Draft Package Travel And Linked Travel Arrangements (Amendment) (EU Exit) Regulations 2018

Lord Swire Excerpts

Tuesday 4th December 2018 General Committees

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

It is a pleasure to serve under your chairmanship for the first time, Mr Hosie. As the Minister indicated, with the rise of the internet and the boom in low-cost airlines, the way we book our holidays has changed significantly. Last year, 38% of all holidays abroad by UK residents—17.5 million holidays—were package holidays. Holidays to the European Union made up 79% of all holidays, and 74% of package holidays, by UK residents. Consumers often buy packaged holidays a long time in advance. They often spend a considerable amount of money—a very significant proportion of their income—on a holiday, including on flights, hotels and car rental.

As the popularity of package holidays rises, so do the risks, including the risk of trader insolvency leaving consumers stranded, the risk of accommodation providers going bust, and the risk of difficulties with access to information, help or redress, to name just a few. That is why the EU directive was an important step forward in protecting consumers in both the UK and the EU.

As the Minister outlined, this statutory instrument amends EU-derived regulations that protect consumers buying package holidays or linked travel arrangements to ensure that these protections continue to operate effectively after the UK’s departure from the European Union. It proposes a new obligation on UK businesses that sell package holidays put together by a European Union business. Those UK businesses will be required to comply with UK insolvency protection requirements, unless they can demonstrate that the EU business has taken out appropriate insolvency protection.

Clearly it is vital that insolvency protection schemes work. To give just one example, in 2016, Lowcostholidays failed, which left 140,000 UK consumers at risk of losing the money they had paid for their holiday, and some stranded overseas. At the time of the failure, the company, which sold primarily to the UK market, was based in the Spanish Balearic islands, following a controversial move in 2013, and its insolvency arrangements were held there. The UK regulator, the CAA, was powerless to prevent the company selling to UK consumers, or to obtain information on its insolvency arrangements. Fortunately, in that case, the majority of UK consumers ended up receiving refunds through the Consumer Credit Act 1974, which covers refunds of credit card payments. However, it has since emerged that the company’s insolvency protection came nowhere near to covering the sales it had made. That illustrates the potential risks of insolvency protection schemes not working in a joined up manner. It is not enough to have a scheme; it needs to work in a joined up way.

The intention behind the mutual recognition rules is to prevent this type of scenario occurring, but without those rules, the only way to do that is to require UK sales to be protected here. As a result of the regulations, the mutual recognition of insolvency protection with EU member states will end. As part of the withdrawal negotiations, have the Government attempted to negotiate continued mutual recognition of this? If not, do they intend to?

As UK individuals and businesses will no longer benefit from mutual recognition of insolvency protection, they could see a reduction in their consumer rights. Is that compatible with the Prime Minister’s statement in October 2017 that she wanted a partnership with the European Union based on strong consumer rights?

Furthermore, the Minister will know when this SI came to the Committee in May, an impact assessment was undertaken, as it was recognised that businesses offering packages that would be newly within the scope of the package travel directive of 2015 would face costs of £21 million in ensuring proper performance of the package. Does she not agree that an impact assessment should have been prepared prior to this debate? The right hon. Member for South Holland and The Deepings asked how businesses could be made more aware of these changes; should that not have been costed as part of an impact assessment? Will she estimate what exactly the cost will be to businesses?

The Minister did talk about an impact assessment. What assessment has she and her Department made of the number of travel companies that may move away from the UK market as a result of the new changes in insolvency protection? Finally, what discussions has she had with British trading standards on the impact these amendments will have on its workload? We know British trading standards has, unfortunately, been underfunded. Will this add to its workload without adding resources? My final question: given the 56% reduction in staffing for trading standards due to Government cuts, has the Minister any assurance to make?

[Sir Hugo Swire (East Devon) (Con)]

How much more money would the hon. Lady’s party give to the trading standards body?

[Chi Onwurah]

I thank the right hon. Gentleman for his intervention, even though it is a little mischievous in nature. As he knows, we would have undertaken these negotiations in an entirely different and more effective way. To ask questions on the detail of what we would do—

[Sir Hugo Swire]

Will the hon. Lady give way?

[Chi Onwurah]

I will finish answering the right hon. Gentleman’s first point before I give way a second time. Asking how we would mitigate the negative consequences of agreements that are part of the Government’s deal—we will see whether it will be approved by the House in a week’s time—is taking hypothetical questions to the extreme.

[Sir Hugo Swire]

For the sake of the Hansard reporters, let me state that I would never want to be accused of saying that the Opposition were strong on detail, but the hon. Lady has just accused the Government of cuts, and of reducing the amount payable to a body, which suggests that her party would commit more funds. It is not hypothetical; we need to know what she means by this.

[Chi Onwurah]

It is entirely wrong to say that I am making an accusation against the Government by simply stating that there was a 56% reduction in staff numbers. How is that an accusation? That is a statement of fact, a statement of the consequence of this Government’s and the preceding Government’s austerity agenda, which has led to our consumer protection services being decimated. The right hon. Gentleman was looking for more detail on this point, and I am happy to give it to him. Our services have been decimated as a consequence of the Government’s austerity agenda. His Prime Minister has said that austerity has ended, but his Chancellor has in no way committed the funds to make that real.

[Sir Hugo Swire]

Will the hon. Lady give way?

[Chi Onwurah]

Again, I would like to answer the right hon. Gentleman’s first point before giving way another time. A Labour Government will ensure that our public services are properly funded. We need to see exactly what mess this Government leaves for us before we can say exactly how much that will cost.

[Sir Hugo Swire]

Hopefully it will not be as great a mess as the one we inherited from her Government in 2010. People are beginning to rumble the Opposition for being opportunistic. The hon. Lady has talked about cuts and decimation; she has accused the Government of decimating this particular body. It is entirely right that, as parliamentarians, we should know what her counter-proposals are. It is no good trying to lose the room in blandishments and vague promises. We need to know, if she has looked at this, how she would better resource it.

[Chi Onwurah]

Our commitments are to comprehensive investment in our public services and our infrastructure, and to strengthening consumer rights and protections. I will not go through every line of funding in our first Budget as a Labour Government, because I am not in a position to do that. However, I am in a position to say categorically that we would not have indulged in the failed economic policy of austerity, which has cut our public services while also giving us the lowest economic growth within the Organisation for Economic Co-operation and Development, and the second lowest within the European Union. If that is successful economic investment, then I think the right hon. Gentleman has a lot to learn about a successful economic policy.