aviation Bill moved by the Minister in the House on Tuesday. Clearly, the Government are indicating that they will continue with that reform and that, in due course, they will hold a consultation on future reforms. Comments made to me and to the Opposition suggest that there is keen interest in continuing the reform process and in making progress. If I remember correctly, the Minister said in the House on Tuesday that a further consultation is due in the spring, but the question from the industry, consumer groups and the Committee is, when is it likely to happen and can it be expedited?
This is unfinished business, going back many years. We began with it in government, and it is great to see the coalition continuing with it. We want the situation reformed, the deficit bridged, and the fund to be in surplus, not in excess, with enough to cover any contingencies. The whole travel industry—airlines and travel operators—wants exactly the same thing. There is agreement that progress has been made over recent years, but work remains to be done and I look forward to the Minister outlining how he intends to finish the job.
The Minister of State, Department for Transport (Mr Simon Burns)
It is a pleasure to serve under your chairmanship, Mr Williams, and I am pleased that the Transport Committee has secured this debate on a very important subject.
Before I get to the detail of the points that have been raised and of the Government’s approach, both to the Committee’s report and in terms of our response to the recommendations, I must make an abject apology—not only to you, Mr Williams, but to the hon. Member for Liverpool, Riverside (Mrs Ellman); to the shadow Minister, the hon. Member for Poplar and Limehouse (Jim Fitzpatrick); and to others who have come to the debate—for the fact that I turned up late.
I was under the impression—totally wrongly, as it happens—that the debate would start at half-past 2, and I had planned on that basis. What had not been taken into account was the fact that we have, of course, modernised our hours since the middle of October and that debate starts at 1.30.
I am very, very sorry about that. I am furious with myself that I have been discourteous to the Transport Committee and to the Chamber. I can guarantee you, Mr Williams, that this will never happen again, as it affects me, and I hope that, in that spirit, you and hon. Members will accept my apology. There is no excuse whatever.
Mrs Ellman
I completely accept the Minister’s apology. At times, we all get caught out by changes in the timetable. Until relatively recently, I thought the debate was at 2.30, then I discovered that it was to start at 1.30. It is perfectly understandable.
Mr Burns
I am extremely grateful to the hon. Lady, who is being remarkably generous in the circumstances. Although I appreciate her kindness, there is no excuse for what has happened. I should have been here at 1.30, but I do thank her.
It is clear that the hon. Lady’s Committee has taken a keen interest in ATOL reform and I am glad to have the opportunity to discuss it further following the Committee’s report, which was published in April. Since the Committee reported on ATOL reform, significant changes to the scheme have come into effect that have greatly improved its functioning. Reform of the ATOL scheme is necessary to increase consumer clarity, ensure its efficient functioning and, in the longer term, put it on a self-sustaining financial basis.
On 30 April, the same day as the Committee’s report was published, the Civil Aviation (Air Travel Organisers’ Licensing) Regulations 2012 came into force, bringing flight-plus holidays into the scope of the ATOL scheme. A flight-plus holiday is one where the consumer requests to book a flight and accommodation or car hire within a two-day period. That change gives consumers greater clarity and covers many more people. It means that, essentially, if one buys something from a travel agent or tour operator that looks like a package holiday, including a flight, one should be protected by ATOL.
The Civil Aviation Authority has reported that in 2012-13, 2.5 million more holidaymakers can be covered, thanks to that single change. The flight-plus reform has enjoyed broad support from industry, consumer groups and other stakeholders. As the Committee and our analysis have suggested, it is critical that consumers are aware of their coverage. Flight-plus has gone a long way towards clarifying the ATOL scheme and reducing the chances of consumers mistakenly thinking that they are covered, but further to address that, on 1 October, we introduced the ATOL certificate, which is a standardised document given to every person booking an ATOL-covered holiday. It sets out the coverage and says what to do if things go wrong.
The introduction of the ATOL certificate has been widely welcomed by the travel industry and consumer groups alike. On its launch, it received favourable coverage in the travel industry and national press. The travel trade has worked hard to get ready for all the ATOL reforms, and I applaud its efforts to do so. The CAA has also done a very good job in supporting the travel trade in its preparations. Receiving the ATOL certificate shows that holidaymakers and travellers are covered; equally, not receiving an ATOL certificate with a booking indicates that people are not covered. It removes any uncertainty and gives holidaymakers and travellers peace of mind.
To make the changes effective, the holiday-buying public must be aware of them. To that end, the CAA is preparing for a publicity campaign in the next few months to increase awareness of the changes. Fortunately, that will coincide with a significant period when people are preparing for and buying their summer holidays, immediately after Christmas. That is a relevant and appropriate time to start getting the message across.
We are pleased with what we have achieved with the ATOL scheme thus far. It goes a long way towards addressing a number of the points in the report. We intend to address some of the remaining issues in the ATOL scheme using new powers in the Civil Aviation Bill, which completed its progress through Parliament earlier this week and will receive Royal Assent in due course.
Jim Fitzpatrick
I hope that the Minister will forgive me if I have missed this point in his comments, and if he has not covered it, perhaps he will do so.
We referred to the fact that the percentage of holidays covered by ATOL is falling because of the different ways in which people book their holidays. The figure was 98% in 1992, but it is down to below 40%. Will the Minister tell us the percentage of holidays covered by the current scheme and the estimate of the number that will be covered following the reforms that he has introduced and the amendments made to the Bill? How much of a gap will there be?
Will the Minister be looking to address that gap, which we need to close, when he undertakes consultation in the spring, although we will never get to 100%, because some people will always book their own holiday and do their own thing? Will he give us those answers at some point?
Mr Burns
I am extremely grateful to the hon. Gentleman, and I will certainly come back to him because I also want to deal with a number of points raised by the hon. Member for Liverpool, Riverside.
Before the hon. Gentleman’s valid intervention, I was about to say that we are pleased with the achievements that the ATOL scheme has so far realised. We believe that they go a long way to addressing a number of the points in the report. We intend to address some of the remaining issues in the ATOL scheme using the new powers in the Bill. For example, holidays sold by airlines are not required to be ATOL protected. That creates a regulatory inequality and potential confusion for holidaymakers. It is important to have a consistent regulatory framework for businesses selling holidays, including a flight, as far as is consistent with EU law.
Further, some consumers are not protected when buying a holiday because that holiday was procured on an “agent for the consumer” basis. That means that, rather than selling a holiday to the consumer, the travel agent technically buys one on the consumer’s behalf, as we discussed on Tuesday in the main Chamber, which means that it is outside the scope of the current ATOL scheme. The powers in the Bill will allow that method of avoiding the scheme to be removed.
Some companies might claim that they are merely facilitating a purchase of a flight, but neither buy on the consumer’s behalf nor make available or sell flight accommodation to them. Thus, they might argue that they are outside the scope of the ATOL scheme. That business practice is a potential avoidance approach. The Bill will give my right hon. Friend the Secretary of State powers to require such businesses to hold an ATOL licence.
The Bill is awaiting Royal Assent. Our intention is to create a level competitive playing field and to avoid holidaymakers mistakenly thinking that they have protection when they do not. Holidays including a flight that look like package holidays should be protected like package holidays under the ATOL scheme. These further reforms will go a long way towards ensuring that.
Of course, before taking further steps, we will consult widely. Subject to parliamentary processes, we expect to produce an impact assessment and launch a consultation on draft regulations in 2013. Our decisions will be based on the outcome of that consultation.
Mrs Ellman
I am reassured by the information that the right hon. Gentleman is now giving us, but can he say when he anticipates that a new scheme or the new regulations will be operational?
Mr Burns
I would very much like to do so, but that would give too many hostages to fortune at this stage, because, as I said, we are going to base our decisions on the outcome of consultations. The consultations will be on draft regulations. Obviously, that is a due process, with time scales. Once we have had a consultation, we will have to consider fully the responses to it and any lessons that we may learn from it—any points that arise. Therefore, I hesitate to give a precise timetable that I could be held to, because often, for the best reasons and intentions, one does not keep to a precise timetable, which then leads to further problems. However, I can assure the hon. Lady that we are determined to do this because we want to get protection for those who deserve and should have protection. We want to get it right, effective and appropriate, and we will do it without cutting corners as soon as it is practically possible to do so.
Let me return to the intervention from the hon. Member for Poplar and Limehouse about the figures. This information may be helpful to him. As I understand it, ATOL coverage is now at about 50% for leisure trips abroad by air. We expect flight-plus reforms to increase that to 55%. No estimate has been made at this stage of further increases from reforms that will be made by the Civil Aviation Bill. However, we expect that to be included in the consultations next year, so that when we move forward with our precise proposals to tackle these problems, we may be in a better position to upgrade the second of the figures that I gave the hon. Gentleman and anticipate the increase in the coverage percentage as a result of the proposals that we will bring forward. I hope that that was of some help to the hon. Gentleman.
Jim Fitzpatrick
I appreciate the statistics that the Minister has just cited. I confess to being a little surprised that, with the advent of flight-plus, the protection goes only to 55% of people travelling abroad on holiday. I am not pointing the finger at anyone and saying that they are responsible for that, but it shows the size of the problem facing the Government, because the other 45% of travellers are the ones the Government will have to pick up the tab for if they need emergency flights to get them home. Those are the people the taxpayer wants to ensure are paying some insurance cover for themselves.
Mr Burns
I can understand the hon. Gentleman’s point. I think, though, that, up to a point the relatively small increase in the coverage reflects the fact that the number of people who buy a package holiday in the conventional sense is far greater than the number of people who will buy a flight-plus plan. I think that that is one of the main reasons for the relatively small increase in the percentage.
On ATOL and our proposals, our aim—from the actions that we have already taken and those that will flow from the Civil Aviation Bill—is to provide clarity about coverage rather than to protect everyone. The ATOL certificate will help to show consumers when they are or are not covered. They can then decide what level of protection they purchase through insurance or by paying by credit card, which is an element of the protection in the scheme. The scheme will give greater clarity to individuals before they decide what to purchase.
Jim Fitzpatrick
One point referred to earlier is the consumer’s awareness of whether what they purchase is ATOL-protected. That is a huge issue, because the more that people realise they are uninsured or unprotected, the more likely they are to think about that and to decide that it is worth the £2.50, as it currently is, to protect their family and themselves against anything that might happen, and with which they may not be familiar.
The Minister may not be able to respond on this now, but in due course, when the CAA launches the extended scheme, will it seek the biggest possible buy-in, particularly from the companies that offer protection, to have as much publicity as possible? That would raise the awareness of consumers, and allow companies engaged in the scheme to point the finger at those that are not, and say to people, “If you go with them, you are not covered; if you come with us, you are.”
Mr Burns
The hon. Gentleman makes an extremely valid point. For any scheme, a crucial element, apart from its effectiveness, is people’s understanding and knowledge of what they may—or, more importantly, may not—have protection against.
I have every confidence that companies, whether tour operators or airlines, will do all they can to make potential customers aware that they are covered by the scheme, because that is a positive selling point for customers and gives them peace of mind. However, as I said earlier, the CAA will also publicise the scheme proactively to ensure that people are generally aware of their protections if they make purchases from those covered by the scheme or from those who, in due course, will be brought within its ambit through our use of the powers contained in the Civil Aviation Bill.
It will become part of people’s mindset that the protection exists, and they will want to know whether they are protected because of the possible implications if they are not. This is slightly off the subject, so I will keep the comments brief, but that is like people going abroad under their own initiative, who may not get the health card for the reciprocal health arrangements in Europe if they travel there, or private health insurance if they travel further afield—to the United States or wherever—although, if they are taken ill or have an accident and need medical treatment, they will face catastrophic bills that could, for instance, completely change their family’s financial position.
The more publicity there is and the more that people are aware of what the situation is and what protections they have, the more the consumer will be interested and concerned to find out exactly what they are buying.
Mrs Ellman
Does the Minister know when the CAA intends to embark on the advertising and the promotion of information? Will the CAA do that with the industry itself, and will the advertising relate to the consumer needs that we have already identified? One feature that has been constant, certainly over the many years that the Committee and people elsewhere have looked at the issue, is the confusion in the customer’s mind about whether they are insured, and about what they are covered for and when.
Mr Burns
I am grateful to the hon. Lady for that intervention, because it raises an important issue. As I said earlier, we expect the campaign to be launched by the CAA immediately after Christmas. That is when many people consider purchasing holidays for the summer, so it will be relevant at that time. It will seek to make people aware not only of the ATOL scheme—for those who are not aware of it, and I fear that many are not or do not fully understand what it is—but of the changes and improvements made during this year. It will also provide clarity, so that the message gets across to those who are purchasing a holiday, flights or whatever, that as well as looking for value for money and so on, they should check whether their purchase is ATOL-protected and what that protection means.
Jim Fitzpatrick
I was going to ask the Minister another question but, if I may, I will ask him a supplementary to the one from my hon. Friend the Member for Liverpool, Riverside.
The Minister has said that the CAA is looking to start advertising in the new year. We all know that summer holidays start being advertised on Boxing day. That is the sort of time when people are indoors and when those who work have a few days off, and they will be tempted by the adverts on the TV. That is the time for the industry to advertise. My hon. Friend asked whether the CAA will be engaged with the industry. An imprimatur on adverts—that they are CAA-approved—might be the way to co-ordinate the publicity campaign between the industry, which will have greater buy-in from the customer, and the CAA, which might have their future bills reduced.
I wanted to ask about the Minister’s earlier comment on people not taking out private health insurance, for example, when they go to the United States. Most people know that if anything happens to them there, they face a massive health bill, and I think that most people therefore take out private insurance. Are there any figures for the comparison between the number of those who travel to such difficult places and the 50% to 55%, who the Minister says are ATOL-protected against the collapse of their airline?
Mr Burns
On the last point, to the best of my knowledge, there are no figures, and I suspect that, by their nature, it would be difficult to find any accurate figures. However, there is one benefit. The hon. Gentleman talks about the north Atlantic route, on which the two main carriers are British Airways and Virgin. At the moment, they have both voluntarily signed up, so their passengers have the protections. They have done that simply because they want to give such protection to their customers, and I pay tribute to them for doing so voluntarily.
As the hon. Gentleman rightly says, the start of the advertising campaign is intended to coincide with the Boxing day bank holiday. He and I are familiar with the huge number of adverts that traditionally emanate immediately after breakfast on that day.
On whether the CAA will consult the industry, I have no doubt that it will. The CAA wants a focused system of advertising that gets across the message. It is open, as the Government are, to views, opinions and recommendations that will help it come up with the most informative and best advertising, and with maximum coverage for their message.
I am not sure that I altogether have the same faith as the hon. Gentleman in human nature. Although, to the best of my knowledge, no figures can prove or disprove this, I suspect that significantly more people do not bother to get health insurance to go across the Atlantic than either of us might think, particularly those who go for only a short period and try to wing it, believing that nothing will happen to them. However, that is a slightly different point.
Let me now move on to the European angle that the report covered. The Committee called for a clearer distinction between the consumer protection and the repatriation functions of ATOL. Much depends, however, on what happens at the European level with the planned reforms of the package travel directive. The ATOL scheme implements in part the PTD requirement for insolvency protection for consumers. We expect the Commission to announce its reform proposals in spring 2013, and the Government will consult on what position the UK should take. The form of the Commission’s proposals will help determine how we implement further changes to the ATOL scheme, so we will not consult on the new ATOL regulations until the Commission has announced its proposals, because, as both the hon. Lady and the hon. Member for Poplar and Limehouse will accept, it would be rather pointless to put the cart before the horse.
The scheme is financed by the air travel trust fund. For historic reasons, the ATTF has a deficit and requires a commercial borrowing facility, backed by my Department, of up to £20 million. The introduction of the ATOL protection contribution and the increased number of protected passengers have, thanks to our recent reforms, brought more money into the fund, and the deficit now is on track to being eliminated in the next year or so. That presents an opportunity to reform the finances of the ATOL scheme.
The Government will consider broader changes to the scheme and invite comments on its funding and management to ensure its continued effectiveness. Our aim is to ensure that the scheme is equitable for consumers, the travel industry and the taxpayer.
The hon. Lady raised a number of matters during her contribution. On some, for the reasons that she is aware of and that I am acutely aware of, I will have to write to her to give her the answers. She asked whether airlines and tour operators based in other countries will be covered by the scheme. All sales of package holidays in the EU are covered by the protections in the PTD, but under EU law we cannot require airlines or tour operators established in a European economic area state, other than in the UK, to have an ATOL licence to protect sales of flight plus holidays. That is why we want to examine the Commission’s proposed reforms to the PTD before consulting on any new ATOL regulations, as that might extend protection to all or some flight- plus type holidays. We want to understand the impact on UK airlines and other businesses as part of that consultation, and, as I say, we will engage in that once the Commission has published its proposals.
The hon. Lady also asked about the discussions on travel insurance between the EU and the Government. All I can say is that they are ongoing. The most appropriate time to discuss them is within the whole consultation process on the PTD in due course next year.
In conclusion, as might be clear by now, ATOL reform is not a simple process, but at each step of the way, the Government have acted to create an effective and financially self-sustaining scheme. To ensure effective protection for travellers and holidaymakers, the Government have increased the extent of coverage, improved consumer clarity and moved to bring more holidays into the scope of the ATOL scheme. We shall keep the principle of effective protection in mind as we consider further changes to the ATOL scheme in the near future.
Once again, I thank the Transport Committee for its constructive comments and I am glad to have had the opportunity to debate this important issue. Again, I offer my sincere and deepest apologies to the members of the Committee for the position that I put them in at the beginning of the debate.