Package Travel and Linked Travel Arrangements (Amendment) (EU Exit) Regulations 2018

Lord Deben Excerpts

Wednesday 28th November 2018 Lords Chamber

[Baroness Randerson (LD)]

My Lords, this is obviously a case of more preparations for a no-deal Brexit. It might be one where the public could suffer directly, and there will certainly be an impact on small businesses and traders in the travel business as a result of this. The key point is that on Brexit, the UK will no longer benefit from the mutual recognition provided for in the EU package travel directive. The remaining 27 EU states will no longer be required to recognise insolvency protections put in place by the UK 2018 regulations, and the remaining EU states will potentially no longer protect UK travellers under the insolvency protection established by their travel organisers and traders.

So the UK does not consider it appropriate to continue to recognise insolvency protection put in place by traders established in the remaining 27 states. This is a simple tit-for-tat: if they do not recognise ours, we will not recognise theirs. As the Explanatory Memorandum points out, this mutual protection is clearly an economic benefit. It facilitates trade and this SI puts an end to that benefit. The big issue is whether consumers and travellers will still benefit from the same level of protection after Brexit. This is not a theoretical situation; insolvency happens with some regularity in the travel business. In the last calendar year Monarch Airlines collapsed, and there are concerns in today’s press about the profit situation of an organisation as large as Thomas Cook. I do not for one moment suggest that it is in a Monarch situation, but it is a tough world out there.

I have some questions for the Minister. Paragraph 7.1b of the Explanatory Memorandum states that,

“the role of a central contact point serves no purpose once the mutual recognition”,


of the insolvency protection ceases. Indeed, the Minister referred to this in her introduction. The CAA was that central contact point, so can the Minister explain more about what exactly that role has been in the past so that we can understand why it is no longer needed? Referring back to the Monarch situation, I recall that when the airline collapsed, the CAA had a vital co-ordinating role in organising the repatriation of travellers and compensation provisions. Who will do that in future if the CAA no longer acts as a central contact point? I am trying to tease out the precise meaning of that phrase.

My second question refers to UK retailers selling packages organised by EU traders. Let us imagine that I go into a travel agent and buy a package consisting of hotel and bus travel in Europe. If that package is put together by an EU-based company, as opposed to a UK-based company, how does a travel agent ensure that insolvency cover is adequate? Maybe the UK travel agent himself puts together the package by choosing a hotel and bus, but in that case does the UK travel agent have to satisfy himself that both the hotel and the bus company have satisfactory insolvency arrangements? Paragraph 7.1c of the Explanatory Memorandum clearly states:

“This may place additional obligations on UK retailers”.


Paragraph 12.2 states that it,

“could present an additional cost to … retailers”.

Hence I was surprised to read in paragraph 13.2, on regulating small business:

“No steps have been taken to minimise the impact of the requirements on small businesses … as no new requirements are being introduced”.


That seems a direct contradiction, and there will be a serious impact and additional responsibility on small businesses. That is, with respect, clearly incorrect. There is also no mention here of the consumer, and the potential impact on them if UK businesses are unable to satisfy themselves accurately about insolvency cover.

The package travel directive has been a major source of protection for consumers. It has been the foundation for the huge growth of the travel industry, giving people the confidence to undertake what might otherwise be financially and personally risky foreign travel. It is important always to remember the significance of the annual, or perhaps twice-yearly, holiday for the average person in this country. That directive was originally introduced simply because the guarantees it brought were, demonstrably, badly needed. Anything that reduces those guarantees or makes them more complex undermines public confidence, and therefore the travel industry itself.

My question for the Minister is: what about bookings made now, before 29 March 2019, for holidays to be taken after that time? What is the situation and what rules should the travel industry follow at this point? Hundreds of thousands of people are making those bookings, and millions will do so in the next few months. The public need absolute clarity on their rights should something go wrong with the process.

Earlier this year the regulations were updated, as the Minister stated, to take account of the digital age. They now encompass so-called linked travel arrangements, which we welcomed at the time. But LTAs provide a lower level of protection than that provided by traditional packages, and the LTA is itself a complex concept. When we debated this before, we emphasised the importance of clarifying this with the public. The Minister referred to that, but the concept of “ATOL protected” is well understood by the public. For example, at the end of an advert on television it very quickly said, “ATOL protected”. People understand it. What are the Government doing to advertise the new concept of linked travel arrangements and the protection that brings? Do the Government intend after the end of March to continue with the concepts of linked travel arrangements and binary levels of protection that come into place as a result of the EU directive, but which we will, of course, no longer be obliged to follow in the future?

[Lord Deben (Con)]

My Lords, I was fortunate in my education to do a long period of medieval history, in which I read a great deal of complicated theological arguments about angels on the end of a pin—and I am beginning to wonder whether the Government have gone to that position. All these people are working away, trying to create an entirely unnecessary thing because they wish to get rid of something which is both necessary and sensible. My noble friend said that this statutory instrument was both sensible and necessary. It is necessary but it is entirely unsensible. It is not sensible to get rid of a perfectly reasonable mechanism whereby we all recognise each other’s insolvency arrangements.

However, I will take my noble friend to the practical situation. A middle-aged gentleman—unhappily, I am not middle-aged now, but just imagine it—wants to buy a package holiday for his family. He goes into a travel agent, who presents him with a series of opportunities. Is he supposed to say to the travel agent, “Is this bus ride arranged for the island of Corfu covered by the insolvency arrangements here, or has there been an arrangement, or are you covering it?” No, of course—that is up to the travel agent. But what if they do not do it? What happens to the protection for the customer? Can my noble friend say what on earth we are doing here, asking the customer to have to know about this? The customer has to know about it. I apologise to the Minister but the customer does have to know about it, otherwise he is entirely in the hands of the travel agent obeying the rules and understanding them.

That leads me to the second issue. The travel agent has to understand not only what the rules are under this peculiar decision but who, among the people who have put together the package, is covered and who is not. He then has to understand how he gets the coverage for those who are not covered. The Minister may be an expert in insurance and in insolvency, but few travel agents are. We are asking them to discern what they have to do in circumstances when a mixed package is presented to them.

In the notes, the words “may” and “could” are used. The fact is that this is not a matter of “may” or “could”. It will be more expensive—that must be true—and it is not that it “could” cause more difficulties: it will cause more difficulties. Therefore, as the noble Baroness, Lady Randerson, said, the bit which suggests that there is no special arrangement for small businesses is true as far as that goes—but not the second half, which says that no new obligation is placed upon them. There is an obligation; they now have to understand the interior workings of very complicated issues.

On the CAA, if it is not going to be the point of contact, which instead will be the Government, will we perhaps have the undoubted quality of the service provided by the Home Office in these circumstances? The CAA has shown itself extremely well organised to deal with these issues, as the noble Baroness said. Or will the Home Office, or whoever, be the point of contact but the CAA will then carry out what needs to be done? If that is the case, we are again complicating something which ought to be simple.

I am sorry that the Minister has to produce a manifestly barmy proposal. It is barmy because, in a world in which we are so close together, and where it is obviously sensible for us to have mutual recognition of things such as this, we are suggesting that there is some fundamentally sensible reason to remove ourselves from that and to set up a system in which the two people who now have to understand it are the two sets of people least able to do so: the travel agent and the customer. The customer will have to make sure, for his own protection, that the mechanism laid down in this statutory instrument, which is so much more complicated, has in fact been complied with.

I would love to be the fly on the wall during the conversation between the slightly informed customer and the slightly informed travel agent who are trying to work this out together. But what saddens me is that we are complicating something that is simple, straightforward, reasonable and about the world we live in, and are putting in its place something which has a much better position in medieval manuscripts.

--- Later in debate ---

[Lord Deben]

I still do not understand. According to what my noble friend has said, there will be a cost because people will have to do a series of things and they might have to take out insurance, yet paragraph 13 of the Explanatory Memorandum says that there has been no special arrangement for small businesses because no extra burden is placed on them. However, she has just told us that there will be an extra burden. It might not be huge but it is an extra burden, although the Explanatory Memorandum says that there is no extra burden. I do not understand.

[Baroness Vere of Norbiton]

My noble friend is quite right to pick that up. What I have just outlined—in a sufficient amount of detail, I hope—is a de minimis burden. It is a very small, almost negligible amount spread across the entire industry. That is why this is structured as it is. We are talking about £1.4 million to £1.8 million a year for the whole industry, and that is at the highest level because we have assumed a cost for every single one of 1,695 travel agents.

[Baroness Vere of Norbiton]

I take the noble Lord’s point that there might be certain businesses for which an additional cost of between £3,000 and £5,000 will be very difficult, but I believe that the number affected will be very limited. We will look at whether any implications arise from this, although my view is that they will not. When the system is eventually in place—if indeed it needs to be in place—I think that consumers will take added comfort from the fact that it is all in place and that they are covered.

[Lord Deben]

Perhaps my noble friend will be kind enough to remove from the Explanatory Memorandum the paragraph that specifically says that there is no additional weight. As someone who runs a small business that has nothing to do with travel—so I am not declaring an interest—I am just saying that that £3,000 or £4,000 comes straight off the bottom line, and that is really serious for a small business. My noble friend says that in the end the customer will pay, but I come back to the point that there is nothing in this document about the customer and I am really concerned about the way in which we are railroading this stuff through without telling customers about the cost.

[Baroness Vere of Norbiton]

My Lords, the figure of £4,200 that I quoted is an average. As we know, travel agents range from ginormous to very, very small. I am sure that all noble Lords who have ever purchased insurance will know that it depends on the size of the business being insured. It is very unlikely that the cost of this insurance will get anywhere close to £4,000 for a small business with a very small amount of revenue.