Air Travel Organisers’ Licensing Bill

Kevin Foster Excerpts

2nd reading: House of Commons
Monday 3rd July 2017 Commons Chamber

[Mr Hayes]

My hon. Friend might have raised that point in that Committee; my memory is good but not encyclopaedic, but I do seem to recall that he has made this point previously. He is both authoritative on matters regarding transport, having served with distinction on the Select Committee, and consistent in his line of argument. His is a perfectly fair question, and it is what the Opposition and the whole House would expect, so we will provide as much information as we can about what further steps we might take in terms of regulation. There is nothing to be hidden here; there is no unnecessary contention associated with this and certainly no desire not to get this right, and the best way of getting it right is to listen and learn—as is so often the case in politics, in Government and in life.

I have talked a little about the diversification of the market and the growth of the internet and smart technologies. That is not a bad thing: consumers now have many options at their fingertips to buy holidays and put together their own packages. Indeed, an ABTA survey estimates that about 75% of UK consumers now book their holidays over the internet. As methods of selling holidays modernise, we must adapt the schemes and regulations that protect them.

“Quality is never an accident; it is always the result of intelligent effort”,

as Ruskin also said. That is why we took steps in 2012 to update the ATOL scheme; we introduced the ATOL certificate confirming the protection covered, and broadened the scope of protection to include “flight plus” holidays. These interventions have had a positive impact, extending consumer protection, levelling the playing field for businesses and improving clarity for all. The key here is that consumers know when and how they are protected: making sure the system is as comprehensible and comprehensive as possible is an important aim.

We now need to build upon the changes we made then, and make sure that ATOL keeps pace with the changing travel market. In particular, the new EU package travel directive was agreed in 2015 to bring similar, but further-reaching, improvements to consumer protection across the whole of Europe. I said earlier that the United Kingdom had led the way in this field. It is not unreasonable to say that Europe is now saying it wants similar provisions across other countries to the ones we have had here for some time. So that travel directive is both reflective of, and perhaps even, to some degree, inspired by, the success of our arrangements. This will need to be implemented into the UK package travel regulations by 1 January 2018.

The Government supported the rationale for updating the package travel directive. It will help to modernise and harmonise protection across Europe. Broadly, it will mean that the protection offered across Europe will be closer to the protection we have enjoyed from the beginning of ATOL, but most especially since the changes we put in place in 2012. It will ensure there is a consistent approach to the protection.

[Kevin Foster (Torbay) (Con)]

The Minister is giving an interesting and full explanation of the benefits of this Bill.

Will the Minister clarify that the point is that the ATOL regulations currently apply to first-leg flights out from the United Kingdom and a UK airport, but that under this Bill the intention will be that in future if a UK ATOL-regulated operator sells a package virtually anywhere in Europe, as long as they comply with the rules here, that will be covered by the ATOL scheme and the potential levy?

[Mr Hayes]

Yes, that is part of what we aim to do: the aim is to ensure that if a holiday is bought here, wherever the person goes they are protected in exactly the way my hon. Friend described. He is also right to say that part of the change is the way people book and make their holiday plans, and part is about how and where people travel. The package holidays people first enjoyed in the 1960s and ’70s are less routine now in that they are no longer the routine way people travel to the continent and further afield, and ATOL was of course born in that period when things were simpler—thus my point for the need for it to evolve, as it has to keep pace with these kinds of changes. That consistent protection of holidays across Europe will ensure that informal package holidays booked online will get the same protection as traditional package holidays booked on the high street—holidays of the kind that had their beginnings in the ’60s and ’70s.

For the first time, these measures will also bring protection to a new concept of “linked travel arrangements”, which I think is what my hon. Friend was referring to. This concept is designed to provide some protection to business models which are not packages, but which often compete closely with packages.

Overall, the new directive has the potential to provide a greater level of protection to UK consumers, whether they purchase from a company established in the UK or overseas. It will also help to level the playing field for companies whether they are in the UK or overseas, and whether they operate on the high street or online.

That point matters in itself. This is about protecting consumers, and about the clarity and comprehensibility that I described. It is also important for those in the travel sector and the industry to know where they stand. Creating a greater degree of consistency for them matters too, particularly for smaller businesses that really need to know, as well as to feel, that the regulations apply across the board in a consistent, fair, reasonable and implementable way.

In order to bring the new directive into force by July 2018, the four clauses simply enable the ATOL scheme to be aligned with the updated package travel regulations. The combined clauses will mean UK-established companies are able to sell holidays more easily. They will be able to protect these holidays through ATOL, and they will not need to comply with different schemes in each country. That is the essence of what we are trying to achieve today. The Bill will also extend the CAA’s information powers so that they are more able to regulate the scheme and this cross-border activity.

Finally, the Bill will allow the scheme to be able to adapt more effectively to changes in the travel market. I have said that I anticipate further change as time goes on, and the Bill paves the way for that. Overall, the updates we will make to the ATOL and package travel regulations 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, but also for 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 changes in our relationship with the European Union. The changes we are making are in keeping with this principle. They will help UK consumers, businesses and regulators to transition to the new package travel regulations in 2018 with minimal impact, but we will also retain flexibility in ATOL regulations to adapt to the changes in our relationship with the European Union, ensuring that we continue to have strong consumer protections in place as we leave the EU.

I hope that that has given a clear and reasonably concise picture of the Bill and the reasons for introducing it. As I have said, the UK has always been a leader in this field. We have led in so many ways and so many areas, and when it comes to providing protection for holiday makers, the Bill will ensure that the UK continues to lead, whether we are inside or outside the EU. It will provide UK businesses with the opportunity to expand and grow, and it will provide a framework to ensure that ATOL remains flexible enough to cope with future trends. The Bill is indicative of a Government who are willing to act to protect and preserve the people’s interests, and I stand here as a Minister ready to do that. It is a Bill for the people from a Government of the people.

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[Robert Courts (Witney) (Con)]

It is an honour to be called to speak in the debate on the first piece of substantive legislation in this Parliament, and to be the first Back Bencher to do so. The Bill brings back some traces of memory lane for me; I declare an interest in that I practised in consumer protection at the independent Bar before my election to Parliament. Indeed, I was involved in lecturing and cases in this very area. Somewhat optimistically, I called it “holiday law”, which makes it sound—I can hear one of my colleagues saying this—like rather good fun. Having spent years prosecuting trading standards legislation and defending criminal law, as well as working in the personal injury sphere, I must have been on my way back from holiday while looking for a new area to branch into, and then an opportunity came up. I obviously decided that if I could not actually be on holiday, I might as well at least talk about being on holiday. I therefore produced a lecture, which I covered with lots of rather attractive pictures of happy people on holiday, sun-dappled beaches and palm trees, but that of course rather missed the point, because when one goes to see a lawyer, one is telling them not how good a holiday was, but that something has gone wrong. That is the all-important point that I was addressing in my career and that the Government are seeking to address through this Bill.

Things occasionally go terribly wrong when people are on holiday and, from my experience at the Bar, that can be anything from simply poor quality through to a catastrophic failure of holiday, injury or, in some cases, even death. That is what we are seeking to address through the Bill.

I started my lecture to the Bar with the same story that the Minister told of the temperance campaigners—it is one of those throwaway anecdotes we tell at the beginning of what can sometimes be detailed lectures—and I thought for one moment that I was about to hear him repeat my lecture back to me. I am glad that he went on to more substantive matters.

In my constituency I have not only a great many places that people come to visit—I will refer to some of them in a moment—but, of course, many people who, as we all do, look for places to tour abroad. It is for the constituents of Witney and west Oxfordshire that I most strongly desire to see the Bill enacted.

I express my support for the Bill at the outset, because ATOL protection is a critical part of the protection that we all rely on when we book a tour. It is only right—and necessary—that we seek to extend that protection to a broader range of holidays. When ATOL protection started in 1973, the world was very different from the one that we inhabit now. It was a world with few airlines—a world of British Caledonian and nationalised airlines such as British European Airways and British Overseas Airways Corporation. One might even say that it was an era before the benefits of a free market were fully explained and realised in this country—we should perhaps remember that at all times in this debate. It was a day before the internet. It was a day when going abroad was full of uncertainty, and sometimes even danger. It was into that world that the package tours regulations came into being, and rightly so.

[Kevin Foster]

Does my hon. Friend agree that at that time it would have been unimaginable that someone could use a mobile phone to book a holiday with an operator in Germany, France or another country in Europe? At that time, walking into a travel agent on the high street was the only real way of booking this type of project.

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[Robert Courts]

I am grateful to the Minister for making that clear. The prospect of amendment has been ongoing for some time, so I am delighted that we are addressing it in the House today.

Although the image we all have of walking down the high street, flicking through a brochure and speaking to somebody behind a till still happens in many cases—many people avail themselves of the services that exist, including at the excellent travel agencies in my constituency—many people do not do that. It is now so easy to go on the internet to put together a bespoke package for ourselves. In a sense, we have become our own travel agents, but that brings challenges as well as opportunities for this new generation of travellers. In this House we embrace the opportunities that come with those challenges. Indeed, I would go so far as to say that we have seen the free market in action with the expansion of providers, destinations and activities. We have seen so many of the advantages that a free market can bring in the interest of consumers. Indeed, the online travel market has led to reduced costs for holidaymakers, as well as increased choice and flexibility.

Of course, we have to reassess protections at the same time as we reassess, and benefit from, those changes. The mix and match of lower prices and wider opportunities has to be seen alongside the protection. Many holidays now fall outside the scope of ATOL, which is very different from the situation in 1973. In 1998, approximately 90% of all leisure flights were covered by ATOL, but I understand that the figure has fallen to under 50% in recent years. I welcomed the Minister’s comment at the start of his speech. As much as I have praised the free market and its benefits in terms of opportunities, choice and reduced costs, I also understand that there is a role for Government. I agree with him that it is appropriate for the Government to step in and ensure that consumers in this field are protected.

That is why I welcome the measures in the Bill to address such changes. The Bill will ensure that the ATOL scheme keeps pace with innovation in the online travel market, while also ensuring that protections are in place, regardless of whether someone books online or on the high street. We will therefore ensure that more than 20 million holidaymakers each year continue to be protected.

[Kevin Foster]

Given my hon. Friend’s comments, will he say something more about clause 1, which extends ATOL to sales made by UK companies within the European economic area? Does he think that that provision is worth while?

[Robert Courts]

I am grateful for my hon. Friend’s timely intervention, as the next page of my notes deals with clause 1. Existing ATOL legislation applies only when the first leg of a relevant flight booking departs from a UK airport. The new legislation introduces a single-market approach to insolvency, whereby EU-established companies will be required to comply solely with the insolvency protection rules of the state in which they are established, as opposed to the place of sale, which is the current position. The legislation is therefore much wider, and the company will only have to be established.

[Robert Courts]

My hon. Friend makes an excellent point. He is right that the ATOL scheme is funded by a levy of approximately £2.50 per protected passenger and that it would be extremely unwise of any holidaymaker to go abroad without adequate travel insurance. I encourage everyone always to have such insurance, although it can sometimes be pricey, especially if someone is looking to protect themselves against some of the more routine failures that are easily covered in the ATOL scheme. However, more serious misfortunes can occur when people are on holiday, which is why travel insurance is, of course, still advisable. As my hon. Friend suggests, the cost of insurance may come down in time as a result of this enhanced package.

Clause 1 will allow travel companies established in the UK that sell flight-inclusive packages to use their ATOL membership and protection to cover all EU-wide sales without needing to comply with the insolvency protection rules of any other member state. Clause 2 deals with funding and qualifying trusts within the ATOL trust management structures. The Department for Transport is alive to the fact that because we have seen significant changes to the travel industry—not only since 1973, but since 2004, as well as more recently—it might be necessary to enter into separate trust arrangements for the greater business model, such as linked travel arrangements, to give greater transparency to businesses and consumers. It might be necessary to introduce a new form of qualifying trust to ensure that the ATOL trust will still protect consumers in the all-important area of flight accommodation. The Bill allows the flexibility under trust arrangements so that we can increase funding and ensure that ATOL is adequately funded as time goes on.

Clause 3 addresses a slightly different point: the ability of the CAA—the House will realise that the authority is responsible for running the ATOL scheme—to require and request information from airlines selling ATOL-registrable products within the UK and more widely. Under the Bill, an important change would apply to airlines that have an air service operator’s licence from another EU member state and therefore would not need any of the licences that have been granted by the Civil Aviation Act 1982.

The House will be delighted that this is a short Bill, containing only four clauses. I have needed to deal with only three, so I do not need to go through the other one—I am sure everyone is delighted. [Interruption.] The Bill is short in terms of clauses, as the House will realise.

[Kevin Foster]

My hon. Friend referred to clause 3. Those who have an air service operator’s licence from other European countries will not need a CAA licence. Is he satisfied that the measure will still give full consumer protection?

[Robert Courts]

I am indeed satisfied that it will give full consumer protection. I say so because the Government have consulted widely. Once again, my hon. Friend has somehow, with extraordinary prescience, managed to prompt me to move on to the next stage of my speech, which may have been his subtle intention.

The Government have consulted widely, and the industry’s response has been favourable. We have received broad support from a majority of respondents to the proposals to harmonise ATOL with the scope of the EU package travel regulations. I noticed that during proceedings on the Vehicle Technology and Aviation Bill, evidence given by the group director of consumers and markets at the CAA stated:

“There are a number of important and welcome developments from”

the Bill

“which will be good for UK consumers. First, the directive makes it much clearer what the definition of a package is.”––[Official Report, Vehicle Technology and Aviation Public Bill Committee, 14 March 2017; c. 63, Q143.]

I hope that the House will forgive my mentioning that in detail. I do so simply because of my experience of having argued the concept of what a package is in the courts of this country throughout my career at the Bar. The Bill has wide support in the industry.

I wish to make one more point, which is simply to note the educating effect of tourism. We are of course leaving the EU, but we are not turning our back on Europe or ceasing to be a European country—I will not make more detailed comments. As all Members will appreciate, travelling to a new country and appreciating a new culture is one of the most educating and enlightening things an individual can undertake. We will want people from this country to be able to expand their horizons throughout the EU, as indeed we will want people from the EU to be able to come here. West Oxfordshire has a plethora of tourist attractions, such as Blenheim palace, the great stately house; Cotswold wildlife park; and Crocodiles of the World, which is an excellent attraction that I invite all hon. Members to visit—I have been. We have many picturesque villages throughout west Oxfordshire, including Bampton, of “Downton Abbey” fame.

I have gone on at some length. The House will probably realise by now that this Bill has my full support, and I urge Members to give it its Second Reading.

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[Kevin Foster (Torbay) (Con)]

It is quite something to be the last Back Bencher called in a debate where we have had, I think, nine maiden speeches back-to-back. We are ending with one of the old regulars. One point I would make to new Members is that when I arrived two years ago I was told to find a nice quiet spot from which to speak. They can see the spot I decided to pick: directly opposite the then 56 Scottish National party Members. There are now slightly fewer of them.

I represent Torbay, which is a main tourism area. Indeed, I struggle to think why anyone would not want to enjoy our beaches and our history. It is one of the most beautiful constituencies in the whole country. It is right, however, if people do go abroad, that there are important protections—the ATOL regulations—in place.

One point made in a number of interventions is that the market has changed massively since the start of ATOL. It is likely to change again so it is important that our regulatory system is kept up to date. I therefore welcome the Bill. A lot of Members mentioned their birthplaces. I enjoyed the speech made by the hon. Member from my own birthplace, the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard). I was born in Freedom Fields, which he will know, and it was interesting to hear the points he made. This is a changing market, where the travel agent with a selection of brochures has been replaced by a smart phone with an app that connects people immediately with a site that can sell them everything, but not necessarily a package holiday. It is important that we keep up to date and it is right that changes are made.

Reference was made to the origin of package holidays, which can be traced back to a temperance meeting. Sadly, one of the earliest package holidays arranged by entrepreneurs out of Torbay was a trip to a public hanging in Exeter, with a trip to the races thrown in on the way back. There was a slight problem, however. The individual concerned was reprieved and spent 30 years in jail, which rather ruined their plans.

It is right that we have talked about the importance of making sure that British travel agents can compete in a marketplace larger than their own. I therefore welcome the changes that will mean it is the place where they are established that governs what system they are related to, rather than from where the first flight departs, which is the current situation under the ATOL regulations. Realistically, firms will want to sell different flights and different packages, and not be constrained by the point of origin. I hope that travellers will see the benefits of booking through British and UK-based travel agents, knowing that they have the certainty of a scheme, supported by a large pot, that has worked well for over 40 years. I do not normally rush to favour extending taxation powers, but it is appropriate that clause 1 provides the ability to extend tax-raising powers to those selling direct to consumers in a European economic area country, rather than just those in the UK.

This has been a fascinating debate. I feel like I have been on a tour of various parts of the United Kingdom, with all the maiden speeches we have heard, in a debate on people taking trips abroad to see what is on offer over there.

I certainly think that this Bill is worthy of its Second Reading. There are clearly points to go over in Committee, but the protections to ensure that nobody will be stuck abroad without being able to return are welcome. It is right that industry should bear the cost of that rather than the UK taxpayer, which would be the case if we allowed the current system to continue and did not reform it in the way suggested. It will make a real difference, and I look forward to seeing the Bill progress into Committee.