Holiday Pricing

Debate between Damian Hinds and Toby Perkins

Monday 24th February 2014 Westminster Hall

[Toby Perkins]

I congratulate the hon. Gentleman on repeating my suggestion.

It is usual during winding-up speeches to talk about what has been mentioned during the debate, but I will talk about what the hon. Member for Birmingham, Yardley did not talk about: the tourism industry. An important point that some colleagues mentioned is that holiday accommodation is available for 52 weeks a year, or slightly less, and there is pressure to push the customer base into a shorter and shorter period. The petition refers to profiteering holiday companies exploiting people, but that is not the reality. If a crude cap were introduced, they might retain the current price in August but they would be unable to reduce the price in April. The important question is whether people would be better off or whether those who can go away at different times would not get cheaper holidays.

The hon. Member for East Hampshire (Damian Hinds) confessed his sins—it is always good for a Member of Parliament to do that. If he did not quite ask for forgiveness, he at least offered mitigating circumstances. The debate involves the many people who cannot go away during school holidays, as well as the many who can go away only during school holidays—for example, teachers and anyone who works in the education sector and so on. If we increase the pressure, we will push up the cost of their holidays too. The debate started 18 months ago, or 40-odd years ago, depending on how people look at it, but certainly prior to the proposed changes, which, if anything, will push prices up further. What was a problem 18 months ago will be an even bigger problem in a year or two.

My hon. Friend the Member for Leeds East (Mr Mudie) asked why we are talking about the matter now and why it has become so important. I will touch on that, but in his broader view of the debate he said that he supported the petition but not necessarily the proposed remedy. That reflected what many other hon. Members said.

The hon. Member for Suffolk Coastal (Dr Coffey) focused on the semantics of “special” and “exceptional” and seemed to question whether there has been a change in policy. The previous Government introduced fines for people who took their children out of school without authorisation. The Secretary of State was clear that he wanted his direction following the statutory instrument to be seen as a change of policy. Head teachers saw it as that, and many in my constituency wrote to parents saying that the policy had changed and that there would be no discretion other than in narrow and exceptional circumstances. That was clearly the intention of the Secretary of State’s policy.

The debate has been consensual and sensible. It has shown that we all believe strongly and passionately that it is vital for our children to be in school for the maximum amount of time, that standards should be resilient and that parents should recognise their responsibility. We recognise that the present situation is desperate because prices have risen faster than wages in 41 of the last 42 months, and families are feeling the pinch. We are discussing another aspect of that cost-of-living crisis. I intended to give some examples of how prices have increased, but many hon. Members have alluded to that so I need not do so. However, the extent of price differences during the high and low seasons is huge and the success of the e-petition calling for swift action is not surprising.

The Association of British Travel Agents has made it clear that price fluctuations are the commercial reality of running a business in a seasonal market, and we understand that. The hon. Member for East Hampshire asked whether the Labour party is proposing a crude cap and rightly gave some reasons why that would be difficult. We do not have a price control policy at a macro level, but that does not mean that there is never a reason to look into whether there is a properly functioning competitive market. I will touch on that.

Many parents believe that they are exploited by the holiday industry, which uses the tight limits on when they can travel to overcharge them, and the huge cost differentials reflect that. However, there have been no thorough studies of the issue in recent years, so it is hard to get to the bottom of the problem and the extent of exploitation. The lack of such a study seems at odds with the Government’s intention of addressing consumer protection concerns. I should be grateful if the Minister commented on whether the apparent contradiction of one group of consumers apparently paying over the odds to subsidise another group is questionable under our consumer protection laws.

Consumer law has strong protections to ensure that the public are charged a reasonable price for a service. That presumably includes arranging a holiday, and does not exempt the law of supply and demand. That is an interesting question for the Government. The purpose of the Consumer Rights Bill is to make those rules clearer, but there is a glaring omission because it does not give consumers or consumer groups any power to access the information they need to check whether that is the case. Does the Minister accept that the only way to resolve that confusion more broadly is to have a proper analysis of holiday prices, and do the Government plan to conduct such research? Was there any research prior to the change of policy?

The situation demonstrates the consequences when there is no organisation to stand up for the rights of consumers as a group. The hon. Member for Birmingham, Yardley suggested that an Offonholiday regulator might not be the answer, but it might be worth considering a broader consumer rights body to act as a useful brake on exploitative practices. Most people accept that the rules of supply and demand will ensure that prices are higher at peak times, but many believe that the extreme divergence in prices is unfair.

[Damian Hinds]

Is the hon. Gentleman saying that there is something in the operation of some elements of the travel industry market over and above that which can be coped with by the current competition arrangements?

[Toby Perkins]

That is a valid question. A broader study would provide better information to establish whether that is the case. In July 2012, the Office of Fair Trading concluded a two-year investigation and found that two travel giants had struck deals with a hotel group to restrict smaller agents’ ability to offer discounted hotel rooms. Expedia admitted afterwards that it had

“engaged in cartel conduct in breach of the law”.

In 2013, a discount hotel site alleged that it was forced out of the market after attempting to undercut rivals by offering cheaper prices. There have been allegations of cartel-like activities, and those involved should be investigated and pursued rigorously. Only when we have open, competitive markets can consumers have faith in the prices that they are paying. That is important and entirely legitimate. At the same time, although we recognise that market forces exist, we do not say, “There is never anything to look at”, in the context of whether those markets are being fairly operated. We stand absolutely resolutely on the side of consumers and would be willing to investigate whether action is necessary to ensure that they get a fair deal in the travel market.

The abolition of the Office of Fair Trading, which would have looked at this issue, has highlighted the fact that a gap now exists. There is not another appropriate body that can do what the OFT did. The Competition and Markets Authority is focused on competition and not on outcomes for consumers, and therefore does not complete the same work. Does the Minister share my concerns about the lack of an appropriate body? Does she think that that makes it more likely that consumers will get a raw deal in future?

Other things can be done to support the tourism industry. We recognise that the issue is not only about tourism overseas, but very much about tourism here in the UK. We know that the VAT increase to 20% placed our tourist industry at a competitive disadvantage compared with many of our European competitors, and that the huge increase in business rates over the past three years has had a big impact on many small businesses in the hospitality and tourism industry.

Pub Companies

Debate between Damian Hinds and Toby Perkins

Tuesday 21st January 2014 Commons Chamber

[Damian Hinds]

It is difficult to go into the maths in great detail in a forum such as this, but with respect, I do not see how we can make that comparison, because we are talking about different pubs in different places.

[Toby Perkins]

The hon. Gentleman is right to say that it is difficult to make such comparisons. That is precisely why we are making the case that the only way to get genuine fairness is to ensure that people know what is a fair market rent. We can then say, “You can take that or you can take an alternative. The choice is yours.” That is the only way we will get a genuinely fair deal.

[Damian Hinds]

I have a lot of sympathy with that view and it is legitimate. We must not forget, however, that the owner of the pub also has an interest in that business thriving, and it must be an arrangement both sides are happy with. In one sense, the tie is just a way of sharing risk. It is a way of having rent that goes up when business is good, and down when business goes down. If we want to complain about how much money pub owners take from licensees, that is perfectly reasonable, but it is misleading to speak only about the tie and to say that if that went, all those problems would disappear. I do not believe they would.

I believe the single most important thing for regulation is to ensure the availability of proper financial and legal advice for new licensees. That must include someone giving advice who is able to understand and challenge what the pub company puts forward. It is called FMT—fair maintainable trade—and involves an estimate of what the pub can make, on which the rent and target return is based. If the licensee enters that arrangement with their eyes fully open, it is a commercial decision. Pub companies tell us that things are getting better and that pre-entry training, consultation and so on has improved, but it is difficult to tell that from the outside—I know the Select Committee has had more opportunity to look at that in detail.

Overall, we want more of a partnership approach between the owner of the pub and the licensee, and in the industry at its best that is of course what happens. For a long time, pulling pints has not been enough to survive and thrive in the licence trade. Such businesses are increasingly food driven, and they are trying to attract a wider range of customers while having to compete against managed houses that have different cost structures. There can be big advantages to being part of a wider group, such as consultancy and guidance on the development of the food business and menus. For some, there are other streams of business such as accommodation and retail opportunities, or—critically—improving purchasing programmes to improve margins.

It may be that as the industry evolves, the old tied model becomes less appropriate as more business goes to food and other products, and a franchising-type model may become more appropriate. It is arguably easier to do that and provide a full range of services if there are managed houses, as well as tenancies or leases. It is not for the Government to force such things through, but competition authorities can ensure there is sufficient space in the marketplace for operators who would provide a different model to licensees. The other crucial thing the Government can do to ensure that pub companies are fully mentally invested in long-term pub operations, rather than having an asset register of real estate, is make it harder to convert to residential property. If someone knows that the way they will make money out of a certain asset is by trading it well as a pub or a place where people come together to eat and drink, their minds will be focused on doing that more and more.

Where communities want to take over a pub, but that does not work out with the pub company and so on, I would like the Government to review continually the way the community right to bid works. We have a number of such instances in my constituency, and there is a great team working on the Anchor in Ropley. People are giving up a lot of time and putting in their expertise. That seems quite hard on occasion, and I hope the Government will keep that under review to ensure the process is as simple as possible.

In conclusion, we should beware of solutions, such as removing the tie, that appear to solve a lot of problems. Let us think back to the beer orders, and those who thought it was a great idea at the time in terms of breaking the vertical integration hold of brewers on individual pubs. I wonder what some of those people think about that now.