Air Travel Organisers’ Licensing Bill

Lord Callanan Excerpts

2nd reading (Hansard): House of Lords
Tuesday 5th September 2017 Lords Chamber

Moved by

[Lord Callanan]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)]

My Lords, the UK has one of the most innovative and advanced holiday sectors in the world and one of the biggest markets in Europe. That is something that we should be immensely proud of. The UK has been a leader in this sector, going back some 175 years, when Thomas Cook first had the foresight to offer a one-day excursion on a steam train. I am pleased to say that the UK continues to lead the way. Overall, tourism now contributes close to £121 billion to our economy annually, with outbound tourism contributing around £30 billion. The sector supports millions of jobs and involves thousands of companies, from small businesses to large multinational brands, both online and on the high street.

Strong consumer protection is vital to underpin confidence in this important sector. As the Minister of State for Transport said in the other place, this is a Government who recognise the value of providing UK businesses with the best possible opportunities to grow. We also recognise the value in ensuring that consumer protections keep pace with the new ways in which people book their holidays. These points ring as true now as when they were made earlier this year. That is why I have introduced to the House the Air Travel Organisers’ Licensing Bill, which will ensure that consumer protection for holidaymakers is modernised to match developments in the travel market. I very much hope that the debate we have today will match the very positive discussion in the other place. I would go as far as to say that there was cross-party support for ensuring that consumer protection reflects the changes in the travel sector.

Consumer protection is an important pillar of the holiday sector, due to a number of characteristics of the market. Holidays are frequently booked and paid for many months in advance of travel, and the consumer may often be unaware of the financial stability of their holiday providers.

The impacts from a failure of a travel company can be twofold. Consumers may experience a financial loss from a cancelled holiday or significant difficulties from being stranded abroad.

The ATOL scheme was originally set up in the 1970s to provide protection in such situations. It does this in two ways. First, travel firms that sell flight packages in the UK must hold an ATOL licence, issued by the Civil Aviation Authority. This helps to regulate entry into the market and filter out any companies that are not financially sound. The scheme also acts as a fund to compensate consumers who might be caught up in a failure. ATOL-licensed companies must pay a small levy—currently £2.50—for each person protected by the ATOL scheme. This money is then held in the Air Travel Trust Fund and used by the CAA to ensure that consumers are returned home or refunded when a company fails.

The scheme plays an important role in the UK travel sector, providing peace of mind to more than 20 million people every year. Since the 1990s, it has also been a key way in which the UK has implemented the European package travel directive. Fortunately, failure of travel companies is relatively rare, but it does happen. In the last financial year alone, 19 ATOL holders collapsed. In each of these situations, the Civil Aviation Authority stepped in to deliver protection to consumers through the ATOL scheme.

I am sure that many noble Lords will also be aware of the failure of the Spanish online travel agent, Lowcost Holidays, last summer. When this company failed, it was reported that there were 27,000 customers on holiday and more than 100,000 customers who were yet to travel. Although many of these customers were from the UK, the company did not have ATOL protection as it was regulated under the Spanish regime.

The collapse of companies such as Lowcost Holidays is an important reminder of the need to ensure that consumer protection keeps pace with the way people book their holidays now. While many people still enjoy booking a holiday in their local high-street travel agent, the market has diversified considerably with the growth of the internet and smart technologies. Indeed, a recent ABTA survey estimated that about 75% of UK consumers now book their holidays over the internet.

The growth in online trade means that customers have a much wider choice of providers, including those based overseas. However, it is clear from the Lowcost Holidays situation that not every travel provider is currently covered by the same level of protection, and inconsistencies apply across borders.

That is why the Government and the CAA took initial steps in 2012 to update the ATOL scheme. This introduced the ATOL flight-plus category to bring ATOL protection to the many consumers who book mix-and-match holidays online, in addition to those who buy traditional package holidays on the high street.

We also introduced the ATOL certificate, so that consumers know when they have booked an ATOL-protected holiday and who to contact if their travel provider fails. These interventions have had a positive impact in extending consumer protection, levelling the playing field for businesses and improving clarity for all.

It is important that we continue to build upon these changes, and I am pleased that a similar view is now held across Europe. In particular, a new EU package travel directive was agreed in 2015 to bring similar improvements to consumer protection across the whole of the EU. This will need to be implemented into the UK’s package travel regulations by 1 January 2018.

Your Lordships may ask why the Government are implementing these changes, given that we will shortly be leaving the European Union. First, this Government have continually supported the rationale for updating the package travel directive. Secondly, and of equal importance, the UK is of course still a member state of the European Union and continues to honour all of its rights and obligations.

The Bill will benefit businesses and consumers alike. For consumers, it will update the protection of holidays, and for businesses it will ensure that there is a consistent approach across Europe, making it easier for British companies to trade across borders. Broadly speaking, it will mean that the protection offered across Europe will be closer to the protection that we have had here in the UK since 2012. It will also extend the scope of protection to a new concept of linked travel arrangements, which is designed to provide protection for consumers even when they make less formal holiday arrangements—for example, when one trader sells a flight, and they then direct the consumer to another trader to complete the booking of a hotel. These are not pre-arranged packages, but they often compete closely with traditional package deals.

Overall, the new directive has the potential to provide protection to a greater number of UK consumers, whether they purchase from a company established in the UK or overseas. This will also help to level the playing field for companies, whether they are based in the UK or overseas and whether they operate on the high street or online. The broadened scope will be underpinned by information requirements, so that consumers have better information about their holiday and how they are protected.

This Bill is the first step in updating the UK’s regulations to bring the new directive into force by July 2018. The four clauses will enable the ATOL scheme to be aligned with the updated package travel regulations and ensure that UK consumers and businesses can enjoy the benefits from these changes. Combined, the clauses will mean that UK-established companies are able to sell holidays more easily throughout Europe; they will be able to protect these holidays through the ATOL scheme, so they do not need to comply with different schemes in each country. The Bill will also extend the Civil Aviation Authority’s powers to request information from businesses, so that they are more able to regulate the scheme and this cross-border activity more effectively.

Finally, the Bill will allow the scheme to be able to adapt more effectively to changes in the travel market. At present, the ATOL scheme is based around a single fund, the Air Travel Trust. While this one-size-fits-all approach has worked well to date, it may not always be the best approach in future. The Bill will provide more flexibility to set up new trust arrangements to respond more effectively to an increasingly diverse pool of risks. But I can be clear that this power will not provide Ministers with a blank cheque. Any regulations brought forward would require extensive consultation and ultimately an affirmative resolution procedure, so that both Houses have an opportunity to scrutinise their content and effect.

Overall, the updates that we are making to the ATOL and package travel regulations will mean consumer protection can extend to a broader range of holidays. It will mean that protection can be provided for traditional and online package holidays, and also 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 future changes in our relationship with the European Union. This measure is entirely in keeping with that principle; it will enable the ATOL scheme to be aligned with the package travel directive in 2018, with minimal impact for UK consumers and businesses. But the ATOL legislation and protection will continue to exist and remain in place as we leave the EU. ATOL is enshrined in an Act of this Parliament, and only this Parliament can change that. As I mentioned previously, the travel sector contributes significantly to the British economy. Implementing the PTD will support British businesses to trade across borders and provide the best deal for our consumers. By extending the scope of ATOL, UK businesses will be able to provide ATOL-protected holidays across the whole of the EU. Consumer protections are a key priority for this Government, and this Bill will further this aim, an aim that transcends the Brexit negotiations. In short, we are legislating now to ensure that we continue to have strong consumer protections in place as we leave the EU.

The UK has always been a leader when it comes to providing protection for holidaymakers, and this Bill will ensure the UK continues to be a leader when we leave the EU. The Bill will provide UK businesses with the opportunity to expand and grow, and provide a framework to ensure that ATOL can remain flexible enough to cope with future trends. But most importantly, it will ensure that the UK’s consumer protection for holidays can keep pace with changes in the travel market. I beg to move.

--- Later in debate ---

[Lord Callanan]

I thank the small number of noble Lords who contributed to the debate this afternoon. I hope, like the noble Lord, Lord Rosser, that it is because of the quality of the Front-Bench contributions that other noble Lords decided not to contribute, but I suspect it probably has more to do with being the first day back after the Recess. Nevertheless, it is about the quality rather than the quantity of the contributions. It has been a good, brief debate.

The travel market has moved on significantly in the past decade, with changes to the way holidays are offered and sold. The market has diversified with the growth of the internet and smart technologies, as many Members have pointed out. Consumers now have a great many options at their fingertips to buy holidays and to put together their own packages. As the methods for selling holidays modernise, we must also update and modernise the schemes and laws that protect them. As I said in my opening remarks, this Bill is a vehicle by which the UK will implement the EU package travel directive. It will ensure that informally booked holidays will have protection similar to that for traditional package holidays, regardless of whether they are booked on the high street or online. This Bill complements the steps we took to update the ATOL scheme in 2012 and is required to ensure that consumer protection can keep pace with the changing travel market.

While it is fair to say that the Bill may not be the largest in terms of clauses, not many Bills can bring peace of mind to so many people. The scheme protects more than 20 million people each year by regulating entry into the market and acting as a fund to compensate consumers who might be caught up in a failure. It has provided robust consumer protection for more than 40 years and is held in high esteem by the travel industry and consumers alike. It has been able to do so by evolving over time and adapting to changes in the travel market. The Bill will help to align our regulatory framework with the changes coming in across the EU in 2018. The combined effect of the clauses will help to cut red tape, allowing UK-established companies to sell holidays more easily throughout Europe. They will be able to protect more holidays through the ATOL scheme, removing the need to comply with different schemes in each member state.

I shall move on to some of the question that have been asked. The noble Lord, Lord Rosser, raised the point about the future of consumer protection once the UK leaves the EU. The UK has always led the way in protecting holidaymakers. We remain committed to consumer protection and will continue to do so after Brexit. For example, we established the ATOL scheme two decades before the original package travel directive was agreed across Europe. ATOL is of course enshrined in UK legislation and will remain on the statute book until such time as these Houses decide otherwise, regardless of what happens with Brexit. We also made improvements to the scheme in 2012 which are now being echoed in the new package travel directive that was passed by the EU in 2015. So I think that I can claim some authority here when I say that we have a track record over many years of being at the forefront of consumer protection in this field and that we hope to remain so.

The Bill will extend the Civil Aviation Authority’s information powers so that it is more able to regulate the scheme and cross-border activity. It will update the ATOL powers so that they align with the scope of the directive and will provide more flexibility to set up new trust arrangements and so on to respond more effectively to an increasingly diverse pool of risks. The scheme now needs to manage a greater variety of risks and business models, and the update the Bill will make to ATOL 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 as well as for the looser combinations of travel which had previously been out of scope. Of course, we must be mindful that the regulatory landscape will need to be able to adapt to future changes in our relationship with the EU, but we will also retain flexibility in the ATOL regulations to adapt to future changes in our relationship, thus ensuring that we continue to have strong consumer protections in place as we leave the European Union. These measures will ensure that the scheme remains fit for today’s world, a world in which digital technologies are offering increasing opportunities for consumers to select the way they purchase a holiday.

Moving on to some of the other questions that were asked, my noble friend Lord Flight reflected on his Burma experience. I hope that he has now recovered from his back operation and his problems with insurance. It is important to say that the ATOL scheme is not designed to replace holiday insurance and we do not want to give consumers the impression that it should or might do so. People should still take out holiday insurance, ideally before they book their holiday, which for its relatively modest cost provides the considerable protections they will need above and beyond the ATOL scheme. Arrangements for flight-only and for airlines are regulated separately, and I am sorry that my noble friend was not able to take advantage of them with his Burma experiences. I am not sure that there are any package holidays to Burma that would be covered by the ATOL regulations.

In response to the point made by the noble Baroness, Lady Randerson, no distraction is intended from any other worthy causes. She got her points in about Brexit anyway, so maybe she could cut and paste them and repeat them in the Brexit debate later this afternoon and save everyone the trouble of listening to them again, worthy though they were. She also asked about drones and lasers, a point also raised by the noble Lord, Lord Rosser. I announced just before the start of the summer vacation the measures we intend to take on drones. We are currently working on further measures to deal with the scourge of laser pens. I cannot be more specific on a timescale at the moment, but I assure the noble Lord that as soon as we can we can provide precise timings I will do so, but we recognise the threat and have published measures on what we intend to do on drones. We will act as soon as is possible.

The noble Baroness, Lady Randerson, also said she thought there was a degree of irrelevancy about the Bill. I am afraid I do not agree. We need to have protection measures in place. As I said, it will exist long after we leave the EU. We were 20 years in advance of the EU package travel directive and our protections will remain in place afterwards.

The noble Baroness raised so-called regulatory shopping. This is a concern, but we have seen no evidence of it so far. Indeed, the package travel directive in many respects implements what we already have in the UK, so it will make it less likely that companies can move to a lower-regulation environment in the rest of the EU. It will raise guarantee standards in countries such as Spain effectively to what we already have in the United Kingdom, so it will prevent the problems associated with Lowcost Holidays that I mentioned earlier.

The noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, mentioned the new trust arrangements. They are right to do so. I hope I will be able to reassure them. We have no plans to establish any other trust schemes beyond what we already have. Indeed, in response to the noble Baroness’s question, we have £175 million in the ATOL scheme, but there have been periods when it has been in deficit. I think I am right in saying that up until 2011 the scheme was in deficit and the Government needed to provide a guarantee for a loan to be taken out to refund failures at that time. Since then, we have had proportionately fewer failures and proportionately more people paying in, so the fund is now in considerable surplus.

We have no plans to change the contribution, but we propose to give ourselves the power to respond innovatively to changes in the market. As I said, we have no plans to do so but it is possible and we would not want to exclude the ability to establish new trust fund arrangements if new and innovative models were to be produced. If we did, we would consult extensively with the scheme providers in the CAA, and with package tour operators, various internet firms, et cetera. Of course, such arrangements would be subject to affirmative resolutions in both Houses.

[Lord Rosser]

To pursue the point on the purpose of Clause 2, the Minister has said the Government have no plans at present, but then goes on to refer to possible changes in the future. Will he give some examples of the changes that might take place that would necessitate using the powers under Clause 2?

[Lord Callanan]

I suppose the short answer to that question is no. If I knew what innovative solutions and changes might come up, we would allow for them now. For example, if a particularly new and what we would consider riskier form of package could be developed, we would maybe want to set up a larger contribution protection than the £2.50 that applies to other schemes. As I said, we will consult extensively with all providers and with the CAA, and the arrangements will be subject to the affirmative resolutions of this House. As I said, these models have not been developed yet, so we do not know what they might be, but we think it prudent to allow for the possibility that they may be developed in the future, even though we have no plans to do so at the moment.

I believe I have responded to all the questions I was asked—somebody will no doubt shout if I have not.

[Lord Rosser]

The Minister may feel he has answered this already, in which case he will obviously say so, but I asked about the secondary legislation, what consultations have already taken place and with whom, and what consultations are currently taking place. I also asked about the production of an impact assessment, because the concern is that there may not be proper consultation or an impact assessment, and we shall have just an affirmative resolution for what are, or could be, quite extensive powers and changes.

[Lord Callanan]

As I said, we can give an undertaking to consult extensively if we propose to do this in the future. I will write to the noble Lord with details of any consultations that have already been carried out; I hope he will consider that an adequate response. I think I have responded to the points that others put to me and I ask the House to give the Bill a Second Reading.

Bill read a second time and committed to a Grand Committee.

Air Travel Organisers’ Licensing Bill

Lord Callanan Excerpts

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

[The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)]

First, I thank the noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, for their co-operation on this matter. I will address the amendments first and then come on to their specific questions about Monarch and other issues.

I recognise the purpose of Amendments 1 and 2 and we have looked very closely at the legal implications of both of them. I understand and recognise the intention to ensure that ATOL protection covers flight-only bookings and linked travel arrangements. Amendment 1 would remove subsection (3) from Clause 1. I will explain why this has been included in the Bill. It is quite complicated so I will go through it. It clarifies the extent of the Secretary of State’s powers to exempt businesses from holding an ATOL when they are selling flight-only tickets. It is not changing the status quo; it is merely adding clarity about exemption from the ATOL scheme.

I think there is a small amount of confusion here. Airlines selling airline tickets are already exempted from ATOL in primary legislation—the Civil Aviation Act. What we are referring to here is ATOL holders—for instance, travel agents—selling an airline ticket. The ATOL protection applies from the moment the travel agent takes your money off you—you might choose to pay for it in instalments—until the airline actually issues the ticket, when you become a customer of the airline and part of the EU 261 compensation arrangements. Your money is protected while it is with the ATOL holder—the travel agent—until it is converted into an airline ticket, when you become the responsibility of separate regulations. Under the Civil Aviation Act, airlines are exempt from ATOL provisions.

Noble Lords may be aware that Section 71(1B) of the Civil Aviation Act already provides a specific exemption for airlines selling flight-only tickets on their own aircraft. This exemption recognises that airline operators are already subject to separate licensing requirements, set out in EU law. Member states do not have discretion to impose additional requirements.

Separately, the Civil Aviation Act also includes a wide power under Section 71(1A)(b) to make further exemptions in the ATOL regulations. This power is not expressly limited in any way in the Civil Aviation Act. However, arguably the presence in the primary legislation of the specific exemption for airlines selling flight-only tickets could be misinterpreted as narrowing this wider power. That is why we have introduced Clause 1(3) to clarify the relationship between these existing exemption powers, and remove any scope for misinterpretation. We believe there is a benefit in having this clarity in law and, as I say, the presence of the airline exemption already exists in primary legislation. If the noble Lord’s concern is that the Government intend to remove flight-only sales from the ATOL scheme, I can provide an assurance that the Government have no such plans. If the noble Lord’s aim was to bring airlines within the ATOL scheme, this amendment would unfortunately not achieve that. We would need to amend the Civil Aviation Act in order to do that.

The noble Lord’s second amendment would add linked travel arrangements and flight-only to regulation 17(1) of the ATOL regulations, which sets out the types of travel arrangements that require an ATOL certificate. I should make it clear that flight-only arrangements are already covered in regulation 17(1)(a), and we do not have any plans to change that. To accept this amendment would therefore duplicate what is already in place.

With regard to the proposal to add linked travel arrangements to regulation 17(1), once this legislation is in place we will introduce regulations to make provision for insolvency protection and the provision of information for linked travel arrangements, as required by the package travel directive. Indeed, work is already under way to draft the package travel regulations and the ATOL regulations to effect this change. The ATOL regulations will be published in draft for consultation. I am sure noble Lords would agree that it would not be appropriate to pre-empt that process by making a change now to the regulations without such consultation, as proposed by this amendment. In summary, if the noble Lord’s concern is that the Government intend to remove flight-only sales from the ATOL scheme, I am happy to provide an assurance that the Government have no such plans. If the noble Lord’s aim was to bring airlines within the ATOL scheme, this amendment would not achieve that aim. I hope therefore that he will withdraw Amendment 1.

I turn to the questions that the noble Lord, Lord Rosser, posed. He asked what percentage of the ATOL scheme would be taken up by linked travel arrangements. It is hard to say definitively but our estimate at the moment is a very small percentage. Part of the reason why we want to consult with industry before we introduce the regulations is that it is not entirely clear what a linked travel arrangement actually is. The directive expands the scope of the package travel arrangements, and the extension of the ATOL scheme will of course take effect for that regulation.

The noble Lord asked why linked travel arrangements are not included in the Bill and which clause deals with them. The Bill extends the ATOL powers but they are used to apply these arrangements throughout the European Economic Area. As such, all clauses apply to linked travel arrangements, and we will implement them in secondary legislation later on in the year when we have consulted with industry.

The noble Lord asked if we will be establishing a new trust for linked travel arrangements. The Government, together with the CAA, are still assessing the best way to implement linked travel arrangements that include a flight. We will consult on more detailed proposals later in the year. BEIS recently completed a consultation on the implementation of the package travel directive, and the responses to the consultation are currently being analysed. The consultation closed on 25 September.

The noble Lord asked about extending ATOL to flight-only. The ATOL scheme does not apply to airlines, as I said earlier, when they are acting as a flight-only provider, which are specifically exempted from it under primary legislation. Such airlines are subject to separate EU regulation and licensing arrangements, which include financial fitness requirements. We are not proposing to make any changes to the arrangements at this stage.

The noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, asked about Monarch. As I said in repeating the Statement yesterday, we believe the circumstances are unique. Monarch was quite a large airline—the UK’s fifth largest—and the circumstances were unique in that, even if we had not agreed to the repatriation package for non-ATOL holders, there was insufficient capacity available in the market so that people who had insurance cover, credit card insurance et cetera would not have been able to purchase alternative flights to bring them home. Because of the scale of the collapse and the time of the year when this occurred, there was insufficient capacity available and therefore there was a very real danger of British citizens being stranded. In those circumstances we thought it was right to step in and fund the repatriation effort, although we are currently in negotiations with ABTA and the credit and debit card companies to try to recoup some of the costs. We hope that the particular set of circumstances that applied in the Monarch situation will never be repeated.

With the answers that I gave to the noble Lord, Lord Rosser, I would be grateful if he will agree to withdraw Amendment 1 and, on the basis that Amendment 2 duplicates what is already in place in respect of flight-only and pre-empts what we will shortly consult on with respect to the relevant regulations, I hope he will agree not to press it.

[Lord Rosser]

I am sure it will come as no surprise to the Minister to know that since we are in Grand Committee I will withdraw the amendment, but I would like to raise one or two questions in the light of the response.

I gather from what he said that nobody quite knows what linked travel arrangements are. I only mentioned them in the amendment because the Minister used the phrase at Second Reading when he said the Bill:

“will also extend the scope of protection to a new concept of linked travel arrangements”.—[Official Report, 5/9/17; col. 1840.]

I had assumed that as the Minister referred to linked travel arrangements the Government would know what they were talking about. I now understand that people are still trying to find out what linked travel arrangements are. If I understood him correctly—and I have not heard any other argument why there should not be a reference to them in the Bill—the Government’s reluctance to put them in the Bill is because they would not know exactly what they were putting in because they do not know what linked travel arrangements are and therefore what they might be committing themselves to. Perhaps the Minister could say whether that is a fair analysis or synopsis of the reply he gave on that point.

Since the Government have expressed a lack of enthusiasm for it, I also asked what would be the cost of extending compensation arrangements or ATOL protection arrangements to flight-only passengers. I did not get a response. It may be that the Government do not have a figure. Clearly, it might impose additional costs. My only comment is that when additional costs are imposed on public sector services, the argument is usually that they will have to be found from within the budget and from efficiency savings. Presumably the same argument might be used elsewhere if the Government chose to do so. I would like the Minister to clarify his response. I got a bit confused, I readily admit, not because the Minister expressed it badly but probably because my powers of taking things on board are not as great as they might be. As I understood him, he did not say that the Government could not introduce compensation arrangements in relation to flight-only passengers, whether ATOL protection or something else, because of EU regulations but that the Government do not wish to do so. Perhaps the Minister can confirm that if the Government wanted to do it, they could, but if they do not want do it as opposed to being unable to do it because of EU regulations, that makes their estimate of the cost even more significant.

The Minister has indicated a lack of enthusiasm on behalf of the Government for going down the road of protection for flight-only passengers. Where does that sit with what was said in the Monarch Airlines Statement? We were told that,

“our effort 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”.—[Official Report, 9/10/17; col. 46.]

Surely one of the options must be a similar kind of protection package for flight-only passengers, bearing in mind that the great bulk of Monarch passengers were in that category. Is the Minister saying, only two days after Monday’s Statement, that one of the options has already been shut down?

[Lord Callanan]

Let me try to clarify the issues. The fundamental reason we are extending the ATOL scheme to cover linked travel arrangements is that the concept of linked travel arrangements is introduced by the EU directive. We had slight difficulty in defining exactly what that is in our discussions yesterday with the noble Baroness, Lady Randerson.

Let us assume that the Rosser family are going on their annual holiday and so book airlines tickets. Within the website used to book the airline tickets, they may be offered a hotel or car hire at the same time. They might be offered those at the behest and specific recommendation of the low-cost airline or through a Google advert placed on the website but with no direct connection to the airline. In the first instance, if you follow up purchasing an airline ticket with booking a car and a hotel, and you do it within 48 hours, it might be a linked travel arrangement. In the second instance, if you respond to an advert placed on the same webpage, it may not be a linked travel arrangement.

The answer to the noble Lord’s question is: we are attempting to define what a linked travel arrangement is through consultation with the industry. The concept itself was introduced in the EU directive. As someone who has taken part in many late-night trialogue sessions at the end of the process of EU legislation, I can see why sometimes the drafting of EU directives is not as good or forthright as it should be.

The package travel regulations extend the definition and scope of what a “package” comprises. From informal discussions that we have had so far with the package holiday companies, we think that the vast majority of products they sell would be covered under either the old or new definition of a package holiday. On their current business models, a very small percentage would potentially be linked travel arrangements. As part of the directive, the information provisions would have to make clear to a customer that if they were signing up to a linked travel arrangement, there may be a lesser standard of protection than that provided by the package holiday directive for those who have purchased a package holiday, which would be guaranteed under the ATOL scheme. I hope I am explaining it well—it is rather complicated, and the noble Lord can come back to me if he wants further clarification.

The noble Lord asked whether we are prevented by EU regulations from extending the ATOL scheme to airlines. My understanding is that we could extend it to airlines—no doubt I can write to him if I have the wrong impression—but to do that we would have to change primary legislation, because the Civil Aviation Act states that airlines are exempt.

Turning to ATOL-protected flight-only booking providers, which we are talking about in this Bill, they are concerns such as high street travel agents. As well as being able to sell package holidays, they can also sell flight-only products. Obviously, before the airline actually issues the ticket, the customer would have ATOL protection in case the travel agent or the high street provider goes bankrupt in the meantime. Once the ticket has been issued, the customer becomes subject to the separate provisions of the EU 261 compensation regulations.

With regard to the Monarch situation, we still have a few days left in which to finish the rescue operation, and I am pleased to say that so far it is going well. On the face of it there are no easy answers to this situation. Of course we could extend ATOL protection to every airline ticket that is sold in the UK, but no doubt the noble Lord will have received the same representations as I have from airlines and others complaining about the impact of air passenger duty and how it makes the UK travel and airline market uncompetitive in many respects, although there are other issues around what might happen in Scotland or Northern Ireland. If we were to extend the insurance scheme to every airline, in effect that would just increase air passenger duty because we would be adding an amount to every airline ticket. That would apply to every airline operating from the UK or anyone transiting through this country, including Emirates, American Airlines and every other operator that travels through the UK. Many are in very robust financial health and people would already have an element of protection through the EU 261 directive.

There are no easy answers to the Monarch situation. The other area that we could look at, but which is outside the scope of the ATOL Bill before us today, would be the insolvency regulations. We can ask whether it is possible to arrange the orderly wind-down of an airline so that it can continue to operate. Again, however, that has some potential problems, not the least of which is creditor action. As soon as an aircraft is abroad in a foreign airport, if creditors know that an airline is in financial difficulties and they want payment for services upfront, they typically impound airplanes and refuse to allow them to return to their home country. It is a potential avenue that we could look at and we are not ruling anything out. We will examine all the possible ways of protecting the taxpayer in the future, but there are no obvious solutions to prevent this happening. However, I should say that we are not aware of any other airlines that might cause us anxiety at the moment.

[Lord Rosser]

I am not surprised that the Minister has not been able to give us an estimate of what the cost would be of extending the ATOL provision to all flights, obviously including the Monarch situation. I assume from that that the Government do not have a figure. I take it from what the Minister has said that the reference in the Statement to all options being looked at still stands, including the options in one form or another that we have been discussing in this debate. On the basis that I have not misunderstood the Minister and that all options are genuinely being looked at, I beg leave to withdraw the amendment.

[Lord Callanan]

Perhaps I may provide some clarification. EU law actually prevents us from adding additional licensing provisions that go beyond EU law in the case of the licensing provisions of airlines.

Amendment 1 withdrawn.

--- Later in debate ---

[Lord Rogan (UUP)]

My Lords, this sensible amendment should be added and I fully support it.

[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.

--- Later in debate ---

[Lord Rosser]

This amendment would enable the Secretary of State to require the—now well-known from our previous debate—Air Travel Insolvency Protection Advisory Committee, within two years of the Act coming into force, to,

“review the impact on UK consumers of booking a holiday through an EU-based company rather than a UK-based company”,

and require the Secretary of State to lay such a report before both Houses of Parliament.

As we know, the Bill updates the Air Travel Organiser’s Licence so that it is harmonised with the 2015 EU package travel directive. In so doing, the Bill extends ATOL to cover a wider range of holidays and protect more consumers. The expectation is that UK travel companies will be able to sell more easily across Europe, since in future they will need to comply with protections based not in the country of sale but in the country in which they are established. The purpose of the amendment is to provide a degree of certainty that there will be a review, in this case via the Air Travel Insolvency Protection Advisory Committee, of the impact of the ATOL revisions to help ensure that there are no adverse impacts on UK consumers using EU-based companies, since the intention and objective of the Bill is to improve the range and extent of the protections available.

There is a possibility that with the change to EU-based companies having to comply with ATOL-equivalent insolvency protections applicable in the member state where a business is based, rather than in the country of sale, such companies selling holidays to UK consumers may not offer the same ease and lack of expense of processing a claim which are afforded by the ATOL provisions that would apply to a UK company. It appears that some half a million passengers could be affected.

The review referred to in the amendment would enable hard facts to be obtained on the impact of this legislation on UK consumers booking holidays through EU-based companies, and the extent to which the protections offered, the processes and timescales for securing recompense and the costs involved differ from our ATOL arrangements. With that information available, the Government would be in a position to make informed decisions on what further action, if any, could be taken or pursued to help ensure that UK consumers using EU-based companies were either not disadvantaged or at least made aware beforehand that they were liable to find themselves in a less favourable position.

A broadly similar amendment was pursued on Report in the Commons. The Minister there appears to have taken some 40 minutes over his reply, taking interventions like there was no tomorrow, some 15 of which were from his own Back-Benchers. One, as the debate reached its pinnacle, was as follows:

“May I say to my right hon. Friend, with the seriousness and candour that the moment demands, that he is a bright flame on a dull and grey afternoon to which the moths of Parliament are being drawn?”.—[Official Report, Commons, 11/7/17; col. 234.]


The Minister’s response was to wonder whether anyone else wanted to intervene in a similar vein. One could take the view that in the Commons the Government were regarding the whole debate on the amendment as a joke. Alternatively, one could take the view that, since a vote was coming at the end of the debate, the Government were playing for time because they were not sure whether sufficient of their troops had yet returned to be confident of their winning the vote. Since there will not be a vote on this amendment as we are in Grand Committee, I hope to have a more adult debate than the Government promoted in the Commons.

When the Government Minister commented in the Commons on a broadly similar amendment to the one we are discussing now, he said:

“It will be for protection schemes in other member states to provide the protections for UK consumers to which the amendment refers. Because that is not our responsibility—we do not have the power that the amendment suggests that we should have—I am not sure that the amendment works on a technical level”.—[Official Report, Commons, 11/7/17; col. 226.]


I am not sure what power suggested in that amendment the Commons Minister was referring to, but his comment was not exactly encouraging. However, despite having said that the issue referred to in the amendment in the Commons was not our responsibility, the Government Minister in the Commons went on to say that the Air Travel Insolvency Protection Advisory Committee, which provides advice to the Civil Aviation Authority, the Air Travel Trust and the Secretary of State on the protection of consumers, would receive a letter from him asking it to review the implementation of the changes provided for in the Bill. They presumably include the impact on UK consumers of booking a holiday through an EU-based rather than UK-based company.

However, the promise of a letter to the ATIPAC from a Minister who had already declared that the matter is not our responsibility is frankly not sufficient. This is a serious issue with potentially serious consequences for passengers, as recent events relating to Monarch Airlines have shown. We need something on the face of the Bill which, while not compelling the Government to require the review from the ATIPAC, makes it much more difficult for the Government not to proceed down this road, and certainly would in a situation where complaints were coming in from passengers booking a holiday through an EU-based rather than UK-based company, over arrangements and procedures on insolvency protection. I beg to move.

[Lord Callanan]

My Lords, please forgive me if I repeat a number of the points that I made on the previous answer, as this covers the same ground. We are proud that we have always been a leader when it comes to providing protection for holidaymakers. We set up the ATOL scheme in UK legislation several years before the original package travel directive was agreed in Europe. That is the significant point. It means that the ATOL legislation is not dependent on European legislation. The Bill will harmonise ATOL with the package travel directive in the immediate term. However, the ATOL legislation and protection will still exist and remain in place as we leave the EU.

I fully understand why this amendment has been proposed, in order that we consider the ongoing impacts on consumer protection as we leave the EU. As I said earlier, this is already catered for in the legal and policy framework in place. As referred to by the noble Lord, Lord Rosser, during the Commons passage of the Bill, my colleague the Minister of State for Transport, the right honourable John Hayes, wrote to the Chair, John Cox, to consider this precise point in ATIPAC’s 2017-18 annual report. I am sure that they are already minded to keep a close eye on consumer protection both before and after we leave the EU. In fact, these reports will be submitted to the Secretary of State within four months of the end of each financial year and will be published on the ATIPAC website.

The noble Lord, Lord Rosser, also asked about HMG’s problem of our UK passengers purchasing from EU businesses. If a travel business is established in Europe, it will be able to sell holidays to consumers in the UK without ATOL protection. However, it would still be obliged to have in place insolvency protection that meets the strict requirements of the new directive. This protection will be broadly similar to ATOL and will need to cover both online and traditional package holidays.

In light of the explanation that I have given and the scrutiny and the annual review already in place, I hope that the noble Lord will feel able to withdraw his amendment.

[Lord Rosser]

I am disappointed but not surprised by the answer that I have received. One issue will relate to EU-based companies that are selling holidays here but which are required to conform to requirements in their own nation. What will the process be for obtaining that compensation and protection? What expenditure may have to be incurred by a UK resident who has purchased a holiday through an EU-based company? Those processes and procedures, and the cost of going through them, may well be rather more extensive than might apply in relation to a UK company under our own ATOL arrangements. That aspect of it has been rather ignored in the answer given. We come back to a situation where the Government seem willing to write letters to people and to stand up and say in one of the Houses of Parliament, “Yes, we intend to do this”, but when it comes to being asked to put their words on the face of the Bill so that everybody can see their commitment, making Ministers much more accountable, and being required in this case to place the report before both Houses of Parliament, the Government resile from such a suggestion without giving a proper justification as to why it would be inappropriate or unworkable. I am disappointed with the reply, since I think that the Government could have gone further, but I beg leave to withdraw the amendment.

--- Later in debate ---

[Lord Callanan]

I again endorse the purpose of the amendments because carefully crafting policies and the regulatory framework is the key to good governance. The Government have no plans to change the current Air Travel Trust deed. The rationale behind this clause responds to the travel sector’s view. In the light of responses to our consultation last year, the Government are proposing to take the power to establish additional trusts to give them the flexibility to make separate provision—

[The Deputy Chairman of Committees (Lord Geddes) (Con)]

I hate to interrupt the Minister, but a Division has been called in the Chamber. The Committee stands adjourned until 5.15 pm.

--- Later in debate ---

[Lord Callanan]

My apologies for the delay: when you walk through the Lobby, you get trapped by Members wanting to talk to you about various issues. I return to the two amendments. In light of the responses to our consultation last year, the Government are proposing to take the power to establish additional trusts to give them the flexibility to make separate provision for different types of risk, or different business models. The impact of failure can be significant, as we have just witnessed in the failure of Monarch Group, to which Members have referred. This makes the need for regulatory flexibility vital for market efficiency and consumer certainty.

This change has the potential to make the scheme’s operation easier for industry to apply and more robust for the consumer. The new looser types of package arrangement called linked travel arrangements are the most obvious example. Currently, we do not know how the industry will react to this innovation and whether riskier products will appear that might require us to separate the trust arrangements. Richard Moriarty from the CAA said in the evidence session when this clause was part of the Vehicle Technology and Aviation Bill that,

“it would be prudent and sensible for Government to have the flexibility to respond to that”.—[Official Report, Commons, Vehicle Technology and Aviation Public Bill Committee, 14/3/17; col. 65.]

There is already a legal duty in Section 71B of the Civil Aviation Act which places a requirement on the Government and the Civil Aviation Authority to consult if we introduce regulations under Section 71A. Like my right honourable friend John Hayes, Minister of State for Transport in the other place, I am happy to give the noble Baroness a commitment today that there will be a thorough impact assessment and consultation before we use these powers.

Throughout the ATOL review process we have consulted on the basis of impact assessment. In 2012 we changed the Civil Aviation Act to better reflect current market practice. In 2013 we launched a call for evidence on our long-term review of the ATOL scheme. Last year we consulted on the very changes to the Civil Aviation Act that we are discussing today, and shortly we will launch a series of consultations on the detailed regulations that will follow the Bill. As noble Lords can see, each stage of this work has been the subject of extensive impact assessments and consultations every step of the way. Indeed, both the Civil Aviation Authority and the industry’s leading trade body—ABTA—have commended the Government’s approach to reform. We will be working closely with them and consulting with industry as and when we develop plans to implement this clause. Given that the Government are already obliged by Section 71B to consult on the use of these powers, it is not necessary to introduce a further requirement in the manner described, particularly when we are midway through an extensive process of consultation and engagement, which has been commended by those involved.

The noble Lord, Lord Rosser, asked whether the requirement to consult is for all ATOL powers. The regulations under Section 71A of the Civil Aviation Act include a requirement to consult for all the powers. The noble Baroness, Lady Randerson, asked whether the Government’s action to repatriate passengers under the Monarch scheme undermined the ATOL scheme. I think she has an arguable case. I hope she is not suggesting that we could segregate people in overseas airports and say, “You are protected by ATOL and you are not”. As I have explained, the Monarch situation was an exceptional collapse. There was insufficient capacity on alternative airlines. Had it happened at a less busy time of the year, it may not have been necessary for the Government to step in and get people home. We looked at the particular circumstances of that airline, the sheer number of passengers involved and the lack of available capacity on alternative airlines to get people home.

However, it is important to say that the ATOL scheme is an important part of the rescue operation. It will help refund the repatriation costs for the ATOL-protected passengers and they will also be covered for additional accommodation and subsistence costs if they are delayed beyond their original date. ATOL protection will also ensure that any protected passengers who are yet to travel with Monarch will receive a full refund. As I mentioned earlier, the Government will be seeking the recovery of costs from card providers—both credit cards and debit cards—and the travel industry has also been asked to contribute towards the costs of the operation. I understand the concentration on the Monarch collapse but those were exceptional circumstances and, as I said in my Statement yesterday as well as earlier today, we would not want to be hamstrung by that in future.

[Lord Rosser]

I will not say that the Minister has dismissed this—that was not the way he did it—but he referred to the Monarch Airlines scheme as being exceptional, somehow in the hope that it will not happen again, and I am sure that hope would be endorsed, but the Monarch Statement given on Monday said that the Government’s,

“efforts will turn to working through any reforms necessary to ensure that passengers do not find themselves in this position again ”.—[Official Report, 9/10/17; col. 46.]

So the Government have to produce measures and proposals that will ensure that if there is another circumstance like Monarch Airlines, passengers do not find themselves potentially stranded without any protection and the Government do not have to pay the cost of getting them home. That is the commitment the Government have given, is it not? The Government can say that Monarch is exceptional, but they have committed themselves to making sure that there are measures that prevent passengers being stranded not knowing whether the cost of bringing them home will be paid for. The Government are committing themselves to measures to ensure that that cannot happen and that there will be certainty for passengers that the cost of getting them home will be met.

[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.

Air Travel Organisers' Licensing Bill

Lord Callanan Excerpts

Report stage (Hansard): House of Lords
Wednesday 25th October 2017 Lords Chamber

[Baroness Randerson (LD)]

My Lords, I have added my name to this amendment because I felt that it raised some important issues for the Government to look at. I also felt it would be genuinely useful if the views of the Government on the progress made so far were put on record.

At the time of the failure of Monarch Airlines the Minister, in his Statement to the House, emphasised that it was the largest repatriation since D-day. But I put in contrast what the airline industry said in my discussions with it: that Monarch was a small airline and that the problems would arise if a big airline were to fail. Of course, those I spoke to believe that their whole industry is in robust health and that Monarch is definitely not an example of its state generally. The point is that, as the noble Lord, Lord Rosser, has just said, airlines have failed before and undoubtedly, at some point in future, something like this will happen again.

We are looking here at whether the Government have set some kind of precedent by bringing everyone back, for understandable and excellent reasons. I think everyone supports the way that was done and the reasons for doing it. But the point is that if and when it happens again people will expect a similar response and, for that to be possible, there needs to be a scheme. The consumer understands that there is a need for a scheme and understands the ATOL scheme. What the Monarch passengers probably did not understand was why some of them were covered by something and others were not. In the end, the Government need to look at the new ways of working—the new ways in which travel is offered—and present a new scheme which covers them. In the days when the ATOL scheme was devised, package holidays covered a huge percentage of the market. That is very much less the case now.

It is also important to look not just at the passengers who are affected by this. One airline’s failure can often adversely affect a number of package holiday operators. If one airline fails, several package holiday operators will find their business seriously affected. There is a serious knock-on effect within the industry from this and it needs to be addressed. I shall listen to the Minister’s answer with interest.

[The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)]

I thank the noble Lord, Lord Rosser, and the noble Baroness, Lady Randerson, for their contributions and for the constructive way that they have approached the Bill. I am extremely grateful to them and I recognise the purpose of Amendment 1 —to ensure that ATOL protection covers flight-only bookings made through airlines—but the simple fact is that the proposed amendment would not achieve that aim.

--- Later in debate ---

[Lord Callanan]

Before I turn to the subject of the noble Baroness’s amendment, which is about information to consumers, let me go through again the business of linked travel arrangements, which I know is causing some confusion—not least to us in the department. As I said to her when we discussed this privately, it was inserted into the directive and a lot of work is going on to work out what it actually is.

The package travel directive has broadened the scope of a package, so it is now clear that protection should apply when customers book customised combinations of travel online. As the noble Baroness outlined in her speech, it is not at all clear what a linked travel arrangement actually is. It is obvious if there is a direct advertisement on a flight website for a linked hotel and that hotel is promoted by the airline directly and is on the same web page. That, it seems to me, is an obvious linked travel arrangement. However, as we know, and as the noble Baroness has discovered in her meticulous research, on the internet, many adverts on webpages have no connection whatsoever with the originator of the webpage. They are placed by advertising companies, principally Google, among others, and the originator of the page has no idea what adverts are appearing on their page. So if you click on an associated advert, that would not necessarily be a linked travel arrangement, but how is the consumer supposed to differentiate between those two things?

Those are the issues we are grappling with at the moment: trying to come up with a definition of a linked travel arrangement and to implement it in regulations. As the noble Baroness said, the directive introduces information provisions to ensure that consumers have a good awareness of the kind of product they are buying, and we are consulting extensively with the industry to try to ensure that that is the case.

Turning to the subject of the amendment, I recognise the purpose of the proposed new clause and the need to ensure that consumers are better informed about consumer protection when they make a booking. This is well-intentioned and entirely in keeping with the Government’s wish that passengers should have a robust level of protection, and that their rights should be communicated to them in a timely and clear way.

However, I do not think that this is the right approach at this time. Let me explain why. First, we need to be mindful that package holidays and linked travel arrangements often do not involve a flight. They could involve a journey by road, rail or sea, so the Civil Aviation Act 1982 is not the most appropriate place for such an obligation. The UK already has regulations in place through the package travel regulations, which cover package holidays across all modes. We are in the process of updating these regulations alongside the Bill to extend them to cover linked travel arrangements, in line with the EU package travel directive.

This brings me to my second point. The new clause would unnecessarily duplicate the new information requirements in the EU package travel directive. The directive has introduced new information provisions which are designed to improve information for consumers. This sets out the specific information that must be provided to consumers about the type of product they are buying and the corresponding level of protection. This must be provided to the consumer both before and after they buy a package or a linked travel arrangement. We have recently completed a consultation on the directive, which proposed that the information provisions will be brought into force in 2018, through changes to the package travel regulations. We are also planning to retain the ATOL certificate alongside these new requirements to help reinforce awareness of consumer protection.

Finally, I fully accept the need to understand the lessons learnt from the Monarch failure, which I outlined earlier to the noble Lord, Lord Rosser, and to respond in the right way. We have to understand the issues that need to be addressed and whether we can make sensible changes to the laws. That is why we are undertaking an internal review, so that we can bring forward solutions that are feasible and have been assessed as being practically enforceable. As the Secretary of State said in his Statement in the other place,

“I do not want us to rush into doing something without doing the ground work properly. We need to look carefully at what has happened, learn the lessons and make any modifications necessary. I assure the House that that is what we will do”.—[Official Report, Commons, 9/10/17; col. 40.]

It is quite possible, of course, that additional information requirements will follow from that review, but it is important that we consider the options and ensure that the steps we take are the right ones and that they both work in the UK and are compatible with EU law.

I therefore believe that an amendment to introduce legislation of this nature—however well-intentioned the noble Baroness is—is premature. So, in summary, if her concern is that the Government are not taking steps to ensure that consumers are informed about consumer protection when they book a trip, I hope she can take comfort that we are ready to make provision through the package travel regulations and the ATOL certificates to do just what she has asked for. In addition, we will of course also consider consumer awareness as we review the lessons learnt from Monarch and, as I said earlier, as we develop our aviation strategy. Therefore, in the light of the assurances I have been able to give her, I hope the noble Baroness will withdraw the amendment.

[Baroness Randerson]

I thank the Minister for his response. I will certainly watch carefully as the Government respond; I am sure that they are working hard on this. My concern is largely with the consumer, but it is also with travel operators, because it is important that they be able to succeed as much as possible. Consumer confidence is an essential part of that. A simple sentence on a website saying that it is a particular type of arrangement is cheap, easy to organise and involves minimal effort for the companies concerned. It is an easy way to provide additional confidence for consumers. Having said that, I am happy to withdraw the amendment.