Tuesday 5th September 2017
(6 years, 7 months ago)
Lords ChamberAir Travel Organisers' Licensing Act 2017 View all Air Travel Organisers' Licensing Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 11 July 2017 - (11 Jul 2017)
The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)
My Lords, the UK has one of the most innovative and advanced holiday sectors in the world and one of the biggest markets in Europe. That is something that we should be immensely proud of. The UK has been a leader in this sector, going back some 175 years, when Thomas Cook first had the foresight to offer a one-day excursion on a steam train. I am pleased to say that the UK continues to lead the way. Overall, tourism now contributes close to £121 billion to our economy annually, with outbound tourism contributing around £30 billion. The sector supports millions of jobs and involves thousands of companies, from small businesses to large multinational brands, both online and on the high street.
Strong consumer protection is vital to underpin confidence in this important sector. As the Minister of State for Transport said in the other place, this is a Government who recognise the value of providing UK businesses with the best possible opportunities to grow. We also recognise the value in ensuring that consumer protections keep pace with the new ways in which people book their holidays. These points ring as true now as when they were made earlier this year. That is why I have introduced to the House the Air Travel Organisers’ Licensing Bill, which will ensure that consumer protection for holidaymakers is modernised to match developments in the travel market. I very much hope that the debate we have today will match the very positive discussion in the other place. I would go as far as to say that there was cross-party support for ensuring that consumer protection reflects the changes in the travel sector.
Consumer protection is an important pillar of the holiday sector, due to a number of characteristics of the market. Holidays are frequently booked and paid for many months in advance of travel, and the consumer may often be unaware of the financial stability of their holiday providers.
The impacts from a failure of a travel company can be twofold. Consumers may experience a financial loss from a cancelled holiday or significant difficulties from being stranded abroad.
The ATOL scheme was originally set up in the 1970s to provide protection in such situations. It does this in two ways. First, travel firms that sell flight packages in the UK must hold an ATOL licence, issued by the Civil Aviation Authority. This helps to regulate entry into the market and filter out any companies that are not financially sound. The scheme also acts as a fund to compensate consumers who might be caught up in a failure. ATOL-licensed companies must pay a small levy—currently £2.50—for each person protected by the ATOL scheme. This money is then held in the Air Travel Trust Fund and used by the CAA to ensure that consumers are returned home or refunded when a company fails.
The scheme plays an important role in the UK travel sector, providing peace of mind to more than 20 million people every year. Since the 1990s, it has also been a key way in which the UK has implemented the European package travel directive. Fortunately, failure of travel companies is relatively rare, but it does happen. In the last financial year alone, 19 ATOL holders collapsed. In each of these situations, the Civil Aviation Authority stepped in to deliver protection to consumers through the ATOL scheme.
I am sure that many noble Lords will also be aware of the failure of the Spanish online travel agent, Lowcost Holidays, last summer. When this company failed, it was reported that there were 27,000 customers on holiday and more than 100,000 customers who were yet to travel. Although many of these customers were from the UK, the company did not have ATOL protection as it was regulated under the Spanish regime.
The collapse of companies such as Lowcost Holidays is an important reminder of the need to ensure that consumer protection keeps pace with the way people book their holidays now. While many people still enjoy booking a holiday in their local high-street travel agent, the market has diversified considerably with the growth of the internet and smart technologies. Indeed, a recent ABTA survey estimated that about 75% of UK consumers now book their holidays over the internet.
The growth in online trade means that customers have a much wider choice of providers, including those based overseas. However, it is clear from the Lowcost Holidays situation that not every travel provider is currently covered by the same level of protection, and inconsistencies apply across borders.
That is why the Government and the CAA took initial steps in 2012 to update the ATOL scheme. This introduced the ATOL flight-plus category to bring ATOL protection to the many consumers who book mix-and-match holidays online, in addition to those who buy traditional package holidays on the high street.
We also introduced the ATOL certificate, so that consumers know when they have booked an ATOL-protected holiday and who to contact if their travel provider fails. These interventions have had a positive impact in extending consumer protection, levelling the playing field for businesses and improving clarity for all.
It is important that we continue to build upon these changes, and I am pleased that a similar view is now held across Europe. In particular, a new EU package travel directive was agreed in 2015 to bring similar improvements to consumer protection across the whole of the EU. This will need to be implemented into the UK’s package travel regulations by 1 January 2018.
Your Lordships may ask why the Government are implementing these changes, given that we will shortly be leaving the European Union. First, this Government have continually supported the rationale for updating the package travel directive. Secondly, and of equal importance, the UK is of course still a member state of the European Union and continues to honour all of its rights and obligations.
The Bill will benefit businesses and consumers alike. For consumers, it will update the protection of holidays, and for businesses it will ensure that there is a consistent approach across Europe, making it easier for British companies to trade across borders. Broadly speaking, it will mean that the protection offered across Europe will be closer to the protection that we have had here in the UK since 2012. It will also extend the scope of protection to a new concept of linked travel arrangements, which is designed to provide protection for consumers even when they make less formal holiday arrangements—for example, when one trader sells a flight, and they then direct the consumer to another trader to complete the booking of a hotel. These are not pre-arranged packages, but they often compete closely with traditional package deals.
Overall, the new directive has the potential to provide protection to a greater number of UK consumers, whether they purchase from a company established in the UK or overseas. This will also help to level the playing field for companies, whether they are based in the UK or overseas and whether they operate on the high street or online. The broadened scope will be underpinned by information requirements, so that consumers have better information about their holiday and how they are protected.
This Bill is the first step in updating the UK’s regulations to bring the new directive into force by July 2018. The four clauses will enable the ATOL scheme to be aligned with the updated package travel regulations and ensure that UK consumers and businesses can enjoy the benefits from these changes. Combined, the clauses will mean that UK-established companies are able to sell holidays more easily throughout Europe; they will be able to protect these holidays through the ATOL scheme, so they do not need to comply with different schemes in each country. The Bill will also extend the Civil Aviation Authority’s powers to request information from businesses, so that they are more able to regulate the scheme and this cross-border activity more effectively.
Finally, the Bill will allow the scheme to be able to adapt more effectively to changes in the travel market. At present, the ATOL scheme is based around a single fund, the Air Travel Trust. While this one-size-fits-all approach has worked well to date, it may not always be the best approach in future. The Bill will provide more flexibility to set up new trust arrangements to respond more effectively to an increasingly diverse pool of risks. But I can be clear that this power will not provide Ministers with a blank cheque. Any regulations brought forward would require extensive consultation and ultimately an affirmative resolution procedure, so that both Houses have an opportunity to scrutinise their content and effect.
Overall, the updates that we are making to the ATOL and package travel regulations will mean consumer protection can extend to a broader range of holidays. It will mean that protection can be provided for traditional and online package holidays, and also looser combinations of travel, which have previously been out of scope.
Of course, we also need to be mindful that the regulatory landscape will need to be able to adapt to future changes in our relationship with the European Union. This measure is entirely in keeping with that principle; it will enable the ATOL scheme to be aligned with the package travel directive in 2018, with minimal impact for UK consumers and businesses. But the ATOL legislation and protection will continue to exist and remain in place as we leave the EU. ATOL is enshrined in an Act of this Parliament, and only this Parliament can change that. As I mentioned previously, the travel sector contributes significantly to the British economy. Implementing the PTD will support British businesses to trade across borders and provide the best deal for our consumers. By extending the scope of ATOL, UK businesses will be able to provide ATOL-protected holidays across the whole of the EU. Consumer protections are a key priority for this Government, and this Bill will further this aim, an aim that transcends the Brexit negotiations. In short, we are legislating now to ensure that we continue to have strong consumer protections in place as we leave the EU.
The UK has always been a leader when it comes to providing protection for holidaymakers, and this Bill will ensure the UK continues to be a leader when we leave the EU. The Bill will provide UK businesses with the opportunity to expand and grow, and provide a framework to ensure that ATOL can remain flexible enough to cope with future trends. But most importantly, it will ensure that the UK’s consumer protection for holidays can keep pace with changes in the travel market. I beg to move.
Lord Flight (Con)
My Lords, I pay tribute to an extremely clear summary of the positive reasons for ATOL, which my noble friend Lord Callanan has just described. I am not quite sure why a colleague suggested that I should speak in this debate—whether it was because of my surname or because somebody knew that I was one of the first people to benefit from ATOL. Some 43 years ago, I was on a holiday organised by Horizon when it went bust. Luckily, ATOL had come in a couple of years before and dealt with everything extremely well.
My noble friend Lord Callanan made the important point that this is also very sensible commerce. ATOL has been one factor underpinning the UK being a leader in the holiday industry and the changes coming through will strengthen that. There is no need for lengthy debate: there is cross-party support for this practical legislation which is good commercial news. The Bill updates ATOL cover to include online booking and booking involving separate organisations. It extends its scope and meets the requirements of the EU package travel directive. It extends consumer protection beyond the traditional package holidays organised by tour operators to include combinations of flights and accommodation booked at the same time, which, as my noble friend pointed out, are now some 75% of the market.
It is particularly positive that the Bill, combined with the EU directive, should be extremely good news for UK holiday companies within the EU, as they will be offering a much better overall package than any other category of company. The improvements and extensions of ATOL will add to that. The protection provided is compensation for loss of holidays where the airline or air transporter goes bust, and the return of the cost of travel and accommodation if that has been lost. It is clear that ATOL applies only where there is flight transport. It is not entirely clear on the coverage of other items such as hotel accommodation or even taxi transport, but it is implicit that compensation will be made if these have been paid for and lost.
I shall focus on two other aspects of travel insurance where compensation is a difficult issue and needs review. Two recent cases—one personal and one relating to a friend—illustrate my point. I was scheduled to visit Burma, but a back operation had unfortunately not been successful and I had to have another at relatively short notice. The surgeon advised that it was not sensible for me to go. I had taken out travel insurance, but the insurers had a bit of illogical small print which questioned whether I was covered; I continue to fight the case. The provider of the Burma trip offered no compensation for my having to cancel. Its insurance arrangements did not cover anyone who had to withdraw because the plane was chartered, not a regular service. At present, the compensation arrangements are not operating satisfactorily when people have to cancel a flight or holiday for health reasons.
In the second case, the son of some friends broke a ligament in one leg during school sport. The whole family had to cancel their holiday but they were advised that there was no compensation for loss of the air tickets because they had originally been bought via a charter arrangement, not a regular package.
Therefore, there is a need across the industry for arrangements for protection against having to cancel a flight, whatever the cause, and standard insurance cover might best be automatically provided by the party organising the flight at the time of purchase. In the case of cancellation as a result of illness, again one might look at obliging airlines to refund up to 90% of the cost and potentially to build a specific charge for this extra protection into the cost. As my noble friend Lord Callanan pointed out, the Bill enables the Secretary of State to establish different protection trusts to cover different requirements.
It is interesting that the UK has made constructive use of public sector provision combined with private sector provision in this sort of area, where insurance companies complain that it is very difficult to provide the same cover unless a standard requirement is laid down by government. I can think of two other areas in different contexts where the state organises standard insurance cover. As my noble friend Lord Callanan pointed out, this is an interesting example of where the UK industry should do even better in the EU notwithstanding Brexit as the service we have to offer will be highly competitive vis-à-vis that provided by other countries.
To conclude, this is an important area in commercial and human terms. I trust that the Government will keep under review other aspects of travel insurance such as those I have described, which need better organisation than they currently have.
Baroness Randerson (LD)
My Lords, this Bill is uncontroversial in its principles and most of its details. I express my gratitude to the Minister for the briefing that he provided earlier today, which was very helpful.
This is the sort of Bill that in normal political times would pass through this place very swiftly indeed. However, we are not, of course, in normal political times and I fear that the Government are keen to distract us from the big issue with something on which we can all agree. I think that we will agree across party that this is a worthwhile, useful and important updating of current legislation. Any controversy associated with the Bill lies in what it does not contain as these measures started life as part of the Vehicle Technology and Aviation Bill. I regret that this Bill is now so narrow in scope that we cannot talk about other important aspects associated with transport and aviation such as the danger posed by drones and lasers, which we could have talked about under the other Bill. After all, we have few enough opportunities to discuss transport issues in this House.
We should, of course, also discuss the impact of Brexit on our aviation industry, but this Bill does not provide that opportunity in full either. It is rather ironic that the first piece of legislation discussed in the other place following the general election was this Bill, which is designed to improve our links with the rest of the EU and the single market. This Bill makes it easier for UK holiday companies to attract customers living in other EU countries by allowing companies to operate within UK law rather than have to adopt 28 different sets of regulations. The Government’s intention to leave the single market means therefore that a great chunk of this legislation will probably become irrelevant within two years and life will again become difficult for travel companies wanting to trade with the rest of Europe. Package holiday companies face a period of intense uncertainty. What regulations will they have to follow after 2018 when operating abroad? We must remember that this is an industry which, by its nature, plans and books seats and accommodation years in advance. Indeed, many customers book their holidays at least one year in advance, and sometimes two, so the operators have to plan even further in advance. They need to know now what will happen in 2019; yet here we are, well over a year on from the referendum, and the Government are still arguing about the rules of the game, having wasted months on an unnecessary general election and now on internal squabbles.
In fact, this modest little Bill is a parable for the Government’s, and our country’s, problems with Brexit. The Bill updates the rules on compensation for consumers originally set down, as the Minister said, in the Civil Aviation Act 1982. It is needed because the world has changed since 1982. Vastly more of us travel abroad— 20 million holidaymakers per year are protected by ATOL. Most people no longer go into a travel agent, with more than 80% of us buying online. We travel across borders from one country to another almost without noticing—indeed, if you are travelling between the Schengen zone countries there is effectively no border to notice. We buy packages of travel much more flexibly, mixing and matching to suit ourselves. All of this reflects modern life, and any attempt to put the clock back will cause serious dislocation to the travel industry and serious inconvenience to the travelling public. But that is, in fact, what the Government intend to try to do. A decision to leave the single market and to go for hard Brexit means that we are trying to recreate the Britain of yesteryear, trying to reimpose those hard borders and the much more difficult decisions that we had to make in those days.
On the detail of the Bill, the Government rightly wish to ensure that we remain compliant with the updated EU package travel directive. We welcome the mutual recognition incorporated in Clause 1 which extends the scope of ATOL to provide protection to customers in the EEA who have bought package holidays from UK companies. This simplifies regulations for UK businesses and will make it easier for them to gain customers abroad, a fundamental principle of the single market.
Clause 2 allows the Government to create different protection schemes for different types of package holidays, to either extend ATOL or create a new scheme for customers purchasing linked travel arrangements. LTAs simply did not exist in 1982; they are essentially a creation of the internet. We welcome the principle that LTAs will be covered, but we question whether a separate scheme is needed; we fear that it could provide inferior rights and compensation than those provided to purchasers of full packages. We will be exploring this point in Committee.
The travel industry does not seem convinced that a separate scheme is needed, and the Government are hazy about what it should encompass or, indeed, whether it is needed. The Bill simply gives the Government the power to create the scheme, and I want a bit more certainty about this. I am reluctant to give the Government any more powers to do anything of this nature because of the mess they have made of so many of the powers they already have. I fear that a second protection scheme will simply encourage companies to restructure their offer to take the most advantageous position for them. I would welcome assurances from the Minister that the Government have given serious consideration to that point so that companies will not be enabled to play the market in that way to the disadvantage of consumers. After all, consumers do not necessarily know whether they are buying a full package or a linked travel arrangement. People do not speak in those terms when they discuss their summer holidays.
The power of a trust fund lies in the accumulated total which comes from many small individual receipts—in this case, £2.50 per traveller. I fear that it could be undermined if the concept is splintered, as the Government think they might decide to do. I am sure that the Minister will confirm that there have been times in the past when the existing ATOL scheme has been under financial pressure. I fear that splintering it into two different funds could intensify pressure.
By modernising the system and harmonising our rules with the rest of the EU, the Bill will help our aviation sector to flourish. We have the third largest aviation sector in the world and the largest in Europe. After all, 49% of passengers from the UK head to the EU, as do 54% of scheduled flights. Our tourism industry supports half a million jobs, and aviation is in a unique position legally. EU rules mean that any EU airline can operate freely within and between EU countries—a point I have previously raised here on several occasions. The EU has also negotiated other agreements across the world, of which we are part by virtue of our EU membership. The Government need to develop a sense of urgency about all this. The current aviation agreements need replacing before we leave the EU, otherwise, as Michael O’Leary said recently, our aviation industry will simply be grounded. If that happens, of course not only our holidays will be messed up. Hundreds of thousands of tourism and aviation jobs will be at risk, and it will fundamentally undermine our whole trade sector, because 40% of our trade goes by air.
Therefore, the Bill is an important step forward for consumers, as well as for the holiday industry—although people also get linked travel arrangements for business purposes. However, it is only one part of the massive jigsaw the Government face to keep our aviation sector flying and flourishing in the future.
Lord Rosser (Lab)
My Lords, I thank the Minister for his explanation of the purpose and content of the Bill, which we support, although that does not mean that we will have no issues to pursue during the further stages of the Bill. I am not quite sure whether the numerical shortage of Back-Bench speakers is despite or because of who the Front-Bench speakers are.
In a situation where those booking holidays do so many weeks or even months in advance, and often do so by paying up front in a situation where services are frequently provided by third parties, to ensure up-to-date and effective appropriate protection for airline passengers in the event of the bankruptcy of their travel company is an objective with which I am sure all agree.
Indeed, in the light of the problems there have been at times this year at some of our airports as a result of difficulties over, for example, IT systems and the enormous adverse impact that that can have on passengers, one is tempted to feel that maybe the protection offered by statute is not as all-embracing as it might be. The consumer, we are led to believe, is king. I am not sure that air travellers always feel that that is the case.
In his letter to Members of this House in July, the Minister states that this Bill is intended to modernise the Air Travel Organisers’ Licensing consumer protection scheme for package holidays that include a flight. The ATOL scheme was introduced in the 1970s for UK holidaymakers flying overseas and, as the Minister said, was most recently updated in 2012. The ATOL scheme is also a crucial means by which UK businesses can meet their obligations to have insolvency protection under EU directives.
As the noble Baroness, Lady Randerson, said, the content of this Bill originally formed part of the Vehicle Technology and Aviation Bill, which met a sticky end as a result of the Prime Minister’s sudden desire to hold a snap election. Perhaps the Minister can tell us whether, and when, all the other parts of the Vehicle Technology and Aviation Bill are likely to reappear and whether the impact of drones and laser beams on the safety of aircraft will also then be addressed.
ATOL is a statutory financial protection scheme managed by the Civil Aviation Authority on behalf of the Government and at present applies only to flights with accommodation sold in the United Kingdom. Businesses selling air holiday packages, or flight-only sales by third parties, in the UK are required by law to hold an ATOL licence. Should an ATOL-licensed firm become insolvent, the Civil Aviation Authority can refund protected customers or, if they are already on holiday, ensure that they can get back home. As has already been said, the scheme is funded by contributions made by travel companies into the Air Travel Trust Fund at the rate of £2.50 for each person they book on a holiday. It has been estimated that the ATOL scheme protects over 20 million holidaymakers each year.
As we know, in November 2015 the European Union adopted a revised directive on package travel and linked travel arrangements, and member states—which, contrary to the belief of some, still include us—have until 1 January 2018 to implement the directive, which will apply from 1 July 2018. The Government supported the updating of the EU package travel directive as it was consistent with our own ATOL protections and should provide a consistent approach to protection, including in respect of holidays booked online.
The revised directive takes account of the major changes that have occurred over the last 20 years or so in the way that holidays are bought and sold with the growth of the internet and mobile phone technology. In particular, the internet has enabled people to mix and match the components of their holiday in a way that often falls outside the scope of ATOL and the current EU directive. One survey has estimated that about 75% of UK customers now book their holidays over the internet. This has led to a fall in ATOL sales as a share of all leisure flights from over 90% in 1998 to, I believe, around 50% more recently.
One aim of the 2015 EU directive is to bring greater clarity on what constitutes a package holiday, with a further objective being to harmonise protection within the EU. The first clause of the Bill updates ATOL to ensure that it is harmonised with the recent EU directive. Many of the changes will be covered in regulations, but a wider range of operators, including more dynamic package providers which offer a greater choice of destinations, activities and providers and enable people to tailor bespoke packages for themselves, will probably be covered under the changes, bringing protection to many more UK holidaymakers not covered under the existing ATOL provisions.
In addition, the requirement for travel companies to be in line with standards at “place of establishment” instead of at “place of sale” will mean that UK companies can sell more easily across Europe by simply adhering to the widely respected ATOL arrangements and requirements. Existing ATOL legislation applies only when the first leg of a relevant flight booking departs from a UK airport. However, will the Minister say whether this change will also mean that EU-based companies selling in the UK will have to adhere only to an ATOL-equivalent protection laid down in the member state where the business is based, which could have processes and timescales for recompense distinctly different from what many UK consumers would expect under our ATOL arrangements? Some 500,000 passengers could be affected.
The second clause relates to the Air Travel Trust, the legal vehicle used to hold the money to refund consumers under ATOL, giving the Secretary of State power to define separate trust arrangements to reflect different market models. This change is not directly relevant to the EU regulation addressed in the first clause, but is a dormant power that would enable the Government to make wholesale change to the structure and applicability of the ATOL brand, subject only to the affirmative resolution. Will the Minister say what consultation—and with whom—will take place prior to the regulations under this clause being laid by the Secretary of State, and will a full impact assessment be undertaken? What separate trust arrangements to reflect different market models are the Government contemplating under Clause 2, and why, and will they provide more, less or the same protection as is provided to consumers under the present trust arrangements?
The third clause extends the scope of the powers under which the Civil Aviation Authority is currently able to request information. Specifically, the clause would ensure that the information power would apply to any airlines established in the UK selling relevant holidays in the EEA that are not covered by the Civil Aviation Act 1982.
The last clause, Clause 4, provides for commencement of the provisions of the Bill, with Clause 3 coming into force on whatever day or days the Secretary of State decides by regulations, and the other provisions coming into force on the day on which the Bill receives Royal Assent. The comment has already been made that the travel industry is one that has to plan, and to sell holidays, up to 18 months or more ahead. Much of the detail implementing the Bill will be done through secondary legislation, the content of which at the moment is unclear. What discussions—and with whom—have taken place and are taking place on the detail of the secondary legislation and when is it expected that secondary legislation will appear, assuming that this Bill becomes an Act?
Further, what guarantees can the Government provide that departure from the EU will not result in any of the existing rights and protections for passengers provided for in EU law, including those provided for in this Bill, being weakened or diminished? Finally, what guarantees can the Government offer the airline industry on the operating environment situation following our withdrawal from the EU, bearing in mind that aviation does not even have World Trade Organization rules to fall back on?
We support the aims and objectives of the Bill, but there are a number of points on which more detail is needed from the Government. The purpose of the Bill will be somewhat diminished if our aviation industry is in trouble following withdrawal from the European Union.
Lord Callanan
I thank the small number of noble Lords who contributed to the debate this afternoon. I hope, like the noble Lord, Lord Rosser, that it is because of the quality of the Front-Bench contributions that other noble Lords decided not to contribute, but I suspect it probably has more to do with being the first day back after the Recess. Nevertheless, it is about the quality rather than the quantity of the contributions. It has been a good, brief debate.
The travel market has moved on significantly in the past decade, with changes to the way holidays are offered and sold. The market has diversified with the growth of the internet and smart technologies, as many Members have pointed out. Consumers now have a great many options at their fingertips to buy holidays and to put together their own packages. As the methods for selling holidays modernise, we must also update and modernise the schemes and laws that protect them. As I said in my opening remarks, this Bill is a vehicle by which the UK will implement the EU package travel directive. It will ensure that informally booked holidays will have protection similar to that for traditional package holidays, regardless of whether they are booked on the high street or online. This Bill complements the steps we took to update the ATOL scheme in 2012 and is required to ensure that consumer protection can keep pace with the changing travel market.
While it is fair to say that the Bill may not be the largest in terms of clauses, not many Bills can bring peace of mind to so many people. The scheme protects more than 20 million people each year by regulating entry into the market and acting as a fund to compensate consumers who might be caught up in a failure. It has provided robust consumer protection for more than 40 years and is held in high esteem by the travel industry and consumers alike. It has been able to do so by evolving over time and adapting to changes in the travel market. The Bill will help to align our regulatory framework with the changes coming in across the EU in 2018. The combined effect of the clauses will help to cut red tape, allowing UK-established companies to sell holidays more easily throughout Europe. They will be able to protect more holidays through the ATOL scheme, removing the need to comply with different schemes in each member state.
I shall move on to some of the question that have been asked. The noble Lord, Lord Rosser, raised the point about the future of consumer protection once the UK leaves the EU. The UK has always led the way in protecting holidaymakers. We remain committed to consumer protection and will continue to do so after Brexit. For example, we established the ATOL scheme two decades before the original package travel directive was agreed across Europe. ATOL is of course enshrined in UK legislation and will remain on the statute book until such time as these Houses decide otherwise, regardless of what happens with Brexit. We also made improvements to the scheme in 2012 which are now being echoed in the new package travel directive that was passed by the EU in 2015. So I think that I can claim some authority here when I say that we have a track record over many years of being at the forefront of consumer protection in this field and that we hope to remain so.
The Bill will extend the Civil Aviation Authority’s information powers so that it is more able to regulate the scheme and cross-border activity. It will update the ATOL powers so that they align with the scope of the directive and will provide more flexibility to set up new trust arrangements and so on to respond more effectively to an increasingly diverse pool of risks. The scheme now needs to manage a greater variety of risks and business models, and the update the Bill will make to ATOL will mean that consumer protection can extend to a broader range of holidays. This will mean that protection is provided for traditional and online package holidays as well as for the looser combinations of travel which had previously been out of scope. Of course, we must be mindful that the regulatory landscape will need to be able to adapt to future changes in our relationship with the EU, but we will also retain flexibility in the ATOL regulations to adapt to future changes in our relationship, thus ensuring that we continue to have strong consumer protections in place as we leave the European Union. These measures will ensure that the scheme remains fit for today’s world, a world in which digital technologies are offering increasing opportunities for consumers to select the way they purchase a holiday.
Moving on to some of the other questions that were asked, my noble friend Lord Flight reflected on his Burma experience. I hope that he has now recovered from his back operation and his problems with insurance. It is important to say that the ATOL scheme is not designed to replace holiday insurance and we do not want to give consumers the impression that it should or might do so. People should still take out holiday insurance, ideally before they book their holiday, which for its relatively modest cost provides the considerable protections they will need above and beyond the ATOL scheme. Arrangements for flight-only and for airlines are regulated separately, and I am sorry that my noble friend was not able to take advantage of them with his Burma experiences. I am not sure that there are any package holidays to Burma that would be covered by the ATOL regulations.
In response to the point made by the noble Baroness, Lady Randerson, no distraction is intended from any other worthy causes. She got her points in about Brexit anyway, so maybe she could cut and paste them and repeat them in the Brexit debate later this afternoon and save everyone the trouble of listening to them again, worthy though they were. She also asked about drones and lasers, a point also raised by the noble Lord, Lord Rosser. I announced just before the start of the summer vacation the measures we intend to take on drones. We are currently working on further measures to deal with the scourge of laser pens. I cannot be more specific on a timescale at the moment, but I assure the noble Lord that as soon as we can we can provide precise timings I will do so, but we recognise the threat and have published measures on what we intend to do on drones. We will act as soon as is possible.
The noble Baroness, Lady Randerson, also said she thought there was a degree of irrelevancy about the Bill. I am afraid I do not agree. We need to have protection measures in place. As I said, it will exist long after we leave the EU. We were 20 years in advance of the EU package travel directive and our protections will remain in place afterwards.
The noble Baroness raised so-called regulatory shopping. This is a concern, but we have seen no evidence of it so far. Indeed, the package travel directive in many respects implements what we already have in the UK, so it will make it less likely that companies can move to a lower-regulation environment in the rest of the EU. It will raise guarantee standards in countries such as Spain effectively to what we already have in the United Kingdom, so it will prevent the problems associated with Lowcost Holidays that I mentioned earlier.
The noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, mentioned the new trust arrangements. They are right to do so. I hope I will be able to reassure them. We have no plans to establish any other trust schemes beyond what we already have. Indeed, in response to the noble Baroness’s question, we have £175 million in the ATOL scheme, but there have been periods when it has been in deficit. I think I am right in saying that up until 2011 the scheme was in deficit and the Government needed to provide a guarantee for a loan to be taken out to refund failures at that time. Since then, we have had proportionately fewer failures and proportionately more people paying in, so the fund is now in considerable surplus.
We have no plans to change the contribution, but we propose to give ourselves the power to respond innovatively to changes in the market. As I said, we have no plans to do so but it is possible and we would not want to exclude the ability to establish new trust fund arrangements if new and innovative models were to be produced. If we did, we would consult extensively with the scheme providers in the CAA, and with package tour operators, various internet firms, et cetera. Of course, such arrangements would be subject to affirmative resolutions in both Houses.
Lord Rosser
To pursue the point on the purpose of Clause 2, the Minister has said the Government have no plans at present, but then goes on to refer to possible changes in the future. Will he give some examples of the changes that might take place that would necessitate using the powers under Clause 2?
Lord Callanan
I suppose the short answer to that question is no. If I knew what innovative solutions and changes might come up, we would allow for them now. For example, if a particularly new and what we would consider riskier form of package could be developed, we would maybe want to set up a larger contribution protection than the £2.50 that applies to other schemes. As I said, we will consult extensively with all providers and with the CAA, and the arrangements will be subject to the affirmative resolutions of this House. As I said, these models have not been developed yet, so we do not know what they might be, but we think it prudent to allow for the possibility that they may be developed in the future, even though we have no plans to do so at the moment.
I believe I have responded to all the questions I was asked—somebody will no doubt shout if I have not.
Lord Rosser
The Minister may feel he has answered this already, in which case he will obviously say so, but I asked about the secondary legislation, what consultations have already taken place and with whom, and what consultations are currently taking place. I also asked about the production of an impact assessment, because the concern is that there may not be proper consultation or an impact assessment, and we shall have just an affirmative resolution for what are, or could be, quite extensive powers and changes.
Lord Callanan
As I said, we can give an undertaking to consult extensively if we propose to do this in the future. I will write to the noble Lord with details of any consultations that have already been carried out; I hope he will consider that an adequate response. I think I have responded to the points that others put to me and I ask the House to give the Bill a Second Reading.