Grand Committee

Wednesday 11th October 2017 Grand Committee

Wednesday 11 October 2017

Air Travel Organisers’ Licensing Bill

Committee: 1st sitting (Hansard): House of Lords
Wednesday 11th October 2017 Grand Committee

Committee

15:45

[The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)]

Before we begin, my Lords, I should explain that the noble Lord, Lord Rosser, who is moving the first amendment, has been detained in the Chamber by the PNQ. With the Committee’s permission, we will wait a few minutes for him; I suppose he might send somebody in his place, but I do not think that he will.

15:51

[The Deputy Chairman of Committees]

Good afternoon, my Lords. I remind the Committee that, in the event of a Division in the Chamber, the Committee will adjourn for 10 minutes from the sound of the Division bells.

Clause 1: Air travel organisers’ licences

Amendment 1

Moved by

[Lord Rosser]

1: Clause 1, page 1, line 8, leave out subsection (3)

[Lord Rosser (Lab)]

I apologise for my late arrival; I had to be on the Front Bench for the Home Office Private Notice Question in the Chamber. I do apologise for the delay I have caused.

I will be brief in speaking to the amendments. Their purpose is to raise the issue of linked travel and flight-only arrangements in relation to ATOL protection. In respect of linked travel arrangements, the Minister said that the Bill would extend protection to consumers making these less formal holiday arrangements. Can he say which clause or subsection says this specifically, or is this a matter that the Government intend to address in regulations? If it is the latter and the Government intend to address it in regulations, why not include the extension of the protection to linked travel arrangements on the face of the Bill, as provided for in my Amendment 2? I take it that linked travel arrangements will be quite significant. Will the Minister let me know, either now or later, what proportion of what I would describe as ATOL sales the Government think linked travel arrangements will make up? Are they contemplating a new separate air travel trust for linked travel arrangements, in view of later clauses?

Turning to flight-only arrangements, one issue that surfaced during the debate on the Monarch Airlines Statement on Monday was the very low percentage of Monarch passengers covered by the existing ATOL provisions. I think the Minister said it was likely to be some 10% to 15%, and that this percentage was unlikely to have been much higher even under the provisions of the revised EU directive and the Bill. As I understand it, that is because nearly all Monarch Airlines passengers were flight-only. The Government decided, particularly because of the numbers involved, to provide flights back home for those Monarch passengers stranded abroad. This is a power the Government have but as I understand it, it is entirely up to them when and if they use it. Surely that can only create a degree of uncertainty, which is not a desirable state of affairs, certainly not for stranded airline passengers.

I put it to the Minister that the Government should consider setting out clear criteria against which they will determine whether to provide flights back home for stranded flight-only passengers whose airline has become insolvent or, alternatively, consider extending the ATOL protection scheme to flight-only passengers, who made up the vast majority left stranded by the demise of Monarch Airlines. Perhaps in that regard, the Minister could give an estimate of the cost to travel organisations of extending the ATOL protection scheme in this way.

Can the Minister expand on the paragraph in the Government’s Statement on Monarch Airlines on Monday? It reads:

“But then our efforts will turn to working through any reforms necessary to ensure that passengers do not find themselves in this position again. We need to look at all the options, not just ATOL, but also whether it is possible for airlines to be able to wind down in an orderly manner and look after their customers themselves without the need for the Government to step in. We will be putting a lot of effort into this in the weeks and months ahead”.—[Official Report, 9/10/17; col. 46.]


What do the Government include in “look at all the options”? Can I take it that this will include flight-only passengers not ending up being stranded abroad with no automatic provision available to fly them back home at no additional cost? I beg to move.

[Baroness Randerson (LD)]

I thank the noble Lord for his remarks, which have provided a useful introduction to his thinking. Clause 1(3) inserts new subsection (1E) into Section 71 the 1982 Act to clarify that the Secretary of State can make regulations to exempt any form of flight-only arrangement from ATOL. As the noble Lord, Lord Rosser, said, most of the passengers in the Monarch situation were not covered by ATOL arrangements, but it inevitably leads one to reconsider the situation and what needs to be done—we will refer to this later on. The key question is whether it is desirable for flights-only to be covered by some kind of scheme of the ATOL type. That would inevitably mean an addition to the cost of flights. In the case of low-cost airlines, it would be a significant addition to the cost of a short-haul flight. In a situation of what I think the Minister will agree is brutal price competition, I suspect, although I do not know, that the airlines would not welcome any additional costs of this nature.

On Monday, the Minister emphasised the massive scale of the repatriation that the Government, via the CAA, have undertaken, and it has been a very effective way of dealing with the problem. However, Monarch was a small airline. It might have been, as the headlines said, the biggest repatriation since D-Day, but it was a small airline that went bust. When one combines the size and complexity of that situation with the issue of linked travel arrangements and the possible development of such a concept, we have to consider what sort of compensation should be available to people throughout the market. We are in a rapidly changing market and just because airlines seem to be in robust health at the moment, it does not mean, in the uncertain future we face, that this will necessarily continue in the decades ahead. I would welcome the Minister’s comments on what forms of compensation the Government are considering for those in situations where airlines go into liquidation, and by contrast what compensation should be considered for those who still stick to the old-style package holiday arrangements—if I can call them that.

16:00

[The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)]

First, I thank the noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, for their co-operation on this matter. I will address the amendments first and then come on to their specific questions about Monarch and other issues.

I recognise the purpose of Amendments 1 and 2 and we have looked very closely at the legal implications of both of them. I understand and recognise the intention to ensure that ATOL protection covers flight-only bookings and linked travel arrangements. Amendment 1 would remove subsection (3) from Clause 1. I will explain why this has been included in the Bill. It is quite complicated so I will go through it. It clarifies the extent of the Secretary of State’s powers to exempt businesses from holding an ATOL when they are selling flight-only tickets. It is not changing the status quo; it is merely adding clarity about exemption from the ATOL scheme.

I think there is a small amount of confusion here. Airlines selling airline tickets are already exempted from ATOL in primary legislation—the Civil Aviation Act. What we are referring to here is ATOL holders—for instance, travel agents—selling an airline ticket. The ATOL protection applies from the moment the travel agent takes your money off you—you might choose to pay for it in instalments—until the airline actually issues the ticket, when you become a customer of the airline and part of the EU 261 compensation arrangements. Your money is protected while it is with the ATOL holder—the travel agent—until it is converted into an airline ticket, when you become the responsibility of separate regulations. Under the Civil Aviation Act, airlines are exempt from ATOL provisions.

Noble Lords may be aware that Section 71(1B) of the Civil Aviation Act already provides a specific exemption for airlines selling flight-only tickets on their own aircraft. This exemption recognises that airline operators are already subject to separate licensing requirements, set out in EU law. Member states do not have discretion to impose additional requirements.

Separately, the Civil Aviation Act also includes a wide power under Section 71(1A)(b) to make further exemptions in the ATOL regulations. This power is not expressly limited in any way in the Civil Aviation Act. However, arguably the presence in the primary legislation of the specific exemption for airlines selling flight-only tickets could be misinterpreted as narrowing this wider power. That is why we have introduced Clause 1(3) to clarify the relationship between these existing exemption powers, and remove any scope for misinterpretation. We believe there is a benefit in having this clarity in law and, as I say, the presence of the airline exemption already exists in primary legislation. If the noble Lord’s concern is that the Government intend to remove flight-only sales from the ATOL scheme, I can provide an assurance that the Government have no such plans. If the noble Lord’s aim was to bring airlines within the ATOL scheme, this amendment would unfortunately not achieve that. We would need to amend the Civil Aviation Act in order to do that.

The noble Lord’s second amendment would add linked travel arrangements and flight-only to regulation 17(1) of the ATOL regulations, which sets out the types of travel arrangements that require an ATOL certificate. I should make it clear that flight-only arrangements are already covered in regulation 17(1)(a), and we do not have any plans to change that. To accept this amendment would therefore duplicate what is already in place.

With regard to the proposal to add linked travel arrangements to regulation 17(1), once this legislation is in place we will introduce regulations to make provision for insolvency protection and the provision of information for linked travel arrangements, as required by the package travel directive. Indeed, work is already under way to draft the package travel regulations and the ATOL regulations to effect this change. The ATOL regulations will be published in draft for consultation. I am sure noble Lords would agree that it would not be appropriate to pre-empt that process by making a change now to the regulations without such consultation, as proposed by this amendment. In summary, if the noble Lord’s concern is that the Government intend to remove flight-only sales from the ATOL scheme, I am happy to provide an assurance that the Government have no such plans. If the noble Lord’s aim was to bring airlines within the ATOL scheme, this amendment would not achieve that aim. I hope therefore that he will withdraw Amendment 1.

I turn to the questions that the noble Lord, Lord Rosser, posed. He asked what percentage of the ATOL scheme would be taken up by linked travel arrangements. It is hard to say definitively but our estimate at the moment is a very small percentage. Part of the reason why we want to consult with industry before we introduce the regulations is that it is not entirely clear what a linked travel arrangement actually is. The directive expands the scope of the package travel arrangements, and the extension of the ATOL scheme will of course take effect for that regulation.

The noble Lord asked why linked travel arrangements are not included in the Bill and which clause deals with them. The Bill extends the ATOL powers but they are used to apply these arrangements throughout the European Economic Area. As such, all clauses apply to linked travel arrangements, and we will implement them in secondary legislation later on in the year when we have consulted with industry.

The noble Lord asked if we will be establishing a new trust for linked travel arrangements. The Government, together with the CAA, are still assessing the best way to implement linked travel arrangements that include a flight. We will consult on more detailed proposals later in the year. BEIS recently completed a consultation on the implementation of the package travel directive, and the responses to the consultation are currently being analysed. The consultation closed on 25 September.

The noble Lord asked about extending ATOL to flight-only. The ATOL scheme does not apply to airlines, as I said earlier, when they are acting as a flight-only provider, which are specifically exempted from it under primary legislation. Such airlines are subject to separate EU regulation and licensing arrangements, which include financial fitness requirements. We are not proposing to make any changes to the arrangements at this stage.

The noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, asked about Monarch. As I said in repeating the Statement yesterday, we believe the circumstances are unique. Monarch was quite a large airline—the UK’s fifth largest—and the circumstances were unique in that, even if we had not agreed to the repatriation package for non-ATOL holders, there was insufficient capacity available in the market so that people who had insurance cover, credit card insurance et cetera would not have been able to purchase alternative flights to bring them home. Because of the scale of the collapse and the time of the year when this occurred, there was insufficient capacity available and therefore there was a very real danger of British citizens being stranded. In those circumstances we thought it was right to step in and fund the repatriation effort, although we are currently in negotiations with ABTA and the credit and debit card companies to try to recoup some of the costs. We hope that the particular set of circumstances that applied in the Monarch situation will never be repeated.

With the answers that I gave to the noble Lord, Lord Rosser, I would be grateful if he will agree to withdraw Amendment 1 and, on the basis that Amendment 2 duplicates what is already in place in respect of flight-only and pre-empts what we will shortly consult on with respect to the relevant regulations, I hope he will agree not to press it.

[Lord Rosser]

I am sure it will come as no surprise to the Minister to know that since we are in Grand Committee I will withdraw the amendment, but I would like to raise one or two questions in the light of the response.

I gather from what he said that nobody quite knows what linked travel arrangements are. I only mentioned them in the amendment because the Minister used the phrase at Second Reading when he said the Bill:

“will also extend the scope of protection to a new concept of linked travel arrangements”.—[Official Report, 5/9/17; col. 1840.]

I had assumed that as the Minister referred to linked travel arrangements the Government would know what they were talking about. I now understand that people are still trying to find out what linked travel arrangements are. If I understood him correctly—and I have not heard any other argument why there should not be a reference to them in the Bill—the Government’s reluctance to put them in the Bill is because they would not know exactly what they were putting in because they do not know what linked travel arrangements are and therefore what they might be committing themselves to. Perhaps the Minister could say whether that is a fair analysis or synopsis of the reply he gave on that point.

Since the Government have expressed a lack of enthusiasm for it, I also asked what would be the cost of extending compensation arrangements or ATOL protection arrangements to flight-only passengers. I did not get a response. It may be that the Government do not have a figure. Clearly, it might impose additional costs. My only comment is that when additional costs are imposed on public sector services, the argument is usually that they will have to be found from within the budget and from efficiency savings. Presumably the same argument might be used elsewhere if the Government chose to do so. I would like the Minister to clarify his response. I got a bit confused, I readily admit, not because the Minister expressed it badly but probably because my powers of taking things on board are not as great as they might be. As I understood him, he did not say that the Government could not introduce compensation arrangements in relation to flight-only passengers, whether ATOL protection or something else, because of EU regulations but that the Government do not wish to do so. Perhaps the Minister can confirm that if the Government wanted to do it, they could, but if they do not want do it as opposed to being unable to do it because of EU regulations, that makes their estimate of the cost even more significant.

The Minister has indicated a lack of enthusiasm on behalf of the Government for going down the road of protection for flight-only passengers. Where does that sit with what was said in the Monarch Airlines Statement? We were told that,

“our effort will turn to working through any reforms necessary to ensure that passengers do not find themselves in this position again. We need to look at all the options—not just ATOL”.—[Official Report, 9/10/17; col. 46.]

Surely one of the options must be a similar kind of protection package for flight-only passengers, bearing in mind that the great bulk of Monarch passengers were in that category. Is the Minister saying, only two days after Monday’s Statement, that one of the options has already been shut down?

16:15

[Lord Callanan]

Let me try to clarify the issues. The fundamental reason we are extending the ATOL scheme to cover linked travel arrangements is that the concept of linked travel arrangements is introduced by the EU directive. We had slight difficulty in defining exactly what that is in our discussions yesterday with the noble Baroness, Lady Randerson.

Let us assume that the Rosser family are going on their annual holiday and so book airlines tickets. Within the website used to book the airline tickets, they may be offered a hotel or car hire at the same time. They might be offered those at the behest and specific recommendation of the low-cost airline or through a Google advert placed on the website but with no direct connection to the airline. In the first instance, if you follow up purchasing an airline ticket with booking a car and a hotel, and you do it within 48 hours, it might be a linked travel arrangement. In the second instance, if you respond to an advert placed on the same webpage, it may not be a linked travel arrangement.

The answer to the noble Lord’s question is: we are attempting to define what a linked travel arrangement is through consultation with the industry. The concept itself was introduced in the EU directive. As someone who has taken part in many late-night trialogue sessions at the end of the process of EU legislation, I can see why sometimes the drafting of EU directives is not as good or forthright as it should be.

The package travel regulations extend the definition and scope of what a “package” comprises. From informal discussions that we have had so far with the package holiday companies, we think that the vast majority of products they sell would be covered under either the old or new definition of a package holiday. On their current business models, a very small percentage would potentially be linked travel arrangements. As part of the directive, the information provisions would have to make clear to a customer that if they were signing up to a linked travel arrangement, there may be a lesser standard of protection than that provided by the package holiday directive for those who have purchased a package holiday, which would be guaranteed under the ATOL scheme. I hope I am explaining it well—it is rather complicated, and the noble Lord can come back to me if he wants further clarification.

The noble Lord asked whether we are prevented by EU regulations from extending the ATOL scheme to airlines. My understanding is that we could extend it to airlines—no doubt I can write to him if I have the wrong impression—but to do that we would have to change primary legislation, because the Civil Aviation Act states that airlines are exempt.

Turning to ATOL-protected flight-only booking providers, which we are talking about in this Bill, they are concerns such as high street travel agents. As well as being able to sell package holidays, they can also sell flight-only products. Obviously, before the airline actually issues the ticket, the customer would have ATOL protection in case the travel agent or the high street provider goes bankrupt in the meantime. Once the ticket has been issued, the customer becomes subject to the separate provisions of the EU 261 compensation regulations.

With regard to the Monarch situation, we still have a few days left in which to finish the rescue operation, and I am pleased to say that so far it is going well. On the face of it there are no easy answers to this situation. Of course we could extend ATOL protection to every airline ticket that is sold in the UK, but no doubt the noble Lord will have received the same representations as I have from airlines and others complaining about the impact of air passenger duty and how it makes the UK travel and airline market uncompetitive in many respects, although there are other issues around what might happen in Scotland or Northern Ireland. If we were to extend the insurance scheme to every airline, in effect that would just increase air passenger duty because we would be adding an amount to every airline ticket. That would apply to every airline operating from the UK or anyone transiting through this country, including Emirates, American Airlines and every other operator that travels through the UK. Many are in very robust financial health and people would already have an element of protection through the EU 261 directive.

There are no easy answers to the Monarch situation. The other area that we could look at, but which is outside the scope of the ATOL Bill before us today, would be the insolvency regulations. We can ask whether it is possible to arrange the orderly wind-down of an airline so that it can continue to operate. Again, however, that has some potential problems, not the least of which is creditor action. As soon as an aircraft is abroad in a foreign airport, if creditors know that an airline is in financial difficulties and they want payment for services upfront, they typically impound airplanes and refuse to allow them to return to their home country. It is a potential avenue that we could look at and we are not ruling anything out. We will examine all the possible ways of protecting the taxpayer in the future, but there are no obvious solutions to prevent this happening. However, I should say that we are not aware of any other airlines that might cause us anxiety at the moment.

[Lord Rosser]

I am not surprised that the Minister has not been able to give us an estimate of what the cost would be of extending the ATOL provision to all flights, obviously including the Monarch situation. I assume from that that the Government do not have a figure. I take it from what the Minister has said that the reference in the Statement to all options being looked at still stands, including the options in one form or another that we have been discussing in this debate. On the basis that I have not misunderstood the Minister and that all options are genuinely being looked at, I beg leave to withdraw the amendment.

[Lord Callanan]

Perhaps I may provide some clarification. EU law actually prevents us from adding additional licensing provisions that go beyond EU law in the case of the licensing provisions of airlines.

Amendment 1 withdrawn.

Amendment 2 not moved.

Clause 1 agreed.

Amendment 3

Moved by

[Baroness Randerson]

3: After Clause 1, insert the following new Clause—
“Potential impact of leaving the European Union on consumer protection under the ATOL scheme
(1) The Secretary of State must carry out an assessment of the potential impact that leaving the European Union will have on consumer protection in the United Kingdom under the Air Travel Organisers’ Licence scheme.(2) The Secretary of State must lay a report of the assessment before Parliament within the period of 12 months beginning with the day on which this Act is passed.”

[Baroness Randerson]

My Lords, Amendment 3 would insert a new clause to deal with the potential impact of leaving the EU on consumer protection under the ATOL scheme. It asks the Secretary of State to carry out an assessment and to lay a report before Parliament within 12 months of this Act passing. The key question is whether consumer rights and protection in this respect will be reduced on leaving the EU. The Minister made much of the fact that the UK was ahead of the game many years ago when it set up the ATOL scheme. He said that in some respects the rest of the EU was catching up with us with the 2015 EU package travel directive.

The Bill is designed to bring us in line with the rest of the EU—an organisation we are about to leave. It is obviously of considerable importance that we understand the potential impact of the various stages of the Brexit process. As I understand it, the Government are no longer suggesting that we can get everything sorted by March 2019, so I assume there will be a transition period. But we will not be members of the EU at that stage, according to statements made by several Ministers. Instead, we will be mirroring EU membership to a greater or lesser extent. Since so much of the legislative structure surrounding aviation and the relevant international agreements are not specifically part of EU membership—but we are nevertheless signed up as members of the EU—there seems to be a particular danger that the aviation sector will be at the sharp edge of decision-making. Certainly, the sector feels that it is important that it is at the leading edge of decision-making. There is uncertainty associated with that, of course.

If the worst happens—not the scenario I have just outlined but the worst—and we crash out of the EU without a deal, what will happen to the additional rights and safeguards conferred by the Bill? I expect that the Minister will say that they will remain as they will be enshrined in UK law. However, if we crash out without a deal, all bets are off. We will no longer be obliged to mirror EU consumer protections. Some Ministers have spoken in terms which suggest that the more bargain-basement approach to international trade might be the preferred option.

As marketing methods and IT develop, this is an increasingly complex area. Today’s discussion has already reflected that. The Monarch case illustrates that complexity, with only about 14% of people covered by ATOL. People can sit next to each other on the same plane and stay at the same hotel but be entitled to different compensation or no compensation, according to their method of payment. Did they pay for it as a package holiday—a single entity? Did they pay for it as separate parts? Did they pay by credit card or PayPal, in which case they would get protection? In some ways, I gather, this can be enhanced protection. If they paid by debit card, they would not get that protection—they would not get compensation. It is worth noting that there is often a superficial financial incentive to pay by debit card because many websites now charge for paying by credit card.

16:30

I welcome the extension of the concept of protection to linked travel arrangements, whatever they may be, but I want to emphasise the Minister’s earlier point in my own way. When an advert for a hotel pops up on your screen after you have booked your flight, how are you to know whether that is a linked travel arrangement or simply a Google advert? I have spoken to people about this issue and they have given me examples of where they thought they were booking on one website but ended up on a different website, because it is so easy to slip from one facet to another.

It is essential that the Government ensure that the industry has to make it very clear—not just in the small print but at the point of decision-making—exactly what your rights are and what you are buying, according to the method of payment. I appreciate that the question of debit and credit cards is covered in other legislation, but do not believe that that would stop the industry making this clear. It should not stop the Government using this opportunity to make the consumer’s rights clear to the public, in every case. It is also important that the public are informed of whether or not it is a linked travel arrangement. I suggest to the Minister we need a consumer campaign on this—we need consumer information.

There is little that is more precious to us than our family holiday. It is a very significant chunk of our annual spending. We look forward to it and we anticipate the relaxation, and after it is over we have—we hope—happy memories, but certainly long-standing memories of time together with friends and family. Holidays are of huge importance to consumers and it is important that they are absolutely clear what their rights and protections are in this complex area. Therefore, it is important also that they know how their rights and protections will be affected by the final scenarios for exiting the EU.

The aviation and package tourism industry is a massive part of our economy. We believe it is important that the Government do not just consider the impact of Brexit on that industry—I am sure the Minister considers it every day—but that consumers are made aware of what the Government believe that impact will be. It is important that the Government produce a report to be discussed by this Parliament.

[Lord Rosser]

I will be brief. It seems that the terms of this amendment are entirely reasonable, since people will surely want to know whether changes are going to be made to the protection arrangements, if and when we leave the European Union. There is a need for people to be clear what the impact is. It may be that there is no impact and so that needs to be clear, but people certainly need to know what the impact is, whether it is negative or not adverse at all. That is what this amendment is seeking. I do not know whether the Minister is going to accept it or not. If he is not, I shall listen with interest to his reasons for saying he cannot.

[Lord Rogan (UUP)]

My Lords, this sensible amendment should be added and I fully support it.

[Lord Callanan]

I start by saying that I fully endorse the purpose of the proposed new clause. In the coming years we will be embarking on major changes in our relationship with Europe, and it is very difficult to predict where the negotiations will end up. Therefore, it is important to begin by offering assurances that the Government would want UK consumers to continue to enjoy strong protections and an effective consumer regime, whether inside or outside the EU. I am sure that is something that all parts of the Committee can agree on. The UK has always been a leader when it comes to providing protection for holidaymakers. After all, as the noble Baroness said, we set up the ATOL scheme in UK legislation several years before the original package travel directive was agreed in Europe. That is a significant point. It means that the ATOL legislation is not dependent on the package travel directive. This Bill will harmonise ATOL with the package travel directive in the immediate term. However, the ATOL legislation and the protection will still exist and remain in place as we leave the EU.

Notwithstanding this, I fully understand why this amendment has been proposed in order that we consider the ongoing impact on consumer protection as we leave the European Union. However, this is catered for in the legal and policy framework already in place. There is already a legal duty on the Government to review under the Small Business, Enterprise and Employment Act 2015. This places an obligation on us to undertake a post-implementation review within five years of passing legislation.

Furthermore, we already have an independent review body in place to provide an ongoing review of the financial protection available for air travellers. The Air Travel Insolvency Protection Advisory Committee— or ATIPAC, the snappy acronym by which it is more commonly known—was set up by the Labour Government in 2000. Its purpose is to provide advice to the Civil Aviation Authority, the Air Travel Trust and the Secretary of State for Transport on policies that should be pursued to protect consumers. The committee consists of representatives of industry, consumers, the CAA and Trading Standards. This means that it is very well placed to provide an informed and independent view on policies. The committee already submits a substantial report to the Secretary of State every year, which is also published on the CAA and ATIPAC websites. This report should draw to the Secretary of State’s attention any concerns on which, in ATIPAC’s view, further action is necessary to maintain strong consumer protection. This includes advice on changes in the market and, where appropriate, their potential impact on consumers and the financial protection arrangements.

I am sure that the committee is already minded to keep a close eye on consumer protection, both before and after we leave the EU. In fact, my colleague the Minister of State for Transport in the other place, the right honourable John Hayes MP, has already asked the committee’s chair, John Cox, to consider this precise point in the ATIPAC 2017-18 annual report. These reports will be submitted to the Secretary of State within four months of the end of each financial year and will, as I said, be published on the CAA and ATIPAC websites at the same time.

I turn now to the specific questions posed by the noble Baroness, Lady Randerson. How do consumers know what is or is not a linked travel arrangement? The package travel directive specifies that businesses must inform the consumer whether or not they are purchasing an LTA before they make the purchase. Given the complications that I referred to in my previous answer, the way this will be done in practice will be considered in the consultation that we will publish later this year.

The noble Baroness also asked what will happen to this Bill if we leave the EU with no deal. ATOL will continue, as the amendment states, and this House will decide on any changes that are to be made, deal or no deal. The Government remain committed to strong consumer protection and will continue to be so after Brexit.

In the light of those answers, I hope the noble Baroness will withdraw her amendment.

[Baroness Randerson]

I thank the Minister for that answer. The Air Travel Insolvency Protection Advisory Committee—a name which does not trip off the tongue of everyone in the pub at the weekend—reports to the Secretary of State. Is that report published? Has that report ever been debated in Parliament? If it has, what is the process to enable a debate about the annual report from ATIPAC?

I am very pleased to hear that there will be consultation. Can the Minister assure us that when the regulations are eventually produced they will reflect the need not just to follow the letter of the law but to give clear and prominent information to consumers about what they are purchasing and that there will be a way of ensuring that people are made much more aware of the difference between using PayPal and credit cards on one side and debit cards on the other?

I fear that we all get used to clicking on terms and conditions. We gave up reading the small print many years ago because it is carefully designed to deter all but the most obsessive and leisurely person. We need some kind of widely recognised industry standard that is easily understandable to people who do not devote their lives to consumer protection issues so that they know the difference between one sort of package of measures they are buying and another. I wonder whether the Minister is able to give some reassurance on that.

[Lord Callanan]

I think I am able to provide the reassurance that the noble Baroness is looking for. ATIPAC reports are published on the CAA and ATIPAC websites, but if the noble Baroness would find it helpful I would be happy to place a copy in the Library of the House to make them more widely available. I am not sure that many people would want to read them, but I am happy to do that if the noble Baroness would find it useful. I am not aware that the report has ever been debated in this House or the other place, but time is made available for general debates and Opposition day debates and I am sure that through discussions among the usual channels time could probably be made available for a debate on the topic. I cannot give a commitment on behalf of the House authorities, but if the noble Baroness wishes for such a debate, I am sure her party leadership could pursue those discussions.

The noble Baroness made a very good point about information provision. Consumers need to be kept fully informed about the differences—whether it is a linked travel arrangement or a package that they are purchasing—and the relevant levels of protection that will apply. That is something that we want to explore in the consultation. As I said, the linked travel arrangement is a new concept, introduced by the directive. It is not entirely clear exactly what one would comprise at the moment. In the consultation that we will be issuing on the draft regulations, we will want to explore how consumers could be made aware of and kept informed about the difference in levels of protection. We are adding an additional level of complication into what is currently a relatively simple, well-understood scheme. The information provisions exist in the directive and we will be looking to implement those through secondary legislation in the public consultation that we will hold. I hope that answers the noble Baroness’s question.

[Baroness Randerson]

I thank the Minister for his answer. I am happy to withdraw the amendment.

Amendment 3 withdrawn.

16:45

Amendment 4

Moved by

[Lord Rosser]

4: After Clause 1, insert the following new Clause—
“Potential impact on consumer protection of UK consumers using EU-based companies
(1) The Secretary of State may, within two years of this Act coming into force, require that the Air Travel Insolvency Protection Advisory Committee review the impact on UK consumers of booking a holiday through an EU-based company rather than a UK-based company.(2) The Secretary of State must lay a report of any assessment carried out under subsection (1) before both Houses of Parliament.”

[Lord Rosser]

This amendment would enable the Secretary of State to require the—now well-known from our previous debate—Air Travel Insolvency Protection Advisory Committee, within two years of the Act coming into force, to,

“review the impact on UK consumers of booking a holiday through an EU-based company rather than a UK-based company”,

and require the Secretary of State to lay such a report before both Houses of Parliament.

As we know, the Bill updates the Air Travel Organiser’s Licence so that it is harmonised with the 2015 EU package travel directive. In so doing, the Bill extends ATOL to cover a wider range of holidays and protect more consumers. The expectation is that UK travel companies will be able to sell more easily across Europe, since in future they will need to comply with protections based not in the country of sale but in the country in which they are established. The purpose of the amendment is to provide a degree of certainty that there will be a review, in this case via the Air Travel Insolvency Protection Advisory Committee, of the impact of the ATOL revisions to help ensure that there are no adverse impacts on UK consumers using EU-based companies, since the intention and objective of the Bill is to improve the range and extent of the protections available.

There is a possibility that with the change to EU-based companies having to comply with ATOL-equivalent insolvency protections applicable in the member state where a business is based, rather than in the country of sale, such companies selling holidays to UK consumers may not offer the same ease and lack of expense of processing a claim which are afforded by the ATOL provisions that would apply to a UK company. It appears that some half a million passengers could be affected.

The review referred to in the amendment would enable hard facts to be obtained on the impact of this legislation on UK consumers booking holidays through EU-based companies, and the extent to which the protections offered, the processes and timescales for securing recompense and the costs involved differ from our ATOL arrangements. With that information available, the Government would be in a position to make informed decisions on what further action, if any, could be taken or pursued to help ensure that UK consumers using EU-based companies were either not disadvantaged or at least made aware beforehand that they were liable to find themselves in a less favourable position.

A broadly similar amendment was pursued on Report in the Commons. The Minister there appears to have taken some 40 minutes over his reply, taking interventions like there was no tomorrow, some 15 of which were from his own Back-Benchers. One, as the debate reached its pinnacle, was as follows:

“May I say to my right hon. Friend, with the seriousness and candour that the moment demands, that he is a bright flame on a dull and grey afternoon to which the moths of Parliament are being drawn?”.—[Official Report, Commons, 11/7/17; col. 234.]


The Minister’s response was to wonder whether anyone else wanted to intervene in a similar vein. One could take the view that in the Commons the Government were regarding the whole debate on the amendment as a joke. Alternatively, one could take the view that, since a vote was coming at the end of the debate, the Government were playing for time because they were not sure whether sufficient of their troops had yet returned to be confident of their winning the vote. Since there will not be a vote on this amendment as we are in Grand Committee, I hope to have a more adult debate than the Government promoted in the Commons.

When the Government Minister commented in the Commons on a broadly similar amendment to the one we are discussing now, he said:

“It will be for protection schemes in other member states to provide the protections for UK consumers to which the amendment refers. Because that is not our responsibility—we do not have the power that the amendment suggests that we should have—I am not sure that the amendment works on a technical level”.—[Official Report, Commons, 11/7/17; col. 226.]


I am not sure what power suggested in that amendment the Commons Minister was referring to, but his comment was not exactly encouraging. However, despite having said that the issue referred to in the amendment in the Commons was not our responsibility, the Government Minister in the Commons went on to say that the Air Travel Insolvency Protection Advisory Committee, which provides advice to the Civil Aviation Authority, the Air Travel Trust and the Secretary of State on the protection of consumers, would receive a letter from him asking it to review the implementation of the changes provided for in the Bill. They presumably include the impact on UK consumers of booking a holiday through an EU-based rather than UK-based company.

However, the promise of a letter to the ATIPAC from a Minister who had already declared that the matter is not our responsibility is frankly not sufficient. This is a serious issue with potentially serious consequences for passengers, as recent events relating to Monarch Airlines have shown. We need something on the face of the Bill which, while not compelling the Government to require the review from the ATIPAC, makes it much more difficult for the Government not to proceed down this road, and certainly would in a situation where complaints were coming in from passengers booking a holiday through an EU-based rather than UK-based company, over arrangements and procedures on insolvency protection. I beg to move.

[Lord Callanan]

My Lords, please forgive me if I repeat a number of the points that I made on the previous answer, as this covers the same ground. We are proud that we have always been a leader when it comes to providing protection for holidaymakers. We set up the ATOL scheme in UK legislation several years before the original package travel directive was agreed in Europe. That is the significant point. It means that the ATOL legislation is not dependent on European legislation. The Bill will harmonise ATOL with the package travel directive in the immediate term. However, the ATOL legislation and protection will still exist and remain in place as we leave the EU.

I fully understand why this amendment has been proposed, in order that we consider the ongoing impacts on consumer protection as we leave the EU. As I said earlier, this is already catered for in the legal and policy framework in place. As referred to by the noble Lord, Lord Rosser, during the Commons passage of the Bill, my colleague the Minister of State for Transport, the right honourable John Hayes, wrote to the Chair, John Cox, to consider this precise point in ATIPAC’s 2017-18 annual report. I am sure that they are already minded to keep a close eye on consumer protection both before and after we leave the EU. In fact, these reports will be submitted to the Secretary of State within four months of the end of each financial year and will be published on the ATIPAC website.

The noble Lord, Lord Rosser, also asked about HMG’s problem of our UK passengers purchasing from EU businesses. If a travel business is established in Europe, it will be able to sell holidays to consumers in the UK without ATOL protection. However, it would still be obliged to have in place insolvency protection that meets the strict requirements of the new directive. This protection will be broadly similar to ATOL and will need to cover both online and traditional package holidays.

In light of the explanation that I have given and the scrutiny and the annual review already in place, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Rosser]

I am disappointed but not surprised by the answer that I have received. One issue will relate to EU-based companies that are selling holidays here but which are required to conform to requirements in their own nation. What will the process be for obtaining that compensation and protection? What expenditure may have to be incurred by a UK resident who has purchased a holiday through an EU-based company? Those processes and procedures, and the cost of going through them, may well be rather more extensive than might apply in relation to a UK company under our own ATOL arrangements. That aspect of it has been rather ignored in the answer given. We come back to a situation where the Government seem willing to write letters to people and to stand up and say in one of the Houses of Parliament, “Yes, we intend to do this”, but when it comes to being asked to put their words on the face of the Bill so that everybody can see their commitment, making Ministers much more accountable, and being required in this case to place the report before both Houses of Parliament, the Government resile from such a suggestion without giving a proper justification as to why it would be inappropriate or unworkable. I am disappointed with the reply, since I think that the Government could have gone further, but I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

Clause 2: Air Travel Trust

Amendment 5

Moved by

[Baroness Randerson]

5: Clause 2, page 1, line 22, at end insert—
“(6A) Any amendments to the definition of “Air Travel Trust” in subsection (5) may not be laid before Parliament until the Secretary of State has published a full impact assessment and undertaken a consultation on the proposed amendments.”

[Baroness Randerson]

Amendment 5—it seems that Amendment 6 is very similar—addresses Clause 2, in which the Government are asking us to give them a power to set up a separate trust for linked travel arrangements. It is a very open-ended power which runs counter to the Government’s actions of the week before last. When Monarch failed, the Government decided, very sensibly, to organise repatriation for all customers of Monarch regardless of whether they had bought package holidays or simply a flight. In essence, the Government were setting aside the special status of package holiday customers, for which they had each paid £2.50. The Government’s action might have been sensible, but it rather undermines the Minister’s argument at Second Reading that it might not be appropriate for one group of more cautious customers to have to subsidise, perhaps indirectly, compensation for other customers who chose a more risky option.

The Monarch case has also illustrated the sheer size and impact of such a failure. The current ATOL trust struggled for some years with more calls on its funds than it could cope with, and it had to be subsidised by the Government. It has been in good health recently, but that history is there. Any fund like this succeeds because it agglomerates many small sums of money into one large total. If you start setting up several funds, you are disaggregating the total money available, and that undermines the principle.

The Minister has been absolutely clear by indicating that currently the Government have no intention of setting up a new trust fund but just want the power to do so if they choose to in the future. This is a dangerous principle which is increasingly creeping into government legislation whereby the Government are gathering up “just in case” powers, giving no clear indication of how they intend to use them. I would argue that they have to do better than that in order to justify including this power in the legislation. We need a more detailed justification, a consultation and an impact assessment before this additional wide power can be considered acceptable. We oppose the power in principle as well as being concerned about the practical impact if it is used. I beg to move.

17:00

[Lord Rosser]

I have Amendment 6 in this group to which I would like to speak. As the noble Baroness, Lady Randerson, has said, it is similar to, although not exactly the same as, the amendment that she has just moved. My amendment states:

“The Secretary of State may not amend the definition of ‘Air Travel Trust’ under subsection (6) until a report outlining the criteria under which those amendments have been proposed has been laid before both Houses of Parliament”.


Clause 2 relates to the Air Travel Trust, which holds the money that is used to refund consumers under ATOL protection. It gives the Secretary of State the power to define separate trust arrangements to reflect different market models. Presumably it has been included in the light of changes in the package holiday market, but no doubt also in the light of Brexit because changes to ATOL and the Air Travel Trust could conceivably be considered necessary by the Government in the event of our leaving the European Union, depending on the basis and terms on which we left. Indeed, in the light of the discussion we had earlier on Monarch Airlines, the Government’s Statement on Monday and now looking at all the options, it could well be that, as a result of looking at those options, the Government have come to the conclusion that changes might be needed as far as the Air Travel Trust and ATOL arrangements are concerned.

During the Commons Committee evidence sessions in relation to the measures contained in this Bill, a trustee of the Air Travel Trust said that he recognised the possible merits of separating the trust to reflect variations in the products in the market, but that we are not there yet and that it would not be appropriate for the Government to use the Bill as a means of making wholesale changes without due consultation. Moreover, the impact assessment does not consider proposals for ATOL reform beyond what is currently required. In the Commons, the Government declined to accept an amendment requiring them to undertake a full impact assessment and consultation before bringing forward regulations to create any new air travel trusts through an affirmative resolution—a very similar amendment to that moved by the noble Baroness, Lady Randerson. In response, the Government said that there would be full consultation and a comprehensive impact assessment in respect of any regulations to be made under these measures. Can the Minister say whether that applies to any measures covered in the whole of the Bill or did the Government’s response refer only to regulations made under new subsection (6) inserted by Clause 2(2) relating to air travel trusts? The Government’s lack of enthusiasm to date for putting these declarations of intent into the Bill, bearing in mind the considerable powers which subsection (6) gives the Secretary of State, is worrying.

We have therefore tabled Amendment 6. It would mean that prior to amending the definition of “Air Travel Trust” the Secretary of State would have to lay before Parliament a report setting out the criteria under which the amendment was being proposed. This would at least enable a view to be formed on the need, or otherwise, for such amendments, ensure a degree of consistency over the reasons for bringing forward such amendments and enable a view to be taken on whether the amendments address the reasons or criteria that had been advanced for bringing them forward. That does not seem unreasonable in the light of the extent to which the powers given to the Secretary of State under subsection (6) to make potentially significant changes by regulations could be used, bearing in the mind the impact they could have, to which reference has already been made, on the viability and sustainability of the current Air Travel Trust or a future, more fragmented trust and thus the whole ATOL protection scheme.

[Lord Callanan]

I again endorse the purpose of the amendments because carefully crafting policies and the regulatory framework is the key to good governance. The Government have no plans to change the current Air Travel Trust deed. The rationale behind this clause responds to the travel sector’s view. In the light of responses to our consultation last year, the Government are proposing to take the power to establish additional trusts to give them the flexibility to make separate provision—

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

I hate to interrupt the Minister, but a Division has been called in the Chamber. The Committee stands adjourned until 5.15 pm.

17:05

Sitting suspended for a Division in the House.

17:17

[Lord Callanan]

My apologies for the delay: when you walk through the Lobby, you get trapped by Members wanting to talk to you about various issues. I return to the two amendments. In light of the responses to our consultation last year, the Government are proposing to take the power to establish additional trusts to give them the flexibility to make separate provision for different types of risk, or different business models. The impact of failure can be significant, as we have just witnessed in the failure of Monarch Group, to which Members have referred. This makes the need for regulatory flexibility vital for market efficiency and consumer certainty.

This change has the potential to make the scheme’s operation easier for industry to apply and more robust for the consumer. The new looser types of package arrangement called linked travel arrangements are the most obvious example. Currently, we do not know how the industry will react to this innovation and whether riskier products will appear that might require us to separate the trust arrangements. Richard Moriarty from the CAA said in the evidence session when this clause was part of the Vehicle Technology and Aviation Bill that,

“it would be prudent and sensible for Government to have the flexibility to respond to that”.—[Official Report, Commons, Vehicle Technology and Aviation Public Bill Committee, 14/3/17; col. 65.]

There is already a legal duty in Section 71B of the Civil Aviation Act which places a requirement on the Government and the Civil Aviation Authority to consult if we introduce regulations under Section 71A. Like my right honourable friend John Hayes, Minister of State for Transport in the other place, I am happy to give the noble Baroness a commitment today that there will be a thorough impact assessment and consultation before we use these powers.

Throughout the ATOL review process we have consulted on the basis of impact assessment. In 2012 we changed the Civil Aviation Act to better reflect current market practice. In 2013 we launched a call for evidence on our long-term review of the ATOL scheme. Last year we consulted on the very changes to the Civil Aviation Act that we are discussing today, and shortly we will launch a series of consultations on the detailed regulations that will follow the Bill. As noble Lords can see, each stage of this work has been the subject of extensive impact assessments and consultations every step of the way. Indeed, both the Civil Aviation Authority and the industry’s leading trade body—ABTA—have commended the Government’s approach to reform. We will be working closely with them and consulting with industry as and when we develop plans to implement this clause. Given that the Government are already obliged by Section 71B to consult on the use of these powers, it is not necessary to introduce a further requirement in the manner described, particularly when we are midway through an extensive process of consultation and engagement, which has been commended by those involved.

The noble Lord, Lord Rosser, asked whether the requirement to consult is for all ATOL powers. The regulations under Section 71A of the Civil Aviation Act include a requirement to consult for all the powers. The noble Baroness, Lady Randerson, asked whether the Government’s action to repatriate passengers under the Monarch scheme undermined the ATOL scheme. I think she has an arguable case. I hope she is not suggesting that we could segregate people in overseas airports and say, “You are protected by ATOL and you are not”. As I have explained, the Monarch situation was an exceptional collapse. There was insufficient capacity on alternative airlines. Had it happened at a less busy time of the year, it may not have been necessary for the Government to step in and get people home. We looked at the particular circumstances of that airline, the sheer number of passengers involved and the lack of available capacity on alternative airlines to get people home.

However, it is important to say that the ATOL scheme is an important part of the rescue operation. It will help refund the repatriation costs for the ATOL-protected passengers and they will also be covered for additional accommodation and subsistence costs if they are delayed beyond their original date. ATOL protection will also ensure that any protected passengers who are yet to travel with Monarch will receive a full refund. As I mentioned earlier, the Government will be seeking the recovery of costs from card providers—both credit cards and debit cards—and the travel industry has also been asked to contribute towards the costs of the operation. I understand the concentration on the Monarch collapse but those were exceptional circumstances and, as I said in my Statement yesterday as well as earlier today, we would not want to be hamstrung by that in future.

[Lord Rosser]

I will not say that the Minister has dismissed this—that was not the way he did it—but he referred to the Monarch Airlines scheme as being exceptional, somehow in the hope that it will not happen again, and I am sure that hope would be endorsed, but the Monarch Statement given on Monday said that the Government’s,

“efforts will turn to working through any reforms necessary to ensure that passengers do not find themselves in this position again ”.—[Official Report, 9/10/17; col. 46.]

So the Government have to produce measures and proposals that will ensure that if there is another circumstance like Monarch Airlines, passengers do not find themselves potentially stranded without any protection and the Government do not have to pay the cost of getting them home. That is the commitment the Government have given, is it not? The Government can say that Monarch is exceptional, but they have committed themselves to making sure that there are measures that prevent passengers being stranded not knowing whether the cost of bringing them home will be paid for. The Government are committing themselves to measures to ensure that that cannot happen and that there will be certainty for passengers that the cost of getting them home will be met.

[Lord Callanan]

As we said in the Statement, we will be looking at the feasibility of extending the ATOL scheme. I referred earlier to some of the difficulties involved in that. We have also said that we will look at the insolvency regime, but that does not necessarily provide an easy answer. We are looking at the circumstances. We are still in the middle of the repatriation operation, but we will look at the circumstances and see whether there is anything we can do that would obviate the need for government to step in in future.

I have given reasons why these amendments are unnecessary, along with assurances, particularly with regard to full consultation and providing impact assessments. The Government have a good record in this area, which I have already outlined. We have consulted on these and all previous changes and have produced impact assessments, so I hope that the noble Baroness will withdraw her amendment and the noble Lord, Lord Rosser, will not move his amendment.

[Baroness Randerson]

I thank the Minister for his detailed answer. I entirely understand that the Monarch situation was unusual, but every situation is in its way unique. I appreciate the dilemma the Government found themselves in. I was simply exploring the basic principles on which the compensation system is based. I will read the record carefully, but I am still to be fully convinced by the Minister’s response in relation to the need for additional trust funds. If he is able to give us any further information about the Government’s plans in relation to that, not this afternoon, but in writing, it would be helpful.

I am grateful for the Minister’s confirmation that there will be an impact assessment, but I wonder whether he can confirm now in one or two words what he means when he says that the Government will shortly launch a consultation on detailed regulations associated with this Bill. What does “shortly” mean?

[Lord Callanan]

I cannot say it in two words, but would “before the end of the year” help clarify what I mean?

[Baroness Randerson]

That is very helpful. As ever, the House of Lords has been able to deal with this important issue with more brevity than the House of Commons, and I am happy to beg leave to withdraw the amendment.

Amendment 5 withdrawn.

Amendment 6 not moved.

Clause 2 agreed.

Clauses 3 and 4 agreed.

Bill reported without amendment.

Committee adjourned at 5.28 pm.