All 3 Lord Rosser contributions to the Air Travel Organisers' Licensing Act 2017

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Tue 5th Sep 2017
Air Travel Organisers’ Licensing Bill
Lords Chamber

2nd reading (Hansard): House of Lords
Wed 11th Oct 2017
Air Travel Organisers’ Licensing Bill
Grand Committee

Committee: 1st sitting (Hansard): House of Lords
Wed 25th Oct 2017
Air Travel Organisers' Licensing Bill
Lords Chamber

Report stage (Hansard): House of Lords

Air Travel Organisers’ Licensing Bill Debate

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Department: Department for Transport

Air Travel Organisers’ Licensing Bill

Lord Rosser Excerpts
2nd reading (Hansard): House of Lords
Tuesday 5th September 2017

(6 years, 6 months ago)

Lords Chamber
Read Full debate Air Travel Organisers' Licensing Act 2017 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 11 July 2017 - (11 Jul 2017)
Lord Rosser Portrait Lord Rosser (Lab)
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My Lords, I thank the Minister for his explanation of the purpose and content of the Bill, which we support, although that does not mean that we will have no issues to pursue during the further stages of the Bill. I am not quite sure whether the numerical shortage of Back-Bench speakers is despite or because of who the Front-Bench speakers are.

In a situation where those booking holidays do so many weeks or even months in advance, and often do so by paying up front in a situation where services are frequently provided by third parties, to ensure up-to-date and effective appropriate protection for airline passengers in the event of the bankruptcy of their travel company is an objective with which I am sure all agree.

Indeed, in the light of the problems there have been at times this year at some of our airports as a result of difficulties over, for example, IT systems and the enormous adverse impact that that can have on passengers, one is tempted to feel that maybe the protection offered by statute is not as all-embracing as it might be. The consumer, we are led to believe, is king. I am not sure that air travellers always feel that that is the case.

In his letter to Members of this House in July, the Minister states that this Bill is intended to modernise the Air Travel Organisers’ Licensing consumer protection scheme for package holidays that include a flight. The ATOL scheme was introduced in the 1970s for UK holidaymakers flying overseas and, as the Minister said, was most recently updated in 2012. The ATOL scheme is also a crucial means by which UK businesses can meet their obligations to have insolvency protection under EU directives.

As the noble Baroness, Lady Randerson, said, the content of this Bill originally formed part of the Vehicle Technology and Aviation Bill, which met a sticky end as a result of the Prime Minister’s sudden desire to hold a snap election. Perhaps the Minister can tell us whether, and when, all the other parts of the Vehicle Technology and Aviation Bill are likely to reappear and whether the impact of drones and laser beams on the safety of aircraft will also then be addressed.

ATOL is a statutory financial protection scheme managed by the Civil Aviation Authority on behalf of the Government and at present applies only to flights with accommodation sold in the United Kingdom. Businesses selling air holiday packages, or flight-only sales by third parties, in the UK are required by law to hold an ATOL licence. Should an ATOL-licensed firm become insolvent, the Civil Aviation Authority can refund protected customers or, if they are already on holiday, ensure that they can get back home. As has already been said, the scheme is funded by contributions made by travel companies into the Air Travel Trust Fund at the rate of £2.50 for each person they book on a holiday. It has been estimated that the ATOL scheme protects over 20 million holidaymakers each year.

As we know, in November 2015 the European Union adopted a revised directive on package travel and linked travel arrangements, and member states—which, contrary to the belief of some, still include us—have until 1 January 2018 to implement the directive, which will apply from 1 July 2018. The Government supported the updating of the EU package travel directive as it was consistent with our own ATOL protections and should provide a consistent approach to protection, including in respect of holidays booked online.

The revised directive takes account of the major changes that have occurred over the last 20 years or so in the way that holidays are bought and sold with the growth of the internet and mobile phone technology. In particular, the internet has enabled people to mix and match the components of their holiday in a way that often falls outside the scope of ATOL and the current EU directive. One survey has estimated that about 75% of UK customers now book their holidays over the internet. This has led to a fall in ATOL sales as a share of all leisure flights from over 90% in 1998 to, I believe, around 50% more recently.

One aim of the 2015 EU directive is to bring greater clarity on what constitutes a package holiday, with a further objective being to harmonise protection within the EU. The first clause of the Bill updates ATOL to ensure that it is harmonised with the recent EU directive. Many of the changes will be covered in regulations, but a wider range of operators, including more dynamic package providers which offer a greater choice of destinations, activities and providers and enable people to tailor bespoke packages for themselves, will probably be covered under the changes, bringing protection to many more UK holidaymakers not covered under the existing ATOL provisions.

In addition, the requirement for travel companies to be in line with standards at “place of establishment” instead of at “place of sale” will mean that UK companies can sell more easily across Europe by simply adhering to the widely respected ATOL arrangements and requirements. Existing ATOL legislation applies only when the first leg of a relevant flight booking departs from a UK airport. However, will the Minister say whether this change will also mean that EU-based companies selling in the UK will have to adhere only to an ATOL-equivalent protection laid down in the member state where the business is based, which could have processes and timescales for recompense distinctly different from what many UK consumers would expect under our ATOL arrangements? Some 500,000 passengers could be affected.

The second clause relates to the Air Travel Trust, the legal vehicle used to hold the money to refund consumers under ATOL, giving the Secretary of State power to define separate trust arrangements to reflect different market models. This change is not directly relevant to the EU regulation addressed in the first clause, but is a dormant power that would enable the Government to make wholesale change to the structure and applicability of the ATOL brand, subject only to the affirmative resolution. Will the Minister say what consultation—and with whom—will take place prior to the regulations under this clause being laid by the Secretary of State, and will a full impact assessment be undertaken? What separate trust arrangements to reflect different market models are the Government contemplating under Clause 2, and why, and will they provide more, less or the same protection as is provided to consumers under the present trust arrangements?

The third clause extends the scope of the powers under which the Civil Aviation Authority is currently able to request information. Specifically, the clause would ensure that the information power would apply to any airlines established in the UK selling relevant holidays in the EEA that are not covered by the Civil Aviation Act 1982.

The last clause, Clause 4, provides for commencement of the provisions of the Bill, with Clause 3 coming into force on whatever day or days the Secretary of State decides by regulations, and the other provisions coming into force on the day on which the Bill receives Royal Assent. The comment has already been made that the travel industry is one that has to plan, and to sell holidays, up to 18 months or more ahead. Much of the detail implementing the Bill will be done through secondary legislation, the content of which at the moment is unclear. What discussions—and with whom—have taken place and are taking place on the detail of the secondary legislation and when is it expected that secondary legislation will appear, assuming that this Bill becomes an Act?

Further, what guarantees can the Government provide that departure from the EU will not result in any of the existing rights and protections for passengers provided for in EU law, including those provided for in this Bill, being weakened or diminished? Finally, what guarantees can the Government offer the airline industry on the operating environment situation following our withdrawal from the EU, bearing in mind that aviation does not even have World Trade Organization rules to fall back on?

We support the aims and objectives of the Bill, but there are a number of points on which more detail is needed from the Government. The purpose of the Bill will be somewhat diminished if our aviation industry is in trouble following withdrawal from the European Union.

Lord Callanan Portrait Lord Callanan
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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 Portrait Lord Rosser
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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 Portrait Lord Callanan
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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 Portrait Lord Rosser
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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 Portrait Lord Callanan
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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.

Air Travel Organisers’ Licensing Bill Debate

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Department: Department for Transport

Air Travel Organisers’ Licensing Bill

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

(6 years, 5 months ago)

Grand Committee
Read Full debate Air Travel Organisers' Licensing Act 2017 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 58-I Marshalled list for Grand Committee (PDF, 65KB) - (9 Oct 2017)
Moved by
1: Clause 1, page 1, line 8, leave out subsection (3)
Lord Rosser Portrait Lord Rosser (Lab)
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I apologise for my late arrival; I had to be on the Front Bench for the Home Office Private Notice Question in the Chamber. I do apologise for the delay I have caused.

I will be brief in speaking to the amendments. Their purpose is to raise the issue of linked travel and flight-only arrangements in relation to ATOL protection. In respect of linked travel arrangements, the Minister said that the Bill would extend protection to consumers making these less formal holiday arrangements. Can he say which clause or subsection says this specifically, or is this a matter that the Government intend to address in regulations? If it is the latter and the Government intend to address it in regulations, why not include the extension of the protection to linked travel arrangements on the face of the Bill, as provided for in my Amendment 2? I take it that linked travel arrangements will be quite significant. Will the Minister let me know, either now or later, what proportion of what I would describe as ATOL sales the Government think linked travel arrangements will make up? Are they contemplating a new separate air travel trust for linked travel arrangements, in view of later clauses?

Turning to flight-only arrangements, one issue that surfaced during the debate on the Monarch Airlines Statement on Monday was the very low percentage of Monarch passengers covered by the existing ATOL provisions. I think the Minister said it was likely to be some 10% to 15%, and that this percentage was unlikely to have been much higher even under the provisions of the revised EU directive and the Bill. As I understand it, that is because nearly all Monarch Airlines passengers were flight-only. The Government decided, particularly because of the numbers involved, to provide flights back home for those Monarch passengers stranded abroad. This is a power the Government have but as I understand it, it is entirely up to them when and if they use it. Surely that can only create a degree of uncertainty, which is not a desirable state of affairs, certainly not for stranded airline passengers.

I put it to the Minister that the Government should consider setting out clear criteria against which they will determine whether to provide flights back home for stranded flight-only passengers whose airline has become insolvent or, alternatively, consider extending the ATOL protection scheme to flight-only passengers, who made up the vast majority left stranded by the demise of Monarch Airlines. Perhaps in that regard, the Minister could give an estimate of the cost to travel organisations of extending the ATOL protection scheme in this way.

Can the Minister expand on the paragraph in the Government’s Statement on Monarch Airlines on Monday? It reads:

“But then our efforts 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, but also whether it is possible for airlines to be able to wind down in an orderly manner and look after their customers themselves without the need for the Government to step in. We will be putting a lot of effort into this in the weeks and months ahead”.—[Official Report, 9/10/17; col. 46.]


What do the Government include in “look at all the options”? Can I take it that this will include flight-only passengers not ending up being stranded abroad with no automatic provision available to fly them back home at no additional cost? I beg to move.

Baroness Randerson Portrait Baroness Randerson (LD)
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I thank the noble Lord for his remarks, which have provided a useful introduction to his thinking. Clause 1(3) inserts new subsection (1E) into Section 71 the 1982 Act to clarify that the Secretary of State can make regulations to exempt any form of flight-only arrangement from ATOL. As the noble Lord, Lord Rosser, said, most of the passengers in the Monarch situation were not covered by ATOL arrangements, but it inevitably leads one to reconsider the situation and what needs to be done—we will refer to this later on. The key question is whether it is desirable for flights-only to be covered by some kind of scheme of the ATOL type. That would inevitably mean an addition to the cost of flights. In the case of low-cost airlines, it would be a significant addition to the cost of a short-haul flight. In a situation of what I think the Minister will agree is brutal price competition, I suspect, although I do not know, that the airlines would not welcome any additional costs of this nature.

On Monday, the Minister emphasised the massive scale of the repatriation that the Government, via the CAA, have undertaken, and it has been a very effective way of dealing with the problem. However, Monarch was a small airline. It might have been, as the headlines said, the biggest repatriation since D-Day, but it was a small airline that went bust. When one combines the size and complexity of that situation with the issue of linked travel arrangements and the possible development of such a concept, we have to consider what sort of compensation should be available to people throughout the market. We are in a rapidly changing market and just because airlines seem to be in robust health at the moment, it does not mean, in the uncertain future we face, that this will necessarily continue in the decades ahead. I would welcome the Minister’s comments on what forms of compensation the Government are considering for those in situations where airlines go into liquidation, and by contrast what compensation should be considered for those who still stick to the old-style package holiday arrangements—if I can call them that.

Lord Callanan Portrait The Parliamentary Under-Secretary of State, Department for Transport (Lord Callanan) (Con)
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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 Portrait Lord Rosser
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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 Portrait Lord Callanan
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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 Portrait Lord Rosser
- Hansard - -

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 Portrait Lord Callanan
- Hansard - - - Excerpts

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.

--- Later in debate ---
The aviation and package tourism industry is a massive part of our economy. We believe it is important that the Government do not just consider the impact of Brexit on that industry—I am sure the Minister considers it every day—but that consumers are made aware of what the Government believe that impact will be. It is important that the Government produce a report to be discussed by this Parliament.
Lord Rosser Portrait Lord Rosser
- Hansard - -

I will be brief. It seems that the terms of this amendment are entirely reasonable, since people will surely want to know whether changes are going to be made to the protection arrangements, if and when we leave the European Union. There is a need for people to be clear what the impact is. It may be that there is no impact and so that needs to be clear, but people certainly need to know what the impact is, whether it is negative or not adverse at all. That is what this amendment is seeking. I do not know whether the Minister is going to accept it or not. If he is not, I shall listen with interest to his reasons for saying he cannot.

Lord Rogan Portrait Lord Rogan (UUP)
- Hansard - - - Excerpts

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

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Moved by
4: After Clause 1, insert the following new Clause—
“Potential impact on consumer protection of UK consumers using EU-based companies
(1) The Secretary of State may, within two years of this Act coming into force, require that the Air Travel Insolvency Protection Advisory Committee review the impact on UK consumers of booking a holiday through an EU-based company rather than a UK-based company.(2) The Secretary of State must lay a report of any assessment carried out under subsection (1) before both Houses of Parliament.”
Lord Rosser Portrait Lord Rosser
- Hansard - -

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 Portrait Lord Callanan
- Hansard - - - Excerpts

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 Portrait Lord Rosser
- Hansard - -

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.

Amendment 4 withdrawn.
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Lord Rosser Portrait Lord Rosser
- Hansard - -

I have Amendment 6 in this group to which I would like to speak. As the noble Baroness, Lady Randerson, has said, it is similar to, although not exactly the same as, the amendment that she has just moved. My amendment states:

“The Secretary of State may not amend the definition of ‘Air Travel Trust’ under subsection (6) until a report outlining the criteria under which those amendments have been proposed has been laid before both Houses of Parliament”.


Clause 2 relates to the Air Travel Trust, which holds the money that is used to refund consumers under ATOL protection. It gives the Secretary of State the power to define separate trust arrangements to reflect different market models. Presumably it has been included in the light of changes in the package holiday market, but no doubt also in the light of Brexit because changes to ATOL and the Air Travel Trust could conceivably be considered necessary by the Government in the event of our leaving the European Union, depending on the basis and terms on which we left. Indeed, in the light of the discussion we had earlier on Monarch Airlines, the Government’s Statement on Monday and now looking at all the options, it could well be that, as a result of looking at those options, the Government have come to the conclusion that changes might be needed as far as the Air Travel Trust and ATOL arrangements are concerned.

During the Commons Committee evidence sessions in relation to the measures contained in this Bill, a trustee of the Air Travel Trust said that he recognised the possible merits of separating the trust to reflect variations in the products in the market, but that we are not there yet and that it would not be appropriate for the Government to use the Bill as a means of making wholesale changes without due consultation. Moreover, the impact assessment does not consider proposals for ATOL reform beyond what is currently required. In the Commons, the Government declined to accept an amendment requiring them to undertake a full impact assessment and consultation before bringing forward regulations to create any new air travel trusts through an affirmative resolution—a very similar amendment to that moved by the noble Baroness, Lady Randerson. In response, the Government said that there would be full consultation and a comprehensive impact assessment in respect of any regulations to be made under these measures. Can the Minister say whether that applies to any measures covered in the whole of the Bill or did the Government’s response refer only to regulations made under new subsection (6) inserted by Clause 2(2) relating to air travel trusts? The Government’s lack of enthusiasm to date for putting these declarations of intent into the Bill, bearing in mind the considerable powers which subsection (6) gives the Secretary of State, is worrying.

We have therefore tabled Amendment 6. It would mean that prior to amending the definition of “Air Travel Trust” the Secretary of State would have to lay before Parliament a report setting out the criteria under which the amendment was being proposed. This would at least enable a view to be formed on the need, or otherwise, for such amendments, ensure a degree of consistency over the reasons for bringing forward such amendments and enable a view to be taken on whether the amendments address the reasons or criteria that had been advanced for bringing them forward. That does not seem unreasonable in the light of the extent to which the powers given to the Secretary of State under subsection (6) to make potentially significant changes by regulations could be used, bearing in the mind the impact they could have, to which reference has already been made, on the viability and sustainability of the current Air Travel Trust or a future, more fragmented trust and thus the whole ATOL protection scheme.

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Lord Callanan Portrait Lord Callanan
- Hansard - - - Excerpts

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 Portrait Lord Rosser
- Hansard - -

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 Portrait Lord Callanan
- Hansard - - - Excerpts

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.

Air Travel Organisers' Licensing Bill Debate

Full Debate: Read Full Debate
Department: Department for Transport

Air Travel Organisers' Licensing Bill

Lord Rosser Excerpts
Report stage (Hansard): House of Lords
Wednesday 25th October 2017

(6 years, 5 months ago)

Lords Chamber
Read Full debate Air Travel Organisers' Licensing Act 2017 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 58-R-I Marshalled list for Report (PDF, 62KB) - (23 Oct 2017)
Moved by
1: Clause 1, page 1, line 3, at end insert—
“( ) In subsection (1)—(a) in paragraph (a) omit “or (1B)”;(b) in paragraph (b) omit “or (1B)”.( ) Leave out subsections (1B) and (1C).”
Lord Rosser Portrait Lord Rosser (Lab)
- Hansard - -

My Lords, in the Government’s Oral Statement on Monarch Airlines of 9 October, the Secretary of State said that,

“right now our efforts are rightly focused on getting employees into new jobs and getting passengers home. After 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, but whether it is possible to enable airlines to wind down in an orderly manner and look after their customers themselves, without the need for the Government to step in. We will be putting a lot of effort into that in the months ahead”.—[Official Report, 9/10/17; Commons, cols. 27-28.]

The demise of Monarch Airlines, along with the Secretary of State’s Statement, has raised questions about the current UK financial protection regime generally for air travellers. The ATOL scheme is intended to ensure that those who purchase ATOL-protected flights and holidays are flown home at no extra cost if an ATOL company fails. However, the scheme does not offer that protection to customers who buy airline seats from airlines which are not within the ATOL scheme.

The Government have estimated that the proportion of Monarch Airlines passengers affected who were covered by the ATOL scheme and ATOL protection amounted to some 10% to 15%. As we know, the Government decided to step in and repatriate Monarch’s passengers regardless of whether they were among the small minority who were protected by the ATOL scheme, a decision which would appear at least to raise questions about the current scheme and arrangements.

While this Bill will update existing powers to enable different and separate arrangements to be established to align with new practices, such as linked travel arrangements, there remains a gap in consumer protection for flight-only seats sold by airlines, despite—I understand, perhaps incorrectly—the industry and the CAA’s previous calls for such a protection regime. The Bill does nothing to address that gap.

The amendment, whose intention has the support of ABTA, would through its proposed deletions to the 1982 Act provide an opportunity for the Government to say how they intend to review and update the existing arrangements and regulations, particularly in respect of flight-only travel under the Civil Aviation Act 1982, to ensure the protection of passengers in the event of a future airline failure—which as I understand it from the Secretary of State’s Statement of 9 October is, at least in part, what the Government intend and want to do.

It is really a matter for the Government, in consultation with the industry and consumers, to determine the precise framework and model for delivering any new protection regime. The Government appear to be looking for a new arrangement which would ensure that passengers in any subsequent Monarch situation are flown home at no extra cost but at the lowest possible cost to the taxpayer and, presumably, to the airlines in particular and the travel industry in general.

A substantial proportion of the failure costs incurred in the ATOL scheme over the years has related to airline failures: Clarksons with Court Line; Laker and Arrowsmith Holidays with Laker Airways; ILG with Air Europe; XL Leisure Group with XL Airways; and now Monarch Travel Group with Monarch Airlines. These failures have also led to significant costs being incurred either by customers not protected under the ATOL scheme or by the taxpayer. Travel companies are also affected by the failure of an airline as they are liable for all aspects of a package holiday under the package travel regulations. While the exclusion of airlines from a scheme of protection means that their customers are not protected against financial loss, in practice those passengers—both British and those in other European countries such as Italy and Germany—have been repatriated at a cost to taxpayers and other industry participants. This surely adds to confusion when failure occurs, particularly around what is and what is not protected under the ATOL scheme. There is also a lack of clarity around the meaning of the ATOL-protected branding and ABTA has consistently called for it to be made much clearer that ATOL protection applies only to a particular set of holiday arrangements rather than the company as a whole.

The amendment is designed to provide the Government with the opportunity to say how they will end the area of exposure to the Government, passengers and taxpayers caused by unprotected airline seat-only sales, and to consider what a new regulatory framework might look like in the event of insolvency. In so doing, it would also enable the Government to fulfil the Secretary of State’s commitment of 9 October to,

“look at all the options”,

and,

“ensure passengers do not find themselves in this position again”.

The Government have said they are going to consult and look at all the options as part of the process of,

“working through the reforms necessary to ensure passengers do not find themselves in this position again”.

Indeed, the Government said in their 9 October Statement that they would be putting a lot of effort into this,

“in the weeks and months ahead”.

More than two weeks since that Statement, have the Government made official approaches to the industry and consumers with a view to commencing consultation about the sorts of mechanisms beyond ATOL which could be implemented to address the issue and consequences to passengers of future airline insolvency? What will be the timespan of such consultation? Which organisations, companies and bodies do the Government intend to consult, and who from beyond and outside the industry do they also intend to approach? Finally, by when do the Government expect to reach conclusions about the actions and changes they intend to make to deliver on the Secretary of State’s promise following the demise of Monarch airlines that,

“passengers do not find themselves in this position again”?

Presumably that commitment was not made without at least some idea of the possible ways of achieving that particular goal.

We certainly cannot continue with a situation where nobody is sure whether the Government will or will not fly people back home in future at no extra cost in the event of another airline failure, and where there is also an apparent lack of clarity for many passengers and potential passengers under the existing arrangements and ATOL scheme about their rights or lack of rights and their protections or lack of protections. In moving my amendment, I express the hope that the Minister will be able to give some answers to the points and questions I have made and asked in the light of the specific commitments given by the Secretary of State on future objectives and intentions in his Statement of 9 October. I beg to move.

Baroness Randerson Portrait Baroness Randerson (LD)
- Hansard - - - Excerpts

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.

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In summary, if the concern is that consumers who buy flight-only sales will not be protected should their airline go bust, the ATOL scheme does not extend to that type of sale. This amendment could not change the existing position for flight-only sales for the reasons I have just set out. However, we are reviewing consumer protection in the aviation sector as a whole through our aviation strategy, and it will take on board the lessons learned from Monarch, which is entirely consistent with the statements I made then. Therefore, I hope that the views I have given the noble Lord will allow him to withdraw the amendment.
Lord Rosser Portrait Lord Rosser
- Hansard - -

My Lords, I thank the Minister for his response and the noble Baroness, Lady Randerson, for her helpful contribution to the debate.

I think I made it fairly clear—and the Minister accepted it—that in moving the amendment the principal objective was to try to get some more information from the Government about how they intend to progress the consultation. I do not intend to ask the Minister further questions as we are on Report, but those in the industry and, one assumes, consumer organisations will take considerable interest in what he said and, perhaps, in what he did not say in his response. There was a very clear, specific commitment by the Secretary of State—which I do not doubt the Government will seek to adhere to—that they would work through any reforms necessary to ensure that airline passengers do not find themselves in this position again of being stranded.

It is presumably incumbent on a Government making that kind of specific commitment to get the consultation under way as quickly as possible, to make it wide-ranging and to come to conclusions reasonably quickly. After all, if we get another incident like Monarch, and changes have not been made to the procedures and arrangements which ensure that passengers do not find themselves in that position, a number of organisations within the industry and consumer organisations, as well as us, will be asking the Government why they did not act earlier and more quickly.

I mean it when I say I am sure it is the Government’s intention to seek to resolve this issue, and I do not doubt that it is their intention to seek to consult widely or to seek to deliver on the very specific commitments given by the Secretary of State in the Statement of 9 October. However, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.
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Baroness Randerson Portrait Baroness Randerson
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The Minister has already referred to the importance of an airport strategy, and the Government are working on that. As the noble Lord states, there is clearly an interrelationship between the availability of flights and the availability of package holidays.

We need clear wording akin to the words used in the ATOL protection. That phrase “ATOL protection” works because over many years the consumer has come to understand what it means, partly through government advertising, partly through the work of consumer groups and, sadly, partly through the hard lesson of the failure of holiday companies. We need similar clear wording for any new scheme, and I fear that “linked travel arrangements” is not a phrase that trips off the tongue or that will be instantly understood by the holiday-buying public.

I turn to an issue that I have raised before: the variation in protection between credit cards, debit cards and PayPal. We might want to pay for a flight by debit card because in many cases, using a credit card costs additional money—a fee for the privilege of using it. However, it is important that at the point where consumers choose how to pay, they are warned that if they pay by debit card they will not get the same protection as if they pay by credit card. It is important that we modernise the system. I am not sure that this Bill is the place to do that, but it is important that the Government take the point away and look at it.

Lord Rosser Portrait Lord Rosser
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My Lords, I add our support to the amendment moved by the noble Baroness, Lady Randerson. I do not intend to go through all the points she has so ably made, but I share her view that there seems to be a lack of clarity over the rights and protections—or lack of them—available, as the amendment says, to those,

“purchasing flights, package holidays and linked travel arrangements”.

Certainly, in some adverts, to which the noble Baroness, Lady Randerson, has already referred, the situation is not made clear. So we agree with the objective of the amendment, which is designed to make much clearer for people, when booking flights, package holidays or other travel arrangements, exactly what their rights are and are not, and what protections are and are not available.