Civil Aviation (Insurance) (Amendment) (EU Exit) Regulations 2020
(4 years, 5 months ago)
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Baroness Vere of Norbiton
That the draft Regulations laid before the House on 5 March be approved.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con) [V]
My Lords, these draft regulations will—[Inaudible.]
Baroness Sanderson of Welton (Con)
I am afraid that we cannot hear the Minister well due to the bad connection. Could she turn off her visuals to see whether the connection is any better?
Baroness Sanderson of Welton
Apologies, but due to the bad signal, we will adjourn for five minutes.
The Deputy Speaker (Lord Duncan of Springbank) (Con)
Now, where were we? Let us begin. The Motion is in the name of the noble Baroness, Lady Vere of Norbiton. I remind noble Lords that the time limit for this debate is one and a half hours.
Baroness Vere of Norbiton [V]
My Lords, I apologise for the technical issues. I blame them on the weather.
These draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018 and will be needed at the end of the transition period. As noble Lords are aware, the Government are committed to ensuring that the UK has a functioning statute book at the end of the transition period while we continue to work to achieve a positive future relationship with the EU. We have therefore conducted particularly intensive work to ensure that there continues to be a well-functioning legislative and regulatory regime for aviation, including for insurance.
These regulations are the second in a series to address deficiencies in a recent EU regulation relating to minimum insurance requirements for air carriers and aircraft operators in respect of passengers, baggage, cargo and third parties. I will give noble Lords some background. EU Regulation 785/2004 requires air carriers and aircraft operators to be insured in respect of passengers, baggage, cargo and third parties and against other risks such as acts of war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft and civil commotion. The amounts for which carriers and operators are required to be insured are measured in special drawing rights, an international reserve asset created by the International Monetary Fund. The EU regulation also requires air carriers and aircraft operators to demonstrate their compliance with the minimum insurance requirements set out in the regulation.
The withdrawal Act will retain Regulation 785/2004 in UK law in its entirety at the end of the transition period. In practical terms, the same minimum insurance requirements for air carriers and aircraft operators that apply today will continue to apply after the transition period.
The first SI relating to this area, the Civil Aviation (Insurance) (Amendment) (EU Exit) Regulations 2018—I will call them “the 2018 regulations”—was made in October 2018. It made changes to the retained regulation so that it continues to function correctly after EU exit. The need for today’s SI has arisen after the EU adopted Regulation 2019/1243, which amended Regulation 785/2004 after the 2018 regulations were made. The purpose of this SI is to fix further deficiencies introduced by those amendments.
The amendments made by this SI are minor and technical in nature. This instrument makes no changes to the policy intent. Regulation 785/2004 includes powers for the Commission to adjust minimum required levels of insurance where international treaties make this necessary. The 2018 regulations converted these into powers for the Secretary of State to do the same via regulations. However, since the 2018 regulations were made, the EU’s amendments to Regulation 785/2004 have replaced the Commission powers with new versions more closely aligned to the legal framework established by the treaty of Lisbon. These regulations take the same approach used in the 2018 regulations for the previous versions of the Commission powers. They replace them with powers for the Secretary of State to amend the minimum insurance requirements by regulations. That is all that this SI does.
In summary, no change in policy is made by these regulations. They make only minor technical and consequential changes to ensure that UK legislation on aviation insurance continues to function effectively after the end of the transition period.
I commend these regulations to the House.
Lord Blunkett (Lab) [V]
My Lords, I am grateful to the Minister. I, too, had problems with my technology.
In the brief time available, I want to acknowledge that this is a narrow and technical statutory instrument—I appreciate that—but it would be remiss of me, in declaring a non-pecuniary interest in the register, if I did not raise issues that are pertinent to the moment. I know that other noble Lords will probably want to contribute on the current difficulties that our people have in relation to insurance arising from the pandemic. It is one of those twists of fate that we are debating regulations relating to insurance covering war, terrorism, sabotage and the like when we are in the middle of a crisis that is affecting the whole of the aviation industry and, catastrophically, airlines and airports.
I ask the Minister, who knows of my interest in this, to write to me if she cannot respond at the end of the debate to my comments about those who are described as “passengers with restricted mobility”. Most people are not aware of the problems that these passengers have with insurance cover for baggage; nor are they aware of the difficulties for those with wheelchairs carrying either dry or wet batteries and those who find that their equipment is severely damaged, whether in catastrophic occurrences as outlined in these regulations or on a day-to-day basis. These difficulties make travelling a virtual nightmare for many people. They involve the interface between the airport and the airline and the contractors for baggage recovery. People often have great difficulty in getting compensation as well as immediate action to facilitate their continuation in travelling. I hope therefore that, although this is technically out of scope, the Minister will recognise—as I know she does—the importance of this issue for literally hundreds of thousands of travellers each year.
Lord Bradshaw (LD) [V]
My Lords, when we debated the other set of civil aviation regulations yesterday, the Minister assured us that the Civil Aviation Authority was extremely happy with the regulations. Having worked for a public body, I know very well that it is extremely difficult to disagree with whatever the Government want; in fact, if you do so, you run the risk of losing your job.
I am concerned about the effects on the insurance industry, which is a big earner. I want the Minister to assure us that the British insurance industry, which obviously has a considerable interest in this matter, has been properly consulted and has not—as in so many cases—had a change waved in front of it, with the assumption made by government that it agrees.
I realise that these sets of regulations have to be rushed through because of the Government’s timetable, but I want to be assured that the best interests of British industries are being considered in the rush towards a legislative framework. Perhaps the Minister could answer that.
Lord Blencathra (Con) [V]
My Lords, I thank my noble friend the Minister for setting out the scope of these regulations, which, if I understand correctly, are a technicality to ensure that the UK rather than the EU is now the legislator. My concerns go wider than that and relate to the compensation levels for disabled passengers and wheelchairs. I endorse absolutely everything the noble Lord, Lord Blunkett, has just said.
Can my noble friend confirm that the EU regs and these UK regs exactly replicate the 1999 Montreal Convention latest compensation levels of 113,100 SDRs, about £90,000, for death and 1,131 SDRs, about £900, for loss of baggage? The EU regs go further and compensate for delay.
However, my noble friend will have been briefed on the scandal in 2016, championed by our noble friend Lord Holmes of Richmond, when Athena Stevens had her £25,000 wheelchair irreparably damaged on a BA flight from London to Glasgow and was offered compensation based on its weight. The Montreal Convention deems wheelchairs to be hold baggage, where the compensation is payable on the weight of the articles, not their value.
I have my battery-operated wheelchairs insured for everything, but the one thing you cannot insure for is air travel, so when the delightful Miami baggage handlers dropped my lightweight aluminium wheelchair costing £2,500, the most I would get—after enormous hassle—would be $300. Air carriers are hiding behind an international convention to avoid paying for damaged mobility equipment vital for disabled people to live their lives independently. As our noble friend Lord Holmes of Richmond said in the Athena Stevens case:
“This unfair policy is trapping disabled people in a cycle of disadvantage, and British air carriers have the moral responsibility to stop applying it to disabled customers’ mobility equipment, as it’s clearly unfit for purpose.”
The United States has passed the Air Carrier Access Act, applying to all internal flights, which states:
“The basis for calculating the compensation for a lost, damaged, or destroyed wheelchair or other assistive device shall be the original purchase price of the device.”
Canada has said that the levels in the Montreal Convention will not apply, and in Europe only Lufthansa has said the same thing. I wish I knew that when I watched my late departed previous wheelchair dropped six feet from a baggage elevator at Frankfurt.
I ask my noble friend the Minister ideally to introduce US-style legislation for all flights departing or landing in the UK, in which damage to wheelchairs will be compensated at the full replacement cost. There is nothing to stop us from 1 January next year; we will be out of the bureaucratic dead embrace of the EU empire. This country was always ahead of every other country in the EU on disabled rights, so let us be in the forefront once again.
There is no downside to bringing in this legislation; the cost to airlines will be minimal. To be fair, my current electric wheelchair has been to Belarus, Azerbaijan, Ankara, Istanbul, Athens, Strasbourg, Paris, Basle, St Petersburg, Bosnia, Georgia and even Aberdeen, and has not been damaged by airlines or airports—not yet, at any rate, but I am tempting fate by boasting about it. The airlines would have to pay for a small number of cases, but cases absolutely crucial to the disabled passengers affected.
If legislation cannot be brought forward in the short term, which I understand, will my noble friend make it clear to all UK-operating airlines that the Government expect them to implement this voluntarily, the same way that Lufthansa has? Of course, we know that there are nasty little operators—we could all name them, but I will not do so—but if the more reputable carriers make this undertaking, wheelchair users will know who to trust and who to travel with.
Lord Berkeley (Lab) [V]
My Lords, I am grateful to the Minister for introducing these regulations. Previous speakers have identified that there is an awful lot wrong with the whole aviation insurance sector at the moment.
The Minister has said it will not change just because we are leaving the EU, but how does this affect the insurance of airlines, airports and other sectors? Does it depend on where companies are registered or located? It is quite clear that there are very different policies coming out of different member states, as well as other parts of the world. This covers safety standards, baggage, compensation and delays—we have seen a lot of these in the last few months. It does not seem to make much difference where the airline is registered; they can have very different policies.
In addition to asking the Minister for some clarification on this, one has to ask what will happen after the end of this year. These regulations give the Government powers to diverge from the European regulations, and maybe the international ones in the future. It is worth pointing out that in the future the only three main groups in the airline business will be the US, the EU and probably China. I do not think the UK will have much of a look-in, so we will have to follow one of them. If we are to produce yet another set of insurance regulations just to make sure that we are seen to be separate, and insist obdurately on not staying in EASA, there will be a very serious and long-term set of consequences for passengers and the insurance industry, as well as airlines.
Like the noble Lord, Lord Bradshaw, I too do not believe a word when the CAA says it supports this. As he says, if it does not support it, it will be out of a job. We have to hope that the Minister can explain in her response what ability the Government will have to change these regulations in future without any consultation with the industry just because they feel it is a good thing.
Lord Chidgey (LD) [V]
My Lords, I confirm my entry in the register of interests as a companion of the Royal Aeronautical Society. I am pleased that the Minister was able to get through to us in the end. It was quite concerning; for those with long memories, she sounded a little like Rowan Atkinson’s famous sketch from outer space. Anyway, she got through.
The Minister mentioned that the EU regulations require a wide range of insurances—obviously so—but can she tell us who oversees the need to demonstrate compliance with these regulations? What is the mechanism for doing this, and who is responsible for doing it? I thought that the contribution from the noble Lord, Lord Blunkett, was particularly pertinent in this regard, and I hope the Minister is able to respond to that. My noble friend Lord Bradshaw’s call for assurances that the British insurance industry has been fully consulted is equally pertinent.
Civil aviation insurance is clearly a critical component of the regulatory process, controlling airlines, civil aircraft design and production and operating procedures around the world—and never more so, I suggest, as we stand on the threshold of a new era of civil aviation technology and reduce our reliance on fossil fuels, turning instead to electricity. I recognise that this is a slight diversion from the main essence of the SI, but I hope I might emphasise these points for the general good.
There is an emerging market for green, electric-powered aircraft in the UK and neighbouring Europe. Cranfield Aerospace Solutions, an offshoot of Cranfield University, has aircraft-designing capability and DOA approval, as noble Lords will know. There are reports in the aerospace journal of the Royal Aeronautical Society saying that with this DOA for complex modifications to existing aircraft, Cranfield can also design and create new concept aircraft. It also has production organisation approval, POA, from the UK Civil Aviation Authority and the European Union’s aviation safety authority, EASA—all key requirements in civil aviation insurance for complex design and production changes. The company recently announced its plans to restart the manufacture of complete aircraft in the UK—I pick up the point of the noble Lord, Lord Berkeley. It believes that it can credibly compete in the small, sub-regional nine to 19 aircraft market, where it is not economical to operate aircraft with conventional fuels. It is now looking at converting the Britten-Norman Islander aircraft to a hybrid aircraft, with Rolls-Royce electric engines, as part of a consortium of UK firms.
Over the past 12 months, a lot of attention has been paid to green aviation, and the potential market for these smaller, sub-regional electric aircraft, with electric propulsion in a neglected sector, now makes a lot of sense. What becomes critical, however, is that the UK Brexit legislation must not deny the UK a potential leadership role in this engineering. It is a sustainable, cutting-edge market. Can the Minister give noble Lords an assurance that this no-deal legislation for civil aviation insurance regulations does not do just that, keeping us out of a market that we have a lead in?
Lord Naseby (Con) [V]
My Lords, I first thank the Minister for introducing this SI. She may know that I am a former RAF pilot and civil pilot, and have done some work for airlines in the past. I am going to ask a series of questions and quote the paragraph number. I do not necessarily expect firm answers this morning. Perhaps she would be kind enough to write to me afterwards on those aspects not covered in her wind-up. I will start by saying how very much I support my two colleagues, the noble Lord, Lord Blunkett, and my noble friend Lord Blencathra. They made a good case that I do not need to re-emphasise, other than to say that I hope the Minister will take it seriously on board.
First, my understanding of the net result of paragraph 2.3 is that, as matters stand, there will be no difference between the EU and the UK in terms of the regulations. Secondly, I will ask about the extent and territorial application. We are to some degree responsible for our overseas territories, and aviation in particular is key to almost all of them—whether it be the Falklands, the Cayman Islands or wherever. Has there been any consultation with them? I know that they have their own devolved Governments, but it would be sensible for a check to be made on whether there is any adverse effect and whether they have any views on the matter. That relates to paragraph 4.
Paragraph 7.1 has partially been covered by my colleagues. Some families have been through horrendous experiences with insurance claims, baggage claims and so on. I was amazed to read last week that there are still 10,000 British citizens wanting to get back to the UK. I do not understand from Her Majesty’s Foreign and Commonwealth Office why on earth, after two months or more, arrangements have not been made to get them back. I hope that the Minister will have a look at these problems as we come out of lockdown and begin to make plans for the future.
Paragraph 10.1 on the consultation outcome states that the CAA has been consulted. Well, one would hope that it has been. I should like to know what the reactions of the CAA and the aviation industry were. The paragraph does not give us any clue on that. Did they just sort of say, “Oh, okay, they’re all right”, or did they have some reservations as yet to be resolved? That is an important dimension.
Paragraph 12.3 talks about correction of deficiencies. What were the deficiencies? It says not only that there are specific deficiencies but that they are minor. Who decides what is a minor deficiency as opposed to a major one? That would help us.
As regards paragraph 14.2, once again, there should be a review clause. I said this yesterday. Governments learn. I sat on the Public Accounts Committee for 12 years and, time after time, problems arose because no one had the nouse to review a situation. It does not matter what the length of time is, but officials should do that.
Finally, as the Minster knows, I take a specific interest in drones and would be grateful to hear of any instance in which they should be treated separately.
Lord Foulkes of Cumnock (Lab Co-op) [V]
My Lords, I too thank the Minister for her helpful introduction, in spite of technical difficulties. However, those difficulties underline the importance of getting a Minister to come into the House in person, wherever possible. I hope that the Government Chief Whip will take this on board.
As I have mentioned in relation to previous orders, this order is part of huge swathes of SIs currently being rushed and trotted through Parliament to deal with what even the Government call the deficiencies arising from our withdrawal from the European Union.
I do not want to oppose this regulation, because it is important and I support it. We need minimum insurance requirements for air carriers and aircraft operators in respect of passengers’ baggage, cargo and third parties, as we heard from the noble Lord, Lord Blencathra, who I travel with regularly around Europe. My concern is about the sheer volume of legislation we need to get through and our ability to properly scrutinise and review it, given the fast-approaching, fixed transition deadline and now, on top of that, the impact of Covid-19, which has altered the workings of our House.
However, I do have a couple of specific points to raise in relation to this instrument. First, it mentions that insurance covers specific risks from acts of war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft and civil commotion. I know that it is somewhat different from those risks, but are Government looking to extend the number of risks to include events such as the current pandemic. I think my noble friend Lord Blunkett referred to that.
I am also keen to understand why there has been a change in phrasing, from the Commission being “empowered to”, to the Secretary of State “may” in both paragraphs 2(2) and 2(3). Can the Minister confirm whether this changes the effect of the powers under this order?
On a positive note, the order shows that we are getting some elements of our house in order to support the aviation sector during this turbulent period. However, looking to address the elephant in the room, while all these regulation changes are necessary and important, I remain concerned about the bigger picture and our progress on negotiations with the EU. Particularly relevant to this debate is the need for a new aviation agreement between the UK and the EU, like the existing open skies agreement, which was mentioned yesterday. In spite of the Government’s rhetoric, it is increasingly likely that the reality for aviation, as well as for other areas, of a no-deal exit from the EU at the end of the year will be very damaging.
While Brexit continues to create a huge element of uncertainty for the aviation sector, the economic upheaval and operational challenges posed by Covid have put the industry under even more significant pressure, as it tries to adapt and survive. Ironically, as we discuss the aviation industry today, and as we did yesterday, our skies are all but empty. The industry is under increasing threat from the pandemic. We can all see that the empty skies have improved our environment, and so the industry will be obliged to take further steps to reduce its impact on the environment as we move out of the current crisis.
I hope that the Minister will find some time, probably not today but at some point in the future, to update the House on all these issues: dealing with the EU, financial support for the industry, how to enforce the quarantine measures and how air bridges might work, along with a number of other areas which are now so important to the aviation industry’s survival.
Lord Goddard of Stockport (LD) [V]
I fully agree with the comments made by the noble Lord, Lord Foulkes, about Ministers. It would be really helpful if they were in the Chamber. We are sympathetic if a Minister is trying to speak remotely and they sound like Donald Duck, but that does not help me, the Minister, or indeed Parliament. Perhaps the powers that be could look at Ministers’ attendance in the House, so that they can stand up in front of the Members who are in their places.
I turn now to these minor amendments. As a member of the Delegated Powers and Regulatory Reform Committee, I know that we get very nervous about, and debate for hours and hours, the specific meaning of the words in SIs. As a previous speaker said, when something turns on the phrase, “the Minister may”, that smacks of Henry VIII powers coming in through the back door.
The insurance industry is crucial to all of this. It must understand the importance of these regulations and stand foursquare behind them. The Minister said that the regulations deal with some further technical deficiencies, although she did not explain what they are, and that there will be no change to the policy. But some 19 speakers are down to speak today on an SI that should probably attract only two or three people who have specific problems, such as the issue of wheelchairs, like the noble Lord, Lord Blunkett. Will the Minister answer a few of the questions that they have put?
People need to understand that people like myself, and others on the Delegated Powers Committee, spend hours looking at these SIs. When they are suddenly amended and brought back without full scrutiny, where is the forensic examination of the real meaning of the changes? It is not enough to say that there will be no change in policy and that these are tidying-up amendments. We are making laws and regulations that will affect millions of people travelling right across the world. The regulations need to be right and they need to be watertight.
Look at all the people who booked and paid for tickets with Ryanair. The boss of Ryanair has said on TV that it will take six to eight months to repay all those bookings, because the situation is very complicated. It is not complicated. He could hit one button and everyone who should have flown with Ryanair could get their money back. This is what we are dealing with: airlines and insurance companies that are very quick to take our money and very loath to hand it back. Insurance is critical to protecting people, whatever their circumstances, when they travel far and wide.
Baroness McIntosh of Pickering (Con) [V]
My Lords, I thank my noble friend for introducing this instrument and for giving us the opportunity to scrutinise it in some detail. Perhaps I may put a number of questions to her. In her introduction, my noble friend said that a key feature of the regulations is the transference of responsibility from the European Commission to the Department for Transport on exiting the European Union. Will there be regular reviews of this, as there were in 2018 and 2019, and now in 2020? Will my noble friend commit to a regular review of the cover under the regulation? Will parliamentary scrutiny of such a review be allowed?
My noble friend will be only too aware of the particular challenges that the current Covid-19 pandemic has presented to the whole of the civil aviation sector, in particular to airlines and airports. In just three short months, we have seen an unprecedented challenge being dumped on to them. Along with other noble Lords, in particular the noble Lords, Lord Foulkes and Lord Blunkett, I would like to ask my noble friend if she can confirm that the Covid-19 pandemic will be added to the categories that are specifically included in the provisions of this instrument.
I have another question in response to my noble friend’s invitation to comment on these regulations. Can she confirm that the refunds, which will come to a huge amount, to reimburse passengers for flights that have been cancelled—I must declare an interest in this regard—will also fall within the remit and the provisions of these regulations?
The greatest challenge to airlines is their cash-flow problem. Most of their funds are tied up in planes and the payment of staff. While we have seen a review of the furlough provisions, we have also had announcements about the very sad redundancies in most of the airlines that fly from the UK. There has been a double hit, in the sense that airlines are being asked to make substantial refunds at speed, but at the same time, surely no future bookings will be made until we know that they can operate as normal again. Will my noble friend take this opportunity to confirm that refunds for those cancelled flights will be covered by the statutory instrument before us?
I have two other brief questions. First, is my noble friend able to confirm the status of the vouchers being issued by most airlines in place of refunds? Will she also confirm that, while having the same validity, these vouchers are not as easily accessible as immediate refunds? Secondly, can she confirm that the provisions for checking in luggage, as part of the new ways in which airlines will operate, are advisory, or are they indeed mandatory?
Baroness Kennedy of Cradley (Lab) [V]
My Lords, this statutory instrument is technical. It makes sure that the Government can ensure that the correct insurance requirements are in place for air carriers and aircraft operators at the end of the transition period. However, as has been noted by my noble friend Lord Foulkes, the deadline for the end of the transition process is fast approaching. With aviation being one of the most heavily regulated industries, there will be a number of SIs in this policy area for Parliament to agree by the end of the year. They must all be done in time for the CAA to prepare and to give airlines the certainty they need after this period of significant upheaval.
Given the understandable delays due to Covid-19, and the limits on Parliament due to social distancing, is the Minister confident that there will be time for proper parliamentary scrutiny, and agreement, of all of the SIs that will be needed to ensure the smooth running of our aviation industry?
I turn now to the issue of aviation insurance. Covid-19 has hit the aviation industry very hard. Hundreds of aeroplanes have been left grounded. Social distancing measures and quarantines, along with low consumer confidence, are creating considerable uncertainty about what air travel there will be in the coming months. Yet I understand that commercial aviation operators have not typically purchased business interruption coverage, nor has it been widely available in the industry. That is why, as we have heard in the debate, discussions about insurance, and in particular business interruption insurance against pandemics, is now a hot topic.
There is interest in exploring insurance solutions to manage the potential impact of future pandemics and other costly disruptions, such as volcanic eruptions and extreme weather. The insurance sector has the capacity to create solutions for these risks. That will take time and will require a high level of commitment and collaboration between airlines, consumer groups, risk advisers and insurance representatives. However, as the world becomes increasingly interconnected, and risk becomes more global and complex, surely now is the time to address this issue by finding a creative solution that can protect passengers and airlines alike. Do the Government have plans to facilitate discussions in order to secure a system that protects airlines and passengers as regards insurance? If so, what conversations have they had with airlines and insurers about a new pandemic-based co-insurance agreement?
Finally, as we begin to look forward to air travel once more, what plans do the Government have to review protections for consumers following the experience of passengers during this pandemic regarding both refund policies and being able to fly safely?
Lord Bourne of Aberystwyth (Con) [V]
My Lords, I extend my sympathies to my noble friend the Minister. It must be very difficult when the connection goes: I think we have all been there.
My basic question on the regulations is whether there is any intention ever to move away from the EU limits. That needs to be clarified by the Minister. I would also like to pick up the point made by my noble friend Lord Naseby about UK citizens overseas. If the Minister is unable to give specific details, I am sure that she could write to all those participating in the debate to let us know what the position is in respect of any UK citizens overseas who are currently unable to get back into the country.
I have given advance notice to my noble friend the Minister about my intention to raise something that is somewhat off-piste but very relevant to the continued viability of air carriers and airlines, which is, of course, in some doubt at the moment; that is, the issue of quarantine and the related issue of testing at airports. It seems to me that quarantine has difficulties, particularly with the dangers related to the unsupervised journey from the airport to home. There is testing, for example, at Iceland’s international airport for people flying in. They are tested there and contacted later if the test is positive, and that gives some assurance to people. There is also testing in Hong Kong on a slightly different basis, but it is obviously a much larger airport with much greater throughput. Is this something that the Minister could say something about? Are the Government giving consideration to this? The context of these regulations means that it is really only if we are able to instil some confidence in the airline sector and provide proper testing facilities for people coming into the country that we will be able to ensure that these regulations have any real lasting relevance. I would be grateful if my noble friend the Minister could deal with that in her reply.
Lord McConnell of Glenscorrodale (Lab)
My Lords, I am very happy to support these regulations and to see their passage through Parliament but will take this opportunity to raise a couple of issues. I strongly support the points made by my noble friend Lord Blunkett and others in relation to the difficulties faced by particular travellers. I hope that the Minister will respond positively on that issue, with an indication not just of understanding but of what action might be taken. The point made by my noble friend Lord Foulkes about adding other situations such as the current pandemic to the list of issues that might be covered is a valid and topical one, and I hope there is a response to that too.
My remarks will mainly follow on from the points made by the noble Lord, Lord Goddard, about the conduct of airlines. Having read the debate on these regulations in the House of Commons and listened to the Minister today and Ministers generally over recent weeks, I sense that there is sympathy for the aviation industry. There is a desire to see it functioning again properly and to see that those who work in the aviation industry have some job security in very difficult times.
However, we cannot ignore the fact that the conduct particularly of airlines—but also airports in this country and beyond—is absolutely appalling at times. There have been comments this week in the other place about the way in which British Airways has been treating its staff over recent weeks. It has been treating its customers in that way for a very long time, and it has been at it again during this pandemic. It is not alone: it is not the worst, but it is certainly far from being the best. It carries our national flag, but it discredits it every time it treats customers badly when they are making complaints, looking for refunds or trying to ensure that their plane actually turns up on time. This is particularly acute in the domestic sector, where British Airways dominates the routes between Scotland and London. It treats customers as almost irrelevant in the way it conducts its business, because it has such domination that it is able to do that when people have no other choice.
Therefore, I hope that the Government will take this on board in all their current negotiations with the aviation industry. Yes, they should be positive and do what they can to help protect the industry and the jobs of those who work in it, and get international routes functioning again, but they should also demand change in the culture of the industry, which takes customers for granted and treats them like dirt far too often.
Baroness Ritchie of Downpatrick (Non-Afl) [V]
My Lords, I welcome the opportunity to participate in this debate. I thank the Minister for her contribution and for setting the statutory instrument in context. The principal context of the aviation industry at the moment is that of the pandemic, which has already been referred to by previous speakers, including my noble friends Lord Blunkett, Lord Foulkes and Lord McConnell and the noble Baroness, Lady McIntosh. There are very clear issues there. What discussions has the Minister or her colleagues in the Department for Transport had with those in the Treasury concerning these insurance issues to ensure that they are uplifted and that they reflect a pandemic situation? Will this area of the pandemic be included in those other areas that she outlined and which are currently applicable in these regulations?
I have a couple of other questions, because all of this is set in the context of Brexit and coronavirus. Will these insurance measures be the same as EU rules on insurance or will they be different? How much will they vary and what will be the cost—above all, to the traveller? Will it be additional and what will be the impact of Covid? As I explained yesterday, there is absolutely no doubt that the aviation industry, particularly in Northern Ireland—which is regionally world-leading in aircraft manufacture, and in the manufacture of aircraft seats and furnishing—is being hit and undermined at the moment, so it needs assistance. What further discussions have been held with the Treasury in relation to the relaxation of air passenger duty for UK regional airports? Will reciprocal EU cover take place and what will be the relationship with the European Aviation Safety Agency?
Flights from London and other regional airports to the Republic of Ireland, which will remain in the EU, are the principal way of travel between London and Dublin for cargo and passengers, and traffic is very heavy. You have only to go to Heathrow to see that. What will be the impact of these insurance arrangements on the east-west relationship between Britain and Ireland, and on air traffic? We do not want to further undermine the aviation industry. Will there be more protected routes to the EU and will the quarantine rules be relaxed? These are perhaps outside the remit of this statutory instrument, but we need answers to these questions, particularly if we face a no-deal Brexit because that will have far-reaching implications on not only the aviation industry but other sectors of manufacturing and business avenues. I thank the Minister but look forward to answers to these questions.
Lord Kennedy of Southwark (Lab Co-op) [V]
My Lords, I agree with the call by my noble friend Lord Foulkes of Cumnock and the noble Lord, Lord Goddard of Stockport, for the Government to make every effort to get the Minister standing at the Dispatch Box on all occasions. I hope the Government Whip in the Chamber will take that point back to her noble friends the Leader of the House and the Government Chief Whip.
The noble Baroness, Lady McIntosh of Pickering, and my noble friend Lady Kennedy of Cradley raised important points regarding consumer rights with respect to refunds and vouchers. I look forward to the Minister’s response to these points, and to those raised by the noble Lord, Lord Goddard of Stockport, regarding the conduct of airlines and how they treat their staff and customers, echoed by my noble friends Lord McConnell of Glenscorrodale and Lady Ritchie of Downpatrick.
As we heard, these regulations are, on the face of it, fairly minor. We are using this transition period to make long-term changes and adjustments but, as we read at paragraph 2.4 of the Explanatory Memorandum, the policy context remains unchanged. Powers that were exercised by the European Commission are to be excised by the Secretary of State. It would be helpful to the House if the Minister could answer the point about what will happen in the future. The Government have taken these powers. Do they always intend to follow without question the European Commission’s decisions? “Take back control” does not appear to fit very well there. Or is the Government’s intention to take different decisions over time? If the latter is the case, could the Minister set out the process for doing so? How will that happen?
Aviation is global, by its very nature, and being global Britain it seems that we have to be part of international agreements to ensure that the UK aviation industry can compete in this new world we all find ourselves in. On that point, could the Minister set out any work done by the department to see what the cost will be of deciding to differ from the European Commission’s decisions, and what the process is for ensuring that any decisions made will not put us in breach of any further international agreements beyond the European Commission and cause our aviation industry further difficulties?
Paragraph 10.1 of the Explanatory Memorandum says that
“The Civil Aviation Authority has been consulted”,
but a subsequent sentence says:
“The devolved administrations and the aviation industry have been informed”.
Could the Minister please set out for the record what, in the Government’s view, is the difference and why the different approaches were taken? Who took the decision only to “inform” the devolved Administrations and the aviation industry, not “consult” them?
Finally, what discussions have taken place with the insurance industry? A number of noble Lords raised this point and I cannot find any reference to it in the Explanatory Memorandum.
Lord Balfe (Con) [V]
My Lords, I declare my interest as president of BALPA, the airline pilots’ union. I endorse what has been said about attendance in the House, not only by Ministers. The Chamber is empty. We need the Whips to get together to find a way to get far more people into the Chamber. At the moment it is very difficult.
I turn to the points made so ably by the noble Lord, Lord Blunkett, and my noble friend Lord Blencathra. I serve on an international pensions committee. It had a disabled member on it for a few years. I became all too aware of the catalogue of errors that my noble friend outlined—the number of times things went wrong and airlines just looked the other way or their compensation was inadequate. Mention has been made of Lufthansa. I like to think that the Minister will introduce a disabled rights in aviation SI or law, or something. As noble Lords all know, I did not support leaving the European Union but, now that the British people have pronounced quite decisively that we are going to leave, for goodness’ sake let us get something useful out of it. This is certainly one thing.
The noble Lord, Lord Kennedy, took part of my speech away, I am afraid. I will mention paragraph 7.1 of the Explanatory Memorandum on the article that confers powers on the Commission to adjust minimum levels. Is it intended that the UK will follow this? How will it monitor what is happening and what the EU intends to do? The EU will obviously have its own internal processes before making changes. How do we propose to be linked into them? What notification arrangements are we expecting to get? I note also that there will be powers for the Secretary of State to amend the minimum insurance requirements by regulation. Are there any plans to do this at the moment?
The next paragraph talks about how an article inserted by the regulations
“includes provision for the European Parliament or the Council to object to continuation of the delegated powers at five-year intervals … these provisions have no practical application in relation to the UK”.
That is because we have a deficient democratic system, frankly. We should also have some system, now that we are leaving the European Union, to look at the continuation of delegated powers and decide whether they should be revoked. I would like the Minister to agree to look into this.
I endorse the points made by my noble friend Lady McIntosh. I have now had three months struggling with BA to get a refund on a ticket. I have very little sympathy for it. It is very good at asking for money, but very bad at giving it back. I would like the Government to add some weight to those customers who are still waiting for refunds after months and a deliberate attempt by airlines, particularly BA, to avoid paying out. I could paper a wall with the number of times that I have been offered a voucher.
Finally, I take the point that the noble Lord, Lord Kennedy, made about the aviation industry having been informed of the department’s intention. Specifically, with what information and in which way were the trade unions informed of the department’s intention and what response did the Government receive from them?
Baroness Randerson (LD) [V]
My Lords, there could not be a more appropriate time to discuss aviation insurance. When we eventually could hear the Minister I was pleased that she set out very clearly the SI’s intention. The EU regulations establish minimum insurance requirements in respect of passengers, baggage, cargo and third parties, but they also require carriers to have insurance that covers acts of war, terrorism, sabotage, unlawful seizure and civil commotion. As other noble Lords mentioned, I am sure that many people wish that that list covered pandemics as well. As the Minister said, this SI replaces the European Commission’s powers regarding this with those of the Secretary of State. Like others, I regret that the SI has to be brought and the causes of it, but I will take the opportunity to discuss some of the specific issues within it.
We have discussed insurance and consumers’ rights several times here in the last few years, but always in the context of the financial failure of an airline, and questions have been put on consumers’ rights in relation to payment methods. This SI puts the spotlight instead on the basic obligations of the airline operators.
The pandemic has placed huge stresses on the aviation industry in general and, as other noble Lords have said, some airlines have resorted to extreme delaying tactics to avoid repaying their customers for cancelled flights. Many consumers are waiting very long periods to receive refunds—the noble Lord, Lord Balfe, being one. Airlines are resorting to devious tactics to make it very difficult even to claim a refund; for example, by removing the refund request option from their website, so customers have to phone to request a refund but then find that the number is continuously busy. There is pressure to accept vouchers instead, but in the current uncertain situation is not surprising that customers consider that a risky option, and they may not wish to travel anyway. There are adverts tempting the public to purchase cheap flights in the near future, when it is highly unlikely that that flight will actually operate. The suspicion here is that this is a device to bolster short-term income for the airline. While all this is understandable at this difficult time, it is certainly not acceptable. Therefore, the level of guarantees and consumer rights provided by the EU regulations have proved valuable and the public will expect them to continue. They will expect Brexit to provide improvements to their rights—that is what those who supported Brexit thought would come. Certainly, they will not expect the EU to provide any improvements that are not immediately adopted in the UK.
Consumers who book linked travel arrangements, such as connecting flights, are often not fully aware of the national registration status of the airlines they choose to use. They might well start off with a UK airline but change planes midway on to an airline from another country. The official national status of airlines is often not obvious. Despite its appalling behaviour towards its employees, BA, for example, trades on its status as the British flag carrier, but it is Spanish-owned. Sometimes, one books with airline A and ends up flying with airline B, its so-called agent. All these uncertainties emphasise the value of a co-ordinated system of insurance and consumer rights, so my question to the Minister is: will the system guarantee the same level of co-ordination and ease of use for consumers in future?
Paragraphs 14.1 and 14.2 of the EM cover monitoring and review and make it clear that no systematic review process is planned. However, paragraph 7.2 shows that the EU regulations have a five-year mechanism for review built in, so there is surely the danger that our regulations will become outdated by default. I would be grateful for the Minister’s comments on this. Finally, on the issue of consultation raised by others, paragraph 10.1 states that the CAA “has been consulted” and was happy with the changes proposed. It does not refer at all to the insurance industry. It goes on to say:
“The devolved administrations and the aviation industry have been informed”
of the Government’s intention. That is a new choice of words to me. It sounds very high-handed. It is against all the usual courtesies of the devolution settlements and it puts us back at least 30 years in the way that, by convention, government works with business. I ask the Minister to address this specific point: is this just a one-off or is it the way the Government intend to do business in future? A very long time ago it was accepted that good government relies to a great extent on partnership and consultation with those within each sector, which leads to a more effective way of doing things. I hope that that will not be abandoned.
Lord Rosser (Lab) [V]
I thank the Minister and her officials for the virtual meeting on these regulations on Tuesday, and the Minister specifically for her explanation of the content and purpose of this draft SI, to which we are not opposed.
EU regulation 785/2004 establishes minimum insurance requirements for air carriers and aircraft operators in respect of passengers, baggage, cargo and third parties. It also requires that air carriers and aircraft operators have insurance which covers specific risks, including acts of war, terrorism, hijacking, acts of sabotage, unlawful seizure of aircraft, and civil commotion. The regulation will be retained in our law at the end of the transition period and the Minister has already been asked more than once about insurance cover for Covid-19 type pandemics—I am sure she will respond to that point.
As a result of recent amendments made to EU regulation 785/2004, these further draft regulations are needed to ensure that the terms of that regulation, as amended, continue to operate effectively in our domestic law after the end of the transition period. This is achieved by replacing Commission powers with powers for Secretary of State for Transport to amend the minimum insurance requirements by regulations which will be subject to the affirmative resolution procedure. As I understand it, the 1999 Montreal Convention provided for airlines to be responsible for compensation in the case of death and injury to passengers, and to be adequately insured to cover any liabilities, and the EU minimum insurance requirements stemmed from that. First, I ask the Government to confirm, as I believe the Minister said, that these regulations make no changes in the present minimum insurance requirements that apply in the UK on the day after the end of the transition period, apart from replacing Commission powers with powers for the Secretary of State.
I wish to raise a couple of other points. Will UK air carriers and aircraft operators have to have, at all times in the future, minimum insurance levels that are not below EU minimum requirements in order to be able to fly to EU countries? If we wanted to, could we have minimum insurance requirements that are below EU minimum requirements and not put in jeopardy the ability of our air carriers and aircraft operators to fly to EU countries? The Government’s mantra is that at the end of the transition period we will have taken back control and be able to do what we want to do and not, as a member of the EU, be a party to EU legislation. What does this draft regulation enable us to take back control of, in practice and not just in theory? What have we been wanting to do but have been unable to do on minimum insurance requirements for air carriers and aircraft operators because we have been a member of the European Union?
The insurance requirements covered by these draft regulations are about providing cover for airline operators rather than consumers, including passengers. Can the Government say whether the minimum insurance requirements provided for in these draft regulations cover airline operators against legal proceedings for failing to reimburse fares for flights that were cancelled? On the face of it, these regulations offer no good news for passengers, of whom I am one, waiting far too long for such refunds. Nevertheless, I hope that the Government, in their response to this debate, will also take the opportunity to say what actual progress they have made in ensuring that airlines make the necessary arrangements to refund these fares promptly and not leave it for several months.
I will listen with interest to the Government’s response to the points made in the debate, including the issues raised by my noble friend Lord Blunkett and the noble Lord, Lord Blencathra.
Baroness Vere of Norbiton [V]
My Lords, I thank all noble Lords who took part in the debate today, and once again I apologise for my technology. It is the first time that that has happened to me and it is a Minister’s worst nightmare. I will certainly be in the Chamber next week and possibly in the future. Some of the debate has reached far beyond the scope of the statutory instrument. I will do my best to respond today but if not, of course I will write. It might help if I start by outlining the underpinning of the EU regulations in the Montreal convention 1999.
The convention was brought in to update and bring together existing international conventions on air carriers’ liability. The main change was to set maximum standards of strict liability in claims against airlines for loss of life or injury and damage to or loss of baggage in cargo. The limits are refreshed every five years, most recently in December 2019. I can tell my noble friend Lord Blencathra that the liability amounts for passengers and baggage will remain in place.
Prior to the Montreal convention, passengers were required to prove that an airline had been wilfully negligent for all claims. Nowadays, passengers are still able to claim above the strict liability limits set out in the Montreal convention, but need to prove negligence on the part of the airline. The convention provides that air operators should have adequate insurance to cover any claims but it does not set out insurance requirements beyond that, so the EU regulations—and in consequence the UK regulations in the future—build on the convention but do not replace it. Instead, the regulations will set out the requirements for minimum insurance levels for air operators flying to, from, within or over a particular state. This sets the definition of minimum insurance standards, rather than the convention’s requirement for adequate insurance.
The regulations’ minimum insurance levels are broadly based on the convention’s strict liability limits, but in general the EU requires insurance levels—and therefore we will require insurance levels—significantly above, in some cases, the strict liability limits set out in the convention. For example, for a liability in respect of passengers, the minimum insurance cover in the EU is 250,000 Special Drawing Rights, which is about £275,000 per passenger. That is about twice as much as the strict liability limit in international law. While strict liability limits are set by the international treaty, if the country is party to it, minimum levels of insurance are set by country, or pan-EU in this case. Minimum levels of insurance for different countries can of course change, and any operator flying into, over or within a country must have such minimum levels of insurance in place.
Part of this is about demonstrating compliance, which is where the Civil Aviation Authority comes in. In the case of the EU, EEA, EFTA and the UK, an air carrier has to be able to demonstrate its compliance with the insurance requirements by providing evidence of valid insurance to the member state that granted its operating licence, or if it flew into that country. In the UK, operating licences are granted by the CAA, which already performs that role. The noble Lord, Lord Chidgey, asked about compliance. The CAA monitors compliance by carrying out spot-checks on aircraft. Non-compliance is a criminal offence. Therefore, we do not anticipate that this SI will have a financial or practical impact on the CAA as it already performs all of those functions and is content with the proposals. I am a little disappointed that the noble Lord, Lord Berkeley, said that he did not believe me when I said that. His words were perhaps a little strong.
A number of noble Lords mentioned the scope of the insurance, which is an important issue as it applies to all carriers and operators flying into or out of various countries. The noble Lord, Lord Foulkes, asked whether insurance could be extended to cover pandemics and the noble Baroness, Lady Kennedy, mentioned business interruption insurance. Of course, carriers are free to make their own insurance arrangements. The insurance under consideration today specifically refers to loss of life or injury to a passenger, and loss of or damage to property, but given how few flights there are, it is not immediately clear how a pandemic could cause these outcomes; the implications are not clear. But I believe that the relationship between the aviation industry and protections for passengers will receive an enormous amount of scrutiny as we come out of this crisis. The Government had already announced an aviation insolvency Bill in the Queen’s Speech and when this crisis is over and done with and planes are starting to fly again, we will be able to look at this in more detail.
My noble friend Lady McIntosh asked whether an insurance policy includes the refunds of payments made by passengers for services not received. Again, that would be a contractual matter if the aviation supplier wanted to get that insurance from an insurer. I know that noble Lords are aware of this, but refunds to passengers where they have been denied boarding or suffered a cancellation are covered by EC regulation 261/2004, which requires compensation within seven days. It will continue to apply. I recognise that in the current circumstances, some passengers are not receiving their refunds within the specified time. The Government are absolutely clear: where a passenger is due a refund, it must be paid.
The noble Lord, Lord Blunkett, and my noble friend Lord Blencathra raised the incredibly important issue of protections for wheelchair users and other passengers with reduced mobility when their wheelchairs and other belongings are damaged. The EU regulations we are discussing today give the minimum insurance cover of 1,131 SDRs for baggage per passenger. I am aware of the case of Ms Stevens’ damaged wheelchair and I sympathise with her situation. Wheelchairs that cost thousands of pounds are subject to the same damaged baggage legislation that limits compensation to around £1,000. A number of UK airlines already voluntarily waive that limit, and the Government will call on all airlines to adopt that practice. We will certainly return to this issue very soon. It is a complex one, given the wide variety of wheelchairs available and their values, and the fact that there are no standardised tether points for safe stowage in the holds of aircraft. We have discussed this with the industry in great detail and we continue to do so. We are looking at testing different storage solutions and improving training. We will continue to work on this.
The noble Lords, Lord Berkeley and Lord Kennedy, asked about divergence in the future. The UK cannot diverge from the requirements of the Montreal Convention. We are obliged to follow it, given that we are a party to the convention. The Government have no plans to diverge from the minimum insurance levels which currently exist in the UK and the EU. However, as with all these things, changes may be required in the future as a result of inflation. Any changes made by domestic legislation, rather than by EU legislation as now, would require an affirmative resolution by your Lordships’ House and the other place, and we will of course be consulting the industry.
The Government discuss matters relating to EU exit with the aviation industry, the travel industry and with consumer representatives. The last round-table meeting was on 16 March. No issues were raised in relation to this instrument, because it keeps all elements of the current system in place. Regarding the insurance industry, there is no change to the insurance requirements, so there will be no practical impact on the industry, but we will have ongoing discussions with the industry on EU exit and other matters.
The Government maintain a close and ongoing relationship with the devolved Administrations. Perhaps the word “inform” is not right, because we rightly discuss matters relating to EU exit, even where they are reserved matters. No concerns have been raised in relation to this instrument.
As for the changes made by this instrument, the noble Lord, Lord Foulkes, mentioned the change from “empower to” to “may”. I assure the noble Lord that there is no difference in this regard. Both confer a discretionary power as opposed to a duty, and “may” is simply more often used in UK legislation. The changes in the SI are very minor, as I said in my opening remarks. They relate to a change in the power of the Commission to do with the legal framework of the treaty of Lisbon. We transferred that power to the Secretary of State in the first SI, which was approved by your Lordships’ House.
Finally, the noble Baroness, Lady Randerson, raised the European Commission’s power to object to the continuation of these powers on a five-year basis. We looked at this and considered it already inherent in our system, as Parliament may, at any time, legislate to remove a relevant power—or powers—from the Secretary of State.
I am aware that this was rushed, that I have not covered everything and that I must write, but this instrument ensures that legislation on aviation insurance requirements—an important part of the regulatory framework for civil aviation—continues to work effectively. I commend the regulations to the House.