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

Lord McNicol of West Kilbride Excerpts

Wednesday 28th November 2018 Lords Chamber

[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for her introduction to this regulation. As I was going through it, I started a note saying that this appeared to be one of the more straightforward regulations but the noble Baroness, Lady Randerson, and the noble Lord, Lord Deben, raised a number of questions and I have a few more. At this stage, there is not a lot to disagree with. It is just sad that we find ourselves in a situation where we are having to rebuild legislation and pieces of text that work well already. I am sure some of my shadow BEIS colleagues will have some points to raise when this is discussed in the other place.

If the Minister is not able to answer my questions, I am more than happy for her to write to me with a fuller explanation. In reading the Explanatory Memorandum accompanying the draft SI, she will be aware—this has been touched on already—that her department has recognised that there will be an additional financial cost for UK businesses arising from this instrument. On that basis, does the Minister not agree that an impact assessment should have been prepared before this debate? Can she inform us what the costs, as stated in the Explanatory Memorandum, will be for businesses?

As a result of these regulations, the mutual recognition of insolvency protection with EU member states will end. As part of the withdrawal negotiations, did the Government attempt to negotiate continued mutual recognition of this? If not, do they intend to try in future? If those mutual recognitions were in place, it would be far simpler than having to move forward as the instrument outlines. This instrument confirms that UK individuals and businesses will no longer benefit from mutual recognition of insolvency protection, and could therefore see a reduction in their consumer rights. In October 2017, the Prime Minister told the Commons that she wanted a new partnership with the European Union based on strong consumer rights. Can the Minister reassure us that, in light of the removal of mutual recognition, we will not see a reduction in consumer rights and protections?

Paragraph 2.3 of the Explanatory Memorandum states that these regulations are being changed to make them work for the protection of travellers after exit. This draft SI covers both package holidays and linked travel arrangements, and I have a specific question about LTAs. As we touched on earlier, an LTA is a holiday that includes two or more travel services, but the protection applies only when the services are booked from one website, shop or call centre, including through travel agents. Many of us now book our holidays online and build our own package holidays using more than one website or operator to arrange flights, hotels, care hire, tourist excursions or travel services. Crucially, these are often paid for separately. As I am sure the Minister will know, these holidays that we build ourselves are therefore not covered. Did she or her department consider extending the definition of LTAs to cover that wider definition, by removing the need for it all to be from a single website or shop, thus giving added protection?

As we all know, if one part of our holiday fails the whole holiday could be ruined. If the definition was expanded slightly to cover this style of holiday, it would offer far more protection for holidaymakers; surely that would be a good thing. I reiterate a point made by the noble Baroness, Lady Randerson, which was also touched upon by the noble Lord, Lord Deben. That is the question of who will check—and where the checks will be made—on the insolvency protection that needs to be offered by EU businesses providing services within the UK. Will this sit with individuals, the travel agent, or the providers, and how will it be monitored?

[Baroness Vere of Norbiton]

I thank noble Lords for their contributions and, once again, I hope to answer as many questions as I can. On the point made by the noble Lord, Lord Deben, I am a little worried that he thinks the world is coming to an end with these regulations. I assure him that it is not, and that this is actually quite a minor change. He talked about why we are removing ourselves from mutual recognition—well, that is only in the context of no deal. If we have a deal, mutual recognition may well remain on the table in the future and, as part of the negotiations for the future economic partnership, we will have mutual recognition. Even without mutual recognition, we must understand that a lot of people go on holiday outside the EU where there is no mutual recognition. This concept is not entirely unknown to the providers of travel services and to consumers.

Nobel Lords have raised a number of issues. I hope to put their minds at rest as to what the different impacts will be; it is clear that there might be some impacts and it is important that we set out exactly what they are. The first issue I address is the impact on UK retailers—this was raised by the noble Baroness, Lady Randerson; indeed many noble Lords have spoken on it—and what they will have to do to make sure they have coverage. The first thing they can do is look at the contracts they have with their suppliers across the EU, providing all sorts of different services. They can look at their contracts and they might adjust them to say that insolvency protection up to a certain standard is suitable for the travel agency and needs to be in place.

The impact assessment assumes that this can be achieved. Given that many traders will have experience of this in non-EU countries, it assumes that a person would need maybe three hours of training and advice to get to that stage. After a couple of hours of legal advice, the contracts could be amended for all participants within the travel arrangement. Some noble Lords may be thinking that surely there will be some providers who cannot provide the appropriate level of insolvency protection—that is indeed the case and our impact assessment looked at that. In such cases, it is possible to buy insurance; this is done with a fair amount of frequency within the sector—it is not unknown. Our impact assessment, which is a little higher than it should be, assumes that all 1,695 travel agents will be impacted by this; of course, that is clearly not the case. We assumed that insurance would be needed in 20% to 25% of cases and that, on average, it would cost £4,200 per business. That is how we got to the figure of between £1.4 million and £1.8 million—

[Lord McNicol of West Kilbride]

The Explanatory Memorandum says that there is no associated impact assessment for this legislation. Will the Minister please clarify?

[Baroness Vere of Norbiton]

In circumstances such as this, the impact assessment would not usually be published. There is an impact assessment but, because it falls below the £5 million threshold, it is not published in detail. I thought noble Lords might be interested to hear how we got to these figures because it is important to understand that. Within the context of the revenue as a whole for this sector, clearly it is not a large amount. I would expect the trade associations to get involved in this area and to help their members to sort it out in a sensible and swift fashion.

[Lord McNicol of West Kilbride]

The point about trade associations was one that I scrubbed out. The Explanatory Memorandum says that there was no consultation. Can the Minister clarify whether there was consultation with the individual companies or trade associations?

[Baroness Vere of Norbiton]

I am afraid that I am not currently able to clarify that but I will write to the noble Lord if anything comes to light. However, from my experience of running a trade association in the past, albeit not one relating to holidays, I can say that this is exactly the sort of thing that trade associations would get involved in. If I were a member, I would expect them to be right on top of this and getting to grips with it.