The Secretary of State for Business, Energy and Industrial Strategy (Andrea Leadsom)
May I first sincerely congratulate you, Mr Speaker, on your new role? I also wish all hon. and right hon. Members who are retiring today every success for their future.
With your permission, Mr Speaker, I would like to make a statement on the Government’s actions to support customers of Thomas Cook. As the House knows, Thomas Cook entered into insolvency proceedings on 23 September. This has been a hugely worrying time for the employees of Thomas Cook and its customers, and the Government have done, and continue to do, all they can to support them. This has included the biggest peacetime repatriation effort ever seen in the UK, with around 140,000 people successfully flown home thanks to the efforts of the Secretary of State for Transport, my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps) and his Department, and to the Civil Aviation Authority. In the Department for Business, Energy and Industrial Strategy, we have set up a cross-Government taskforce alongside local stakeholders to support employees and supply chains.
I am sorry to have to inform the House, however, that the official receiver has recently brought to my attention further impacts of Thomas Cook’s insolvency, which I wish to share with the House today. There is an important outstanding matter relating to personal injury claims against Thomas Cook companies, impacting customers who have suffered life-changing injuries, illness or loss of life while on Thomas Cook holidays. Thomas Cook took out insurance cover only for the very largest personal injury claims. For agreed claims below this figure, up to a high aggregate amount, the company decided to self-insure through a provision in its accounts. As Thomas Cook has entered liquidation without ensuring any protection for pending claims, the vast majority of claimants who are not covered by the insurance, including customers who have suffered serious injuries and loss of life, will be treated as unsecured creditors. This means that it is uncertain whether they will receive any of the compensation they would ordinarily have received against their claims. This raises a potentially unacceptable prospect for some Thomas Cook customers, who face significant financial hardship through no fault of their own where Thomas Cook should rightly have provided support. They are customers who have already suffered life-changing injuries or illness and who may face financial hardship as a result of a long-term loss of earnings or significant long-term care needs. This is an extraordinary situation that should never have arisen.
The Government cannot and will not step into the shoes of Thomas Cook, but we intend to develop proposals for a statutory compensation scheme. Any scheme must strike a responsible balance between the moral duty to respond to those in the most serious financial need and our responsibility to the taxpayer. Accordingly, it will be a capped fund that is sufficient to ensure support for those customers facing the most serious hardship as a result of injuries or illness for which UK-based Thomas Cook companies would have been liable. We will develop the scheme to ensure that only genuine claims are provided with support. The scheme will not consider routine claims covering short-term problems. After the election, we intend urgently to bring forward the legislation necessary to establish such a scheme, and I am sure that any new Government would wish to do likewise.
I have also written to the official receiver to ask him to take this serious matter into account as part of his investigation into the conduct of Thomas Cook’s directors relating to the insolvency. I am sure the House will agree that it was important to act quickly today to give reassurance to those individuals and families who would otherwise be left with unfunded serious long-term needs or other financial hardship as a result of injuries or illness sustained abroad, for which Thomas Cook would have been liable. The House will have the opportunity to consider the matter in more detail in the new Parliament.
I want to make it clear to all businesses that the Thomas Cook approach was unacceptable, and that we will take steps to require suitable arrangements to be in place to ensure that this cannot be repeated. I have asked BEIS officials urgently to bring forward proposals for speedy action in the new Parliament. I am grateful to the official receiver for bringing this matter to my attention, and for all his efforts in this case. It is critical that we act to provide support to those who, through no fault of their own, have been severely impacted by the collapse of Thomas Cook. I commend this statement to the House.
Bill Esterson (Sefton Central) (Lab)
As your next-door-but-one constituency neighbour, Mr Speaker, may I congratulate you on your election?
I thank the Secretary of State for her statement. She is right to raise these matters today, because they raise serious questions that will need far more attention in the new Parliament, whichever Minister is at the Dispatch Box. I also have some questions today to take this forward.
In her statement, the Secretary of State mentioned a “high aggregate amount”. Can she tell us more about what that is? On the question about audit, to which I will return shortly, will she tell us why no regulation was in place to ensure that this serious weakness did not materialise? I should also like to put on record my thanks to all those involved in bringing 140,000 holiday- makers home.
We welcome the fact that the online services have now been bought, and that shops in the constituencies of Members across the House are being reopened by Hays Travel, but why oh why did Thomas Cook have to close first, and why were the opportunities that were given to the shops and online services not given to the airline? Intervention to ensure the retention of those viable parts of the business would have been a major step towards addressing the serious weaknesses that the Secretary of State identified in her statement. The Government were told at the time that parts of the business were successful, and Hays Travel clearly agreed because it bought the shops. There is also value in the brand, which is why the online business has been recovered. Could the airline have been saved, as the ones in Germany and Scandinavia were, if the liquidation had been delayed?
Why did the Government not listen to those calling for intervention? Why did they not take a stake in the company, so that the shops and digital business could have been transferred while still trading and so that other parts of the business could have been saved? Let us remember that the Turkish and Spanish Governments wanted to step in. They saw the potential value, but our Government did not. Had our Government intervened, the hardship to which the Secretary of State rightly referred could have been identified and possibly avoided. Does she regret her failure to speak to the company and to intervene to protect the jobs and rights of workers? Had the company continued trading, with the Government holding a stake, the rights of workers would have been protected. It is good news that staff will now have jobs with Hays Travel, but will they be paid for the time since Thomas Cook closed? Will their rights from their years of service be protected? Are staff being TUPE-ed over, or not?
What can the Secretary of State tell us about her response to the warnings about auditor conflicts of interest? She mentioned audit responsibility and potential failure in her statement. Auditing conflicts of interest have been repeatedly identified at Carillion, at BHS, in the banks and now at Thomas Cook. Has she read the excellent report from the Business, Energy and Industrial Strategy Committee, and what is her response to its recommendations, including its calls for a new regulator and for the audit profession to be proactive rather than reactive? Why is the Secretary of State so resistant to change? The Competition and Markets Authority wants action; why does not she?
What action is the Secretary of State taking to address the scandalous payment of bonuses to executives who have profited at the expense of workers and customers and who presumably have direct responsibility for the appalling hardship to which she has referred? Analysis by Unite and Syndex shows that £188 million in bridging loans would have prevented the liquidation. That would have allowed profitable parts of the business to be sold while still trading, and for workers’ rights to be protected. This would have supported the wider economy and communities, too.
The Government should be a partner of business, not stand apart from it. That means intervening and providing support where intervention stands a chance of succeeding. The more evidence emerges about the Thomas Cook collapse, the more it appears that the case for intervention was there to be made. If they would not intervene at Thomas Cook, exactly when would the Government intervene?
If the Secretary of State wants to avoid hardship for those covered by insurance, she needs to change her approach and her attitude to intervention. When she referred to a drop in the ocean in responding to a question from the shadow Business Secretary, she demonstrated that she did not agree with her predecessor, who said that reforms were needed to ensure a strong level of consumer protection and value for money for the taxpayer. He was right, was he not?
The Secretary of State said that the Thomas Cook approach was unacceptable and that support must be given to those severely impacted by its closure through no fault of their own. I agree, but the Government have failed Thomas Cook. They sat back and let it fold. Only proper reforms will make sure that catastrophic failures of this type do not happen again.
Andrea Leadsom
I am glad that the hon. Gentleman recognises the Government’s efforts, particularly on the repatriation of customers stranded overseas and, of course, in the work, which I know through chairing the Government taskforce, to try to ensure that we get the best possible arrangements for Thomas Cook staff. He asks why the Government did not bail out Thomas Cook. He will be aware that, according to court reports, there was about £1.9 billion of debt on Thomas Cook’s balance sheet. It did approach Government looking for a loan facility of up to £250 million, but it is clear that, had the Government put that significant sum of taxpayers’ money into Thomas Cook, we would have ended up in the same position as we are in today. We would have had to repatriate those customers. We would have to have done exactly as we have done, but the taxpayer would have been £250 million worse off, so it was not an appropriate use of taxpayers’ money. It is very sad that Thomas Cook went bust, but it is not right that Government should just bail out every business. Businesses need to stand on their own two feet.
The hon. Gentleman made some very important points about regulation. I can tell him that I wrote to the Financial Reporting Council asking it to prioritise as a matter of urgency consideration of an investigation into the audit of Thomas Cook’s 2018 accounts, as well as the conduct of its directors. He asked why the Government did not foresee this.
It was never envisaged that a UK tour operator would fail to insure itself fully to cover claims for personal accident or fail to ensure that it had ring fenced the funds to meet those liabilities so that they were safe if the company got into difficulty. The company has a legal obligation to cover personal injury claims arising from package holidays abroad, and that is why I have asked the official receiver to investigate, in particular, this aspect of the conduct of Thomas Cook’s directors.
Andrea Leadsom
The hon. Gentleman asks from a sedentary position who the auditors were. They were EY, and they will be investigated by the official receiver.
The hon. Member for Sefton Central (Bill Esterson) asked how the Insolvency Service supported Thomas Cook employees. It has received over 8,000 claims for unpaid liabilities from former employees and has paid out over £41 million so far to claimants for arrears in pay, compensatory notice pay, holiday pay accrued, holiday pay not taken, notice worked not paid and redundancy pay. The Insolvency Service continues to work to offer, for example, the services of BUPA’s employee assistance programme and the Centre for Crisis Psychology to Thomas Cook employees as a particular request that came from the taskforce. The Government continue to do everything possible to support those affected and we are delighted that Hays has taken over the shops, providing jobs for well over 2,000 of those who lost their jobs under Thomas Cook.
Finally, I am very keen on the BEIS Committee’s report into audit. As I made clear when I appeared before it, I will bring forward fundamental changes to audit. I expect that to be in the first quarter of next year. I am very interested to read its report and, as I also made clear, I want to see Donald Brydon’s report, which I believe he expects to provide to Government by the end of this year.
Dr Julian Lewis (New Forest East) (Con)
Thank you, Madam Deputy Speaker. May I congratulate you on your own gallant and good-humoured campaign to be Speaker?
I must congratulate my right hon. Friend the Secretary of State on being so proactive in responding to this shocking discovery that Thomas Cook did not properly insure so many people against injury while being on a Thomas Cook holiday. Am I right in thinking that there would have been no way in which this would have come out but for the collapse of the company? If it turns out to be the case that the company was not breaking any existing rules, regulations or laws by behaving in this totally irresponsible and inhumane way, will it be possible to make a change in the law to ensure that this can never happen again?
Andrea Leadsom
I am grateful to my hon. Friend for his recognition of the fact that it felt important to raise this before the House prior to Dissolution. He is absolutely right. In doing so, we seek to provide some sort of reassurance to those who have been profoundly impacted by accidents and illnesses overseas on Thomas Cook holidays. He asked whether there could have been any legitimate expectation that this might have happened. That is not the case. It was never anticipated that a business such as Thomas Cook would not have adequately provided for such claims that were known to them. I am putting on notice today that any future Government––I am sure that the Opposition spokesman has made similar a commitment––will wish to resolve this to ensure that it cannot happen again. BEIS officials will work over the next few weeks to bring forward proposals on how to ensure that this cannot be repeated.
Christine Jardine (Edinburgh West) (LD)
I share the Secretary of State’s surprise and horror that Thomas Cook was operating without the necessary insurance. Many of my constituents and, indeed, I myself travelled with Thomas Cook unknowing. We all assume that the safeguards that we see with travel companies through the Association of British Travel Agents and so on ensure that we are travelling safely and that we are protected. Will the Secretary of State assure us that there will be safeguards to ensure not just that we investigate what went wrong at Thomas Cook, but that all travel companies, or anyone offering travel in this country, is properly insured?
Andrea Leadsom
The hon. Lady gives me the opportunity to say this again: I call on all similar travel and tour operators to ensure that they covered this and that they have not got a similar arrangement to the one that Thomas Cook had. I can assure her that BEIS officials during the next few weeks will bring forward proposals for ensuring that this does not happen again
Kate Green (Stretford and Urmston) (Lab)
It is great pleasure to see you in the Chair, Madam Deputy Speaker.
What the Secretary of State has told us this afternoon is shocking. Can she assure the House that there will be no similar shocks in relation to Thomas Cook’s public liability and employer liability insurance?
Andrea Leadsom
There are certain types of public liability and employers’ liability that are required to be insured by law, and there is no expectation that any business would not have provided that kind of insurance. Officials are looking carefully to satisfy themselves, as they do as a routine matter, but I say again in this particular instance, it was a great surprise and shock to see that there was an attempt at self-insurance with no proper provision made for these types of claims.
Jim Shannon (Strangford) (DUP)
I thank the Secretary of State for her statement. I have had several people in my office absolutely devastated because the hard-earned holiday that they had saved for has been cancelled. They are asking me when they will have their money back. They have to wait months, by which time their holiday options will have changed. Could the Secretary of State outline what she believes to be the absolute time limit for refunds for holidays and how that will be achieved?
Andrea Leadsom
It has been a difficult time for all those affected whether they were customers on holiday, customers who had paid for a holiday but not yet taken it, or employees and those in the supply chain. The Government have sought to tackle all those issues as far as we are able to do so. The hon. Gentleman will be aware that the ATOL scheme is designed to provide refunds and repatriation costs that arise from a failure of a company such as Thomas Cook. Many of those who have suffered financial loss will be able to claim through ATOL or, indeed, through a credit card provider if their holiday has not yet been taken.
Mike Kane (Wythenshawe and Sale East) (Lab)
I thank the Secretary of State for her personal energy, commitment and skill in chairing the Government taskforce on the collapse of Thomas Cook. I agree with both Front-Bench spokespeople that the directors did not comport themselves well before, during or after the collapse. With 2.8 million passengers taken out of the equation at Manchester airport, with the huge repatriation event, and with employees still employed on temporary contracts trying to close the company, will she join me in thanking the workers who remain after losing their jobs and the trade union reps at Unite and the Transport Salaried Staffs Association, who have worked so hard to represent them so ably?
Andrea Leadsom
I thank the hon. Gentleman for his contribution to the taskforce and join him in thanking all those who have played their part. People from right across Government, from trade unions and from local enterprise partnerships and so on have all sought to find new work. The Department for Work and Pensions rapid action taskforce has been helping people write CVs, and there has been mental health support and so on. It is a great shame and a huge pity to see this long-standing brand collapse, but I am sure we are all glad that its name will survive perhaps as an online travel company. I join the hon. Gentleman in wishing our very best to all those who lost their jobs in finding new work in a similar sector.
Jeff Smith (Manchester, Withington) (Lab)
I thank the Secretary of State for her statement. This is clearly a combination of shocking system failure and a failure by the company, but I am unclear whether the Secretary of State thinks that the law has been broken here. If it turns out that the law has been broken by executives, who may well have been taking large bonuses at the time, will she reassure us that the Government will be seeking some redress?
Andrea Leadsom
The hon. Gentleman raises an important point. I have written to the Official Receiver today asking him to take carefully into account in his review the behaviour of directors in the run-up to the insolvency of Thomas Cook and to consider whether this further appearance of failure on their part should require further action with regard to his statutory duties. This will be thoroughly investigated, and if there is wrongdoing, the Official Receiver has the ability to claw back bonuses and, of course, to take further steps through the Insolvency Act 1986.