Air Travel Organisers’ Licensing Bill

Baroness Randerson Excerpts

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

[Lord Rosser (Lab)]

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

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

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

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

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

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


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

[Baroness Randerson (LD)]

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

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

--- Later in debate ---

Moved by

[Baroness Randerson]

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

[Baroness Randerson]

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

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

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

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

--- Later in debate ---

[Lord Callanan]

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

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

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

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

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

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

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

[Baroness Randerson]

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

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

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

[Lord Callanan]

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

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

[Baroness Randerson]

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

Amendment 3 withdrawn.

--- Later in debate ---

Moved by

[Baroness Randerson]

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

[Baroness Randerson]

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

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

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

--- Later in debate ---

[Lord Callanan]

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

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

[Baroness Randerson]

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

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

[Lord Callanan]

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

[Baroness Randerson]

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

Amendment 5 withdrawn.