Package Travel and Linked Travel Arrangements Regulations 2018

Lord Henley Excerpts

Wednesday 16th May 2018 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Package Travel and Linked Travel Arrangements Regulations 2018.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I beg to move that the Committee considers the draft Package Travel and Linked Travel Arrangements Regulations 2018, which were laid before the House on 16 April. The purpose of the draft regulations is to update and replace existing legislation by implementing the requirements set out by the 2015 European package travel directive. It may be helpful to give some background on consumer protection and the importance of consumer rights before I explain the changes in detail.

In this country, we have a long history of delivering high standards and strong protection for consumers. That history extends into our time as a member of the EU, where we have been influential in developing the EU’s consumer protections. Indeed, the current framework reflects UK priorities. But in some areas the UK has chosen to go further, providing additional protection for British consumers. For instance, through the Consumer Rights Act, we regulated for the supply of digital content, ensuring that there are clear rights for people buying things such as movies and music online. As e-commerce continues to grow, those protections give shoppers the peace of mind that they need to make a purchase, which is crucial to our prosperity. Household expenditure accounts for around 60% of the UK’s economy, more than a trillion pounds a year. Package holidays form an important part of households’ expenditure. Each household spends an average of £1,200 a year on package holidays, around one-third of their total spending on recreation and culture.

Our recently published impact assessment shows that the new rules we are proposing will protect an extra 10 million UK package holiday trips, bringing those who mix and match their holidays in line with those who opt for traditional prearranged combinations. Last summer we consulted on the idea of a light-touch approach to implementation of these proposals. We published the Government’s response to the consultation and the impact assessment last month. The EU’s deadline for transposing the requirements of the EU package travel directive into UK law was this January, with a further six months for these requirements to be brought into force. The travel industry is aware that we are copying out the directive, which has been in the public domain since 2015. We recognise the concerns raised that the Government are late in implementing the regulations. Therefore, we have engaged intensively in advance of laying the regulations to help the industry adjust, and will continue to work with businesses on implementation after the regulations come into force.

Package travel regulations have provided protection to travellers for many years, but they were introduced in 1992, and much has changed since then. Technical innovations have opened up new ways of buying and selling holidays. This has provided increased choice and flexibility in the travel market, allowing consumers to mix and match components of a holiday to suit their particular needs However, such rapid change has left new methods of packaging holidays outside the scope of the current regulations. The 2018 package travel regulations will address this gap. We are ensuring that people who book package holidays through travel sites online enjoy the same rights as those who book with a traditional travel agent. The draft regulations will introduce a broader definition of package holidays to capture modern booking models.

The regulations will also introduce a new concept of linked travel arrangements, or LTAs. These provide some level of protection for looser combinations of travel services than exist in a package holiday, so they have fewer requirements. We are also making it a requirement that package travellers are given clearer information on what they are agreeing to and what their rights are. In addition, we have strengthened the insolvency protection so that consumers can get their money back or be returned home if the company that arranged a package goes bust.

The United Kingdom is required to designate central contact points to supervise UK-established package organisers that are selling into other EU member states. After careful consideration, we have agreed that from July the Civil Aviation Authority will take on that role. With regard to the enforcement of the regulations, the arrangements will be as before, with the responsibilities being taken on by either the Civil Aviation Authority or trading standards.

The department’s impact assessment, which was published alongside the regulations, estimates a net cost to business of around £100 million a year. However, these changes will level the regulatory environment for all businesses selling travel packages. Businesses which have been providing packages not previously covered will now be subject to the full range of protections under the 2018 package travel regulations, including the organiser taking on liability for all the services provided under the contract and providing cover against insolvency.

All these measures will help to ensure that on the day we leave the EU we will maintain our high standards of consumer protection, delivering the stability and continuity that consumers need. It is also our objective to have effective protection in place for consumers purchasing goods and services cross-border in the future. The way that consumer protection will apply when buying across borders is still a matter for negotiation, but we are determined to co-operate closely with our EU partners on matters of consumer protection.

The regulations will enhance protections for consumers when buying package holidays either through the traditional method or online, and they have been welcomed as a positive step by the travel industry. Throughout the consultation process and the development of policy, we have sought to strike a balance between increased protection for consumers and minimised burdens on businesses. I commend the regulations to the Committee.

[Baroness Randerson (LD)]

My Lords, this updating of the 1992 legislation is welcome, as things have undoubtedly moved on a great deal since then. We now use computers and we travel a great deal more, particularly taking short breaks. The Minister has outlined how important holidays are to the UK public, so I welcome the fact that the definition of a package is to be expanded. Of course, we were prompted to do this by an EU directive, and we have only until 1 July to deal with it. The impact assessment makes it clear that these regulations—and the Minister said as much just now—do not go beyond EU requirements; rather, the EU directive has in effect been simply copied over.

When we discussed this issue last year, in the wake of the Monarch Airlines insolvency, the Minister at the time, the noble Lord, Lord Callanan, made it a point of great pride that we in the UK had the first laws to protect the purchasers of package holidays and that our laws go beyond the protections available in other countries. Given that, my first question is whether this is a conscious change of policy by the Government in terms of consumer law. The Monarch situation revealed again the differing levels of protection available to travellers, depending on how they purchase their holiday and the unfairness that existed between different sorts of purchase. It demonstrated that nowadays relatively few people buy traditional packages for their holidays, although I read recently that declining public economic confidence has started to reverse that trend. People are now looking for more security and are therefore more likely to buy a package. So it is to be welcomed that these regulations are specifically designed to cover other sorts of arrangements.

Just when I thought I had got my head around linked travel arrangements and what they mean, I find that there are two other categories as well. When we discussed this last year, the noble Lord, Lord Callanan, made it clear that the idea of a linked travel arrangement was still in the process of being divined. Looking at the categories, I see that there are prearranged packages, which is the traditional arrangement we are all used to, and dynamic packages, which have the features of a package but allow the consumer to pick and mix, to customise the content of their package, buying from one trader. As a further option, travellers can put together the components of a package themselves—one assumes online—based on specific offers from more than one trader. The Explanatory Memorandum says that, although this has elements of from more than one trader, it comes from a single point of sale. My second question to the Minister is this: what does a “single point of sale” mean?

Last night, I happened to be organising a weekend away. I booked my flight on a holiday package website and then up popped the offer of a car hire. But as I dealt with the car hire, I found myself on a separate website, although it had come to me via the first one. I am interested in how this option differs from other options. I quite understand that, if you walk into Trailfinders, you can buy a variety of things from one point of sale. But what is a “single point of sale” when you are dealing with this on the computer?

Apparently, in addition to and separate from the two forms of dynamic package and the simple prearranged package, there are linked travel arrangements. These are the combination of at least two different travel service for the same holiday but, unlike packages, they involve separate selection and payment for each services and separate contracts. Those are created with a trader and, according to the explanation, a linked travel arrangement is created where the,

“trader facilitates either … the selection and payment of two or more services for the same trip, under separate contracts with individual providers, upon a single contact with a point of sale, or … the separate selection and payment of two or more travel services for the same trip through targeted linked booking processes within 24 hours without transferring the travellers’ payment details. Conversely, if the traveller’s payment details, name and email address are transferred then this would count as a package”.

I understand the last sentence, but I got lost halfway through the rest of it.

The point I am making is that this is hugely complex. How is a person purchasing their holiday to know that it is linked by a trader rather than a link inspired by Google? I get extremely worried when I visit a restaurant, for example, and am then asked to rate it. I have not told anyone I am going there—I have simply carried my phone there—yet, somehow, Big Brother knows I have been there. We are all susceptible to having things promoted to us as a result of our choices, using the computer or simply carrying around a phone. This is so complex that publicity will be essential. It will affect a whole new cohort of traders—the Explanatory Memorandum estimates a one-off cost of £620 million to the industry and an annual cost of £48 million. This is a significant new thing for the industry. So my question is: how are the Government planning to raise awareness within the travel industry?

--- Later in debate ---

Finally, the worry I have about this in practice is that while the regulations for those who take flight bookings, which stem from the DfT, are being organised by one body—the CAA—the actual body that is charged with sorting this out for the package end in the regulations, as I understand it, is trading standards. Trading standards is under considerable pressure for all sorts of reasons, not least the fact that the pressure on local authorities is reducing the amount of money available. I would be grateful if the Minister could comment on that and whether additional resources will be available for those who will have to address any complaints that may come forward.

[Lord Henley]

I thank all three noble Lords for their comments on these regulations. In summary, I think all three were saying that they welcomed them but that the regulations were somewhat on the complex side and they needed some explanation and guidance. The noble Lord, Lord Snape, gave from his own history the example of the first SI that he dealt with in opposition, many years ago back in 1992. He and I do not have to remember it but that legislation was only five pages long and these regulations are somewhat longer. The first thing to say is that things have got more complicated. As the noble Lord knows, the way we buy things has got much more complicated than it was some years ago. The old, simple package holiday is no longer there; we all buy things in a completely different way.

The noble Baroness, Lady Randerson, gave an example of the way that, as families, we sit down in front of the computer and say, “Right, let’s get a flight”. We take many more short holidays and may suddenly think, “We’ve got a long weekend—let’s get a flight”, then up jumps the offer of car hire, hotels and other things. In a sense, we create a package. For that reason, things will obviously be more complicated when putting together the regulations. It is therefore quite likely that they will have to contain more than the five pages that the noble Lord, Lord Snape, remembers so well.

[Lord Stevenson of Balmacara]

I am sorry to interrupt the Minister but is not one of the Government’s aims here to make sure that people who buy things digitally have the same rights and experiences as those who might walk into a shop and buy them on the ground? I think the point that the noble Baroness, Lady Randerson, was making is that it is actually not being replicated here. There is not quite the same sense of buying, in a shop at a particular time, the package—even though it comes in slightly different forms. That is the issue which is causing concern.

[Lord Henley]

The noble Lord is quite right to highlight that as an issue. The point to make is that when you are buying something slightly different, as a package, it will be quite difficult to put together exactly the same regulations as those remembered so fondly by the noble Lord, Lord Snape, which covered only five pages. To try to give the same sort of coverage when something so completely different, which did not exist in the past, is being bought necessarily makes for more complicated regulations. It is not that we have become more verbose since 1992. It is just harder to do these things.

I was going to offer some thanks to the noble Lord, Lord Stevenson, for his thanks for the Explanatory Memorandum. It is very rare that we get praise of that sort but we are grateful for it.

[Lord Snape]

I am sorry to interrupt the Minister again but, regarding the question of what constitutes a package, set against linkage, it is not just about going on to a computer and booking a flight. What would happen if I went into a travel agent and said I wanted a weekend in Marbella, they had the perfect flight for me from Birmingham, my local airport, at 6 o’clock on a Friday evening, I booked it and paid for it there and then, but then said, “What about car hire at the other end?” Is that covered by the package, or is that regarded as a linked package and therefore not covered, in the way that getting the whole thing together and paying for it all at once would be? I am sorry if that is a bit complex, but I hope the Minister understands what I am getting at.

[Lord Henley]

I will deal with these points when I get on to the different sorts of coverage. I was broadly trying to get across that we were trying to give coverage where there was not coverage in the past. I believe it was the noble Lord who congratulated the Government on being the first to offer these protections, helping to get these regulations and trying to get a degree of protection for the consumer in them.

I will deal with some of the points raised, starting with the common commencement date. My advice is generally that common commencement dates do not apply to the implementation of EU legislation and, in this case, there was no compelling reason to diverge from that position. What we did—I appreciate that we have taken some time over it—was to give a degree of time. I think that has been useful for the industry and this is why we have gone up to the wire, going up to 1 July rather than doing it on 1 January.

The noble Lord, Lord Stevenson, also asked about the other regulations coming from the Department for Transport, which will be negative regulations. I remind noble Lords of how seamless the Government are in the way they operate, with no silos between departments. My advice is that the Department for Transport expects to publish its final ATOL regulations and the formal government response to the ATOL conversation in the coming weeks. At the same time, they will be laid before Parliament and come into force in line with the implementation deadline of 1 July, so the noble Lord has time and we will try to make sure that we can meet this.

I return to the questions, largely led by the noble Baroness, Lady Randerson, on the single point of sale and the complication of the LTAs. Put simply, it is when the same retail premises, the same website or the same telephone service is used to put those together. I appreciate there is a degree of complexity; that is why we hope to provide guidance that will help to explain the concept as far as possible, making it easy for the consumer so they know that they are buying an LTA. Although LTAs do not offer the same level of protection as a package, traders who facilitate putting together an LTA will be required to inform the traveller that they are not buying a package and therefore will not benefit from the protections associated with that package.

We want to make sure that there is appropriate guidance to assist the industry with that concept and, as a result, to assist the consumer and make sure that they are aware that they are buying an ATOL-protected product. The noble Baroness was correct to stress the importance of the initials ATOL.

[Baroness Randerson]

I am grateful to the Minister for his attempts at explanation. He clearly understands the subject a lot more deeply than I do. The problem with ATOL-protected packages is that they are something that the trader put together. All these other variations, whether it is either sort of dynamic package or a linked travel arrangement, are things you create for yourself. If you choose this car hire rather than that one, you may choose this car hire from the website, but that car hire would be from a different website. Given the average person’s knowledge and understanding of computers and sources of information—most of us are fairly hazy about where we get a lot of information and there will be no label saying, “This is protected”—my concern is how people will know that they are protected and what is the level of protection.

Briefly, because there are so many variations, we are talking about shades of grey. It is now difficult to justify having different levels of compensation depending on whether you create your own package or are given one by a tourism operator.

[Lord Henley]

The noble Baroness is stressing the complexity of what has come into existence over the years. Earlier, she stressed the need to ensure that the industry was properly informed, but she went on to say that it was important that we ensure that the consumer—I always stressed the importance of the consumer—is also protected. What it makes even clearer is that we in the department must ensure that we provide the appropriate protection and compliance. That is why we want to work with the industry and regulators to help them understand all the changes being introduced, develop some guidance and ensure compliance. We will also be working with Citizens Advice to ensure that the guidance helps. I hope that, as a result, we can ensure that consumers are fully aware of what protection they have.

I appreciate that I probably have not got this out as clearly as I should like to all three noble Lords who have spoken, and I will probably end up writing a letter setting it out in some detail—I see from nods that that would be popular and appreciated.

I end by dealing with the noble Baroness’s final point. She asked about the policy change and why, having been the leader in this, we were going only as far as the current directive suggests. We have always been the leader when it comes to the protection of holidaymakers. I was grateful for what the noble Lord, Lord Snape, said at the beginning. Obviously, we will continue to do that whether we are inside or outside the EU but, at the moment, it is vital that we bring the directive into force. That is what we are obliged to do by 1 July.

As the noble Baroness is fully aware, thereafter, it will be open for us to go further, should we wish. The United Kingdom recognises that there is a need at this stage to introduce that stronger consumer protection to address the gap that has been identified and it is important that we implement those changes at this stage irrespective of where we are with our exit from the EU.

The directive is the maximum harmonisation, so there is limited scope at this stage to go beyond it. As I said, I hope to write to noble Lords to set out some of this with slightly greater clarity to make clear what we are doing. I accept that the arrangements are complex, but life is more complex than it used to be and how we buy holiday packages certainly is. I think it is a great deal more convenient and a great improvement, but it means that protections have to be devised in a different way.

I again thank the noble Lord for his welcome for our Explanatory Memorandum—it is very rare that we get such praise, so when we get it, I always like to thank people for it. I commend the regulations to the Committee.

Motion agreed.