Holiday Pricing

Jenny Willott Excerpts

Monday 24th February 2014 Westminster Hall

[Damian Hinds (East Hampshire) (Con)]

I am grateful for the elevation implicit in your introduction, Mr Turner. It is a pleasure to see you in the Chair. As it was said earlier, you represent the Isle of Wight, which is one of the important tourist destinations in this country.

This debate has already covered a number of important subjects, including the importance of family life and family time, the value of an education, which people do without by missing part of education, the joy and the benefits of discovery through travel, and the health of the travel industry. I hope that you will forgive me, Mr Turner, if I restrict my remarks mostly to the topic of the e-petition, which is on whether to stop holiday companies charging extra in the school holidays.

In the current tough times, of course we are focused in this Parliament on affordability of everything for families and being able to spend time together away from home is one aspect of that. In the words of the petition:

“Family time is so much more essential in the current working world, but so many people cannot afford holidays in school holidays”

and a

“break at home is not the same as getting away from it all where…focus is on family”.

Who could disagree with that?

I understand why people would say, “If holiday companies can make money charging price x in the winter, surely they must be able to make profit by charging the same price in the summer. By charging a higher price, they must be making huge profits on the backs of other people.” That is not correct. If the same is charged in summer as in winter for a popular sun-based tourist destination, those companies would be out of business and nobody would be going on those holidays. It is also worth saying that what counts as a peak period in the travel business is partly but not entirely determined by when school holidays are. Weather also plays a big part, and so does the timing of public holidays such as Easter, Christmas and, in this country, bank holidays.

A little Google research this morning revealed that for holidays on which presumably no children are involved, and therefore school holidays are not involved, there is also a big difference in price. The price for a Thomas Cook couple’s retreat in Negril, Jamaica goes up by 31% between June and August. As you will recall from when we were there together recently, Mr Turner, the price for an “Ibiza Rocks” clubbing holiday also rises by 31% between June and August. The differences in those prices are clearly not driven by the timing of school holidays.

I have a confession: I come here today as a sinner. Before coming to Parliament I spent about a decade in the travel trade. I am afraid that I was mostly involved in pricing and what the travel trade calls “revenue management.” I do not want to go into the technical detail, but revenue management is basically the discipline of deciding what prices to offer, to whom, when and under what conditions.

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)]

It’s your fault.

[Damian Hinds]

Yes, it is my fault. I worked mostly in the hotel business, but the same principle applies to airlines and most of the travel business’s wide range of products—basically anything with high fixed-cost assets, a perishable product and fixed or semi-fixed capacity. Hotels are also suppliers to holiday companies. Package operators buy in capacity from airlines, hotels, bus companies and so on. It is also worth bearing in mind that there is an international market, especially in foreign travel. Packagers are to some extent price takers. No one in this country decides the market rate of a hotel room in Spain in the high season. Even if we believed that British companies set the prices for holidays, no one would suggest that Spanish hoteliers are within the control of Her Majesty’s Government. Resort-based travel is international in nature. People have already mentioned the timing of German and French holidays, which are already factored into the price. If people from different countries are going to a resort, the demand is an amalgam of all the incoming traffic.

I come here as a sinner, but I have not come here to confess. I do not anticipate a popularity boost from my appearance in Westminster Hall this afternoon, but the simple fact is that to a large extent we are talking about the laws of economics. There is no single year-round market clearing price in holiday resorts.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)]

As everyone has today, I congratulate my hon. Friend the Member for Birmingham, Yardley (John Hemming) on leading the debate in the wake of a very significant number of signatures on the e-petition.

It is interesting that this was an issue in Parliament long before I was born—I do not know whether that is a good or a bad thing, but it has clearly been an issue for many decades. I have listened with great interest to the points that have been made. There have been a variety of speeches, coming, in a number of cases, from slightly different perspectives. I agree with the hon. Member for Chesterfield (Toby Perkins) that it has been a very good debate, which on the whole, has been fairly consensual; there is a reasonable amount of agreement across the Chamber. As a constituency MP, constituents have been getting in touch with me about the subject, and I have a personal interest, as my children are heading rapidly towards school age. Along with a lot of other people, this issue is close to my heart as well.

I would like to put my comments into context at the start and make it clear that the Government do not regulate the price at which goods or services are offered for sale. We have heard from a number of Members that most people would agree that that is the way it should be. We feel that it is a commercial matter for the businesses concerned and that the Government should not intervene. It is not for the Government to dictate to any particular market how it should charge for its services, or to intervene unless there is evidence of market distortion or market failure. That is when Ministers and the Government would get involved.

As we have heard today, and as I hope hon. Members would agree, the UK holiday sector is one of the most competitive markets in the UK, if not Europe. That has made the sector not only one of the most responsive to consumer demands and preferences, but one of the most innovative. It has driven change very much over the years. It is not so long ago—only a few decades—that only the wealthy could contemplate having a holiday abroad, and even holidaying in the UK, which was more popular and much more affordable, was certainly not the norm for many people. That was the situation not that long ago. With the development of cheaper package holidays and so on, far more people have found that they can afford a foreign holiday, but the sector has developed rapidly over the past few decades and expanded in many respects.

An almost endless variety of offers are available for people, which meets the demand from consumers for more choice, flexibility, value and so on. The dynamism and innovation that is shown in this diverse sector is evidence of keen and persistent competition in the market, so the Government feel that there is no market failure and therefore no reason for the Government to intervene to impose price limits. I got the feeling today from colleagues across the House that most would agree on that point.

As the hon. Member for East Hampshire (Damian Hinds) said in his confession, prices charged across the year reflect demand, availability and the need to attract consumers in a competitive market. It is common to all competitive markets—it is especially acute in fluctuating markets, such as the travel sector—that prices rise and fall according to demand and supply. That is the way in which markets work in general. When demand is high and supply is limited, prices invariably increase to the point at which demand moderates. It is the level of demand that dictates the prices in a competitive market, so if demand increases, so do prices.

Demand appears to remain high in the travel and holiday market, despite the economic difficulties that many people are facing—it has been a very difficult time for many across the economy over recent years. The industry reports that the holiday market is buoyant and consumers are prepared to pay the prices being asked for the services on offer. If people were not prepared to pay the prices being asked, demand would drop and prices would come down, so it is being driven by the fact that people are prepared to pay the prices that holiday companies are demanding.

[John Hemming]

Given that the issue is about supply and demand, the regulations that the Government introduced affected the demand by focusing it more on one place. Is my hon. Friend as surprised as me that the Department said in the explanatory note to that statutory instrument that an

“impact assessment has not been provided for this instrument as no impact on businesses or civil society organisations is foreseen”?

[Jenny Willott]

I shall come back to the point about the schools regulations if my hon. Friend will bear with me. If he is not satisfied with my comments, he can come back to me.

There is another important element to consider in respect of the prices in this sector, and it was mentioned by the hon. Member for East Hampshire. During peak periods, the UK industry is in fierce competition with those of other countries, whose consumers want to go on holiday to the same destinations. That competition for limited facilities means that costs rise—it is not all being driven by consumers in the UK—and those costs are reflected in the price put to the consumer. As this is a Europe-wide market, consumers are similarly affected in other countries across Europe. As a result, Governments across Europe have decided that protection is needed for consumers in the package holiday sector over and above that provided by general consumer protection law.

I hope that what I say now answers a point made by the hon. Member for Chesterfield. One of the key protections in the package travel directive is the requirement that those arranging and selling package holidays and package tours have in place protection for consumers against their insolvency. That additional protection is an area in which we in the UK were leaders. The air travel organisers’ license—ATOL—system was brought in before the European regime as a result of the huge growth in the UK of the package holiday market in the 1970s and 1980s.

The extra protection is considered necessary because those operating in the package travel market are deemed to be more at risk of insolvency than businesses in other sectors. That is because the business model in the holiday industry is based on predicting demand and committing to those predictions in advance. I mention that because it is further evidence of the extent and level of competition in that market—the industry is forced by those pressures to price as competitively as it can. There is considered to be a higher risk of insolvency in that sector because the margins are thin and because the market is so competitive.

[Toby Perkins]

The Minister describes the pressures on the market, and we have heard that there was no impact assessment because it was considered that there would be no impact on the industry. Given that the change was introduced after people had booked their holidays and after the holiday companies had set their prices, does she think that it was right to say that there would be no impact whatever on the industry from the change?

[Jenny Willott]

I cannot comment on the impact assessment done by the Department for Education, but I will come back to the point about the regulations. I think it is wrong to say that the 2013 change was a significant change in the law, but I will come back to that in a minute.

Hon. Members will have gathered from what I have said that I am not convinced that businesses in the holiday market are treating consumers unfairly in the way in which they price their products. It is pressures in the market that cause the fluctuation in prices that some have concluded is unfair. However, the hon. Member for Chesterfield raised allegations of cartel-like behaviour. If hon. Members come across allegations of that nature, they should be referred to the Competition and Markets Authority for investigation. That is what it is there for, or at least it will be from 1 April. Cases like that involving Expedia, which the hon. Member for Chesterfield mentioned, were dealt with by the Office of Fair Trading, but will in the future be dealt with by the Competition and Markets Authority. However, the CMA will also have a role in keeping markets under review for breaches of competition law and consumer detriment, so it has a broader remit. It will also have a role in dealing with consumer enforcement issues when an issue has nationwide implications. This would be an area where that could be considered.

The hon. Member for Leeds East (Mr Mudie) asked about discussions between travel agents, the holiday industry and the Department for Business, Innovation and Skills. BIS is in regular contact with the holiday industry on a very wide range of issues—that is the relationship—and my officials will of course raise the points that have been raised in today’s debate when they next meet representatives of the industry, so we will ensure that hon. Members’ views are fed back.

Having said that, I am very sympathetic to those who struggle to afford a holiday in peak season. I appreciate that the difference in price between off season and high season can be very significant. If people have children, it becomes increasingly expensive and difficult to take holidays, and I appreciate that the problem places an extra burden on families. I also completely agree that family holidays are enormously important. They give children opportunities to relax and unwind and create lasting memories, as well as building family relationships and broadening the experiences of children. I have very fond memories of taking holidays as a child with my grandparents and parents and I am sure that everyone in the room would say the same. It is important that children are able to have those experiences and benefit from them.

Clearly, in all of this, the dates of the school holidays are critical. It has been suggested that pressures on the industry might be alleviated by extending the periods during which families can take a holiday, thereby spreading the demand over a longer period. We have heard that idea mentioned today, and it is put forward not only by those who want cheaper family holidays; it is also supported by many in the industry. We have also heard it said a lot today that the rules on school attendance are too strict. Almost every hon. Member who spoke discussed that. People have suggested that schools should be able to approve families going on holiday during term time. Others believe that it would help if schools had different term dates. I shall come back to that point, but, on the issue of absence, despite the clear value that a family holiday can have for children and also for parents, the Government’s view is that a good education is more valuable for pupils in the long run and that getting a good education depends on regular school attendance throughout the school year.

We have heard a lot about the change in regulations in 2013. The hon. Member for Suffolk Coastal (Dr Coffey) gave a very useful summary of the legal framework. I found it quite illuminating and am sure that a number of other colleagues did as well. What the Government did in 2013 was remove the misconception held by some parents that pupils were entitled to 10 days’ absence for holidays per year. There was actually no entitlement in the previous regulations—that was not what they said. We have clarified that school heads should accept a request for a leave of absence only in exceptional circumstances.

We have heard a number of examples of cases in which requests have been turned down by head teachers. Many of them are very distressing, but I clearly cannot comment on individual cases, not knowing the full details. Let me make it clear that the Government have not said that any absence is not possible. We have given head teachers the discretion to make that call. In addition, we have not specified what constitutes exceptional circumstances, as we believe that cases need to be considered individually. A number of hon. Members mentioned the need to trust head teachers, and that is exactly what the Government are trying to do—we want to ensure that head teachers have the power and discretion to look at the individual circumstances of an application and take them into account.

[John Hemming]

Obviously, it is difficult being a Minister in a different Department. Will the Minister ask the Ministers in the Department for Education to write to me and the other hon. Members who have spoken in the debate about what pressures Ofsted is putting on schools to reduce the number of absences? I ask because if Ofsted is driving down the numbers, that affects what is considered to be exceptional and what is not. Obviously, some of the cases that I would consider exceptional, such as funerals, are not being considered as such by the schools.

[Jenny Willott]

I am happy to ask colleagues to write to my hon. Friend, because clearly I haven’t got a clue about that. As a Minister in BIS, I do not know what discussions Ofsted and the Department for Education have had, but I am happy to pass the request on to colleagues in the Department for Education.

[Mr Mudie]

Could the Minister ask the relevant Education Minister to tell the people who have attended the debate whether a child who has an excellent attendance record can have a holiday with the rest of their family only outside term-time? Can the fact that they have a perfect attendance record and so on be accepted as exceptional? That is the dilemma that heads face: the problem is not exceptional events such as funerals, but the year in, year out problem of those who cannot afford a family holiday unless they take it outside term time. Will the Minister reassure heads that that can be regarded as exceptional?

[Jenny Willott]

When we contact colleagues in the Department for Education, I am sure that we can send them a copy of Hansard so that they can respond to the hon. Gentleman and others who have raised that point. When head teachers decide whether to grant absence, they must be able to take into account individual circumstances such as the examples raised today of parents in the military or the police, or cases in which a close relative has died. We cannot legislate for such instances; they must be left to the head teacher’s discretion.

Several hon. Members have asked for head teachers to be given clearer guidance on what constitutes exceptional circumstances, and the point has been made that it is difficult to balance the provision of clearer guidance with allowing head teachers discretion and trusting them to make the right call. I will refer that matter to colleagues in the Department for Education.

[John Hemming]

A number of participants in the debate think that head teachers are making the wrong decisions. If Ofsted is putting pressure on numbers, guidance would help us to analyse that in more depth. Prior to the changes, less than 10% of parents took advantage of the process in primary schools and less than 3% in secondary schools, so it did not affect many people. Those were clearly special circumstances, but for some reason they were deemed not to be acceptable. Guidance would give head teachers strength to argue with Ofsted.

[Jenny Willott]

My figures on the number of parents who took their children out of school are slightly different from my hon. Friend’s. My hon. Friend the Member for Solihull (Lorely Burt) also said that most parents do not take their children out of school for holidays, and my figures show that in 2011-12, some 90% of secondary school pupils and 80% of primary school pupils did not miss school for a family holiday. Although the overwhelming majority of pupils are not missing school to go on holiday, therefore, a significant number of pupils are. The Department for Education was sufficiently concerned about the matter to want to tighten up the rules. I understand that in some areas, parents thought that they were entitled to 10 days’ absence a year for holidays, which was not the intention of the original regulations. The regulations introduced last year were designed to correct that misconception and clarify that schools should authorise absence only in exceptional circumstances.

[John Hemming]

The discrepancy between the Minister’s figures and mine may rest on the fact that mine deal with authorised absence, whereas hers include unauthorised absence as well. Unauthorised absence is increasing, which is another factor in this debate.

[Jenny Willott]

That may well be the case, but it does not undermine the argument that we must ensure that parents do not take their children out of school for holidays unless there are exceptional reasons for doing so. As the right hon. Member for Knowsley (Mr Howarth) said, family holidays taken during term time disrupt the education not only of the individual student but of other pupils. The hon. Member for Leeds East, whose wife is a head teacher, said the same thing. Such absences create additional work for teachers who have to try to help pupils catch up on their return while looking after the other students in the class and ensuring that their progress is not disrupted. Removing a child from school has significant implications for other pupils in the class and for teachers. The Government do not want to change the rules on permitted absences, because the effects on a child’s education and a school’s ability to teach pupils effectively are significant.

Another suggestion has been to introduce more flexibility into school term dates. The holiday industry argues that making the peak period longer would spread consumer demand, and because holiday companies could make the same amount of money over a longer period of time, they would be able to reduce prices a little for families. The spreading of demand would also reduce competition for facilities and allow them to be used more efficiently. Although there would still be competition with organisers of holidays from other countries, it would be spread over a longer period of time.

[Mr Ellwood]

Is the Minister saying that she agrees with that proposal? I gave the example of Kent, Yorkshire and Dorset having slightly different school holidays. If she agrees with the idea, how would it best be co-ordinated?

[Jenny Willott]

The staggering of school holiday periods may well lengthen the period of peak demand and help to lower prices. I completely understand the suggestion that the Government should arrange for holiday periods to be spread, but currently local authorities, not the Government, set the term and holiday dates for community and voluntary-controlled schools. Academies, free schools and voluntary-aided schools—including some church schools—set their own dates. The Deregulation Bill, which is currently before the House, will extend the power to set term dates to all schools by 2015. The Government believe that term dates should be dealt with locally, through negotiation and co-operation across an area, to take into account the educational needs of students and the practicalities of varying the school year. I cannot remember which hon. Member raised the fact that someone with a child in a primary school and a child in a secondary school wants their holiday dates to line up.

[Justin Tomlinson]

I raised that point. I accept that schools can lead locally, but the reason why the system works so successfully in Germany is because the dates are set by regions, which ensures that children in primary school are not off at a different time from those in a nearby secondary school. Although I accept that the decision should be made locally, I think that the Government might guide regions to pick the dates.

[Jenny Willott]

It is clear that such a decision will have to be made across a local authority area, or more broadly. When the Deregulation Bill becomes law, we will look at how that can be done most effectively, and with the minimum disruption, to help schools and families.

[Mr Ellwood]

I am sorry to press the matter, but I think it is an important takeaway from the debate. As my hon. Friend has just said, some co-ordination will be required. I am sitting next to my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke), and we know that it is quite a challenge to get Poole, Bournemouth and Christchurch to co-ordinate. It does happen, but it takes time. It will be tricky to get all local councils to co-ordinate. I encourage the Government, or at least the Department for Education, to consider the leadership role that may be necessary. Whether the decision is taken on a county or regional basis is something for a later date.

[Jenny Willott]

As I have said, free schools, academies and some church schools can set their own dates. There is already some co-operation, or at least awareness, between some local schools regarding what others in the area are doing. When the Deregulation Bill gives more schools the power to set term and holiday dates, we will encourage schools to collaborate more widely to take into account the needs of families and other schools in the area. I am confident we can ensure that the hon. Gentleman’s views are fed into the process and taken into account by the Department for Education.

[John Hemming]

On that point, schedule 14 to the Deregulation Bill will give schools the power to set term and holiday dates, but in constituencies such as mine, one family may have children in a primary school in the Birmingham local education authority and children in a secondary school in the Solihull local education authority. I would propose bringing in the Education Committee to look at the country as a whole and suggest sub-regions wherein local education authorities could co-ordinate. A parent would not want their children in a Birmingham primary school to have different holidays from their children in a Solihull secondary school.

[Jenny Willott]

I cannot really comment on what the Education Committee should or should not look at, but I am sure that its Chairman, the hon. Member for Beverley and Holderness (Mr Stuart), will have noted my hon. Friend’s comments. Perhaps my hon. Friend and anyone else present with views on that matter might wish to take it up with the Chairman directly and suggest that his Committee initiates such an inquiry.

[Dr Thérèse Coffey]

I just want to make the Minister aware that not everyone present wants Parliament, the Education Committee or Ministers to determine schools’ term dates. We really should leave such decisions to be made locally. Schools currently manage to cope quite well. Different parts of the country already have different holiday dates for different traditions—for example, places such as Leicestershire and Wigan. We should allow local authorities to work with schools to recognise what is best for their areas.

[Jenny Willott]

I must confess that as an MP representing a Welsh constituency, I benefited significantly last week when Parliament was in recess because it was half term in England. When I went home to Cardiff, all the places I took my small children were mercifully empty because half term in Wales is this week. There is already a difference between some areas, and it is possible to enable that on a broader basis in order to extend the peak period, which would hopefully bring down prices across the sector.

To conclude, the Government are not convinced that higher prices in school holiday periods are the result of market abuse by the holiday industry. Rather, they reflect market forces in a very competitive sector, and are made worse by the fact that there is international competition as well. I recognise the fact that family holidays can be incredibly valuable, but they should not be at the expense of a child’s education. School attendance throughout the school year remains critical—we know that pupils who stay at school for longer do much better in their final exams.

[Steve Brine (Winchester) (Con)]

I absolutely agree with the Minister, but although we know that school attendance is important, we also know that parents are not daft. A constituent of mine who is a governor at a primary school in Winchester said to me that the changes to the rules are an insult to his intelligence and discretion—he would never dream of taking a child out of school at a crucial time. I find it perplexing that a Conservative Government are meddling in this area full stop, but we should think especially about the early years—reception and year 1. Does the Minister have a view on whether there should be more discretion during a child’s early years in primary school? Do we really need to come down on head teachers and question their integrity in the way that we appear to be doing?

[Jenny Willott]

I completely disagree with the hon. Gentleman. The Government are actually ensuring that head teachers have the discretion to make a decision in exceptional circumstances. Clearly, the decision that a head teacher makes will involve looking at the child’s age, the circumstances under which the parent has applied and so on. The point of the regulations that the Government have put in place is that we are leaving it to the discretion of head teachers to take into account individual circumstances and make a judgment. That is exactly the reverse of Government meddling. However, the issue is not just the effect on a child’s education. As I and a number of other Members have already said, when a child is taken out of school in term time, that does not just affect that child’s education; it has a broader impact on the school, the teacher and other pupils in the class. We must take that into account as well, and I am sure that head teachers will consider that when making decisions.

Finally, I congratulate the House on this very lively debate. It has been a really good example of a debate in which a number of different views have been put forward but the tone has remained extremely pleasant. I have an awful lot of points to feed back to the Department for Education, and I am sure that Ministers have been listening carefully and will respond to Members’ concerns. Thank you very much, Dr McCrea, and I congratulate Members again on a really good debate.