Air travel organisers’ licences

Vehicle Technology and Aviation Bill – in a Public Bill Committee at 10:45 am on 21 March 2017.

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Photo of Richard Burden Richard Burden Shadow Minister (Transport) 10:45, 21 March 2017

I beg to move amendment 22, in clause 18, page 13, line 20, at end insert—

“(4) The Government must publish a review within one year of this Act receiving Royal Assent the impact on UK consumers using EU-based companies affected by changes to consumer protection introduced by this section.”

This amendment requires the Government to regularly review the impact of the new regulation to ensure that it is working and not adversely affecting UK consumers using EU-based companies.

We moved from cars to licence modifications for NATS and its relationship with the Civil Aviation Authority, and we now move seamlessly to the air travel organisers’ licence. Essentially, the clause will update ATOL to ensure that it is harmonised with the 2015 EU package travel directive. As with other parts of the Bill, many of the changes that this part of the Bill envisages will be covered in regulations, but broadly it will extend ATOL to a wider range of holidays and protect more consumers.

UK travel companies, we are told, will be able to sell more seamlessly across Europe, as they will need to comply with protection based not in the country of sale but the country in which they are established. Those are the objectives that the Government seek to achieve. As with other parts of the Bill, there is no difference of principle between the Government and the Opposition on this matter. Indeed, it is a result of that package travel directive that it has been necessary to put such a provision in the Bill. However, we seek clarification on some issues, which is why I tabled amendment 22.

The amendment would provide a guarantee that the Government will review the impact of the ATOL revisions to ensure they are not adversely affecting UK consumers using EU-based companies. The objective is precisely the opposite: the whole idea of the clause is to improve the range of protections available. Similar to other measures within part 3, the broad substance of these changes to ATOL are necessary and broadly welcome. As I said, they will harmonise UK law with the latest EU package travel directive, which should have many benefits. A wider range of operators, including more dynamic package providers, are likely to be covered by the changes. That will hopefully bring protection to many more UK holidaymakers who are not covered under existing ATOL provisions.

For UK travel companies, standards have to be in line with the country in which the company is established, rather than the place where the company sells the holiday. That should mean that companies established in the UK can sell far more seamlessly across Europe by simply adhering to the widely respected ATOL flag. However, the changes at EU level bring about an issue that could have adverse effects for some UK consumers who purchase their holiday or travel from EU-based travel companies, not British companies that sell into other European countries. Amendment 22 would address that.

The changes made through the directive will now mean that EU-based companies selling in the UK will have to adhere to ATOL-equivalent insolvency protection laid out in the member state where the business is based. In practice, that could have unintended consequences and, more significantly, costs for UK consumers. Processes and timescales for recompense may be distinctly different from what many travellers would expect under the current ATOL provisions, which are in many ways regarded as the gold standard.

The impact assessment warns:

“If consumers purchase a trip from a business established elsewhere in the EU and the company becomes insolvent there may be some costs to the consumer of processing a claim with a non-UK insolvency protector.”

Based on the latest CAA figures, this matter will not just affect a relatively small number of holidaymakers; if it went wrong, it could currently compromise more than 500,000 passengers. It is therefore important that the Government take some steps to anticipate and prepare for any negative impacts that the change could have.

Amendment 22 would achieve that by making it a requirement for the UK Government to monitor the impact for UK consumers using EU-based companies. That would help to inform whether the UK Government should consider further guidance or co-operation with consumers and member states to ensure that protections are adequate.

The changes envisaged by the clause clearly make sense and are in line with what is required under the package travel directive. There is no doubt that where UK-established companies are selling into other countries, the consumers in those other countries will have the benefit of the gold standard of ATOL protection. We are concerned about the protection given by EU-based companies selling in the UK. Hopefully that will be equivalent to ATOL, but it will be subject to the rules and regulations of that EU country. We are nervous about whether UK holidaymakers could lose out in that process, so we are asking the Government to look at that and to try to monitor the situation.

Photo of Alan Brown Alan Brown Scottish National Party, Kilmarnock and Loudoun 11:00, 21 March 2017

I support the hon. Gentleman’s principle. The amendment states:

“The Government must publish a review within one year” of Royal Assent, but the explanatory statement says that the Government must “regularly review the impact”. By stating only that there must be a review within one year, that is asking for only one review. As we move into the post-Brexit world, would a review after one year be appropriate? We may need to look at the wider consequences as we go forward.

Photo of Richard Burden Richard Burden Shadow Minister (Transport)

The hon. Gentleman is right that the amendment talks about a year, which is because we want to get that ball rolling. As with so many other things, the environment is changing—that is particularly the case in relation to Brexit. ATOL will still be there post-Brexit, although when we discuss the next group of amendments we may explore possible changes.

The package travel directive will no doubt still be there for the states that are still members of the European Union. What is uncertain at this stage is what the interface will be between those two things post-Brexit. The Government must address that. As I said, we ask them to get the ball rolling within a year of the Bill receiving Royal Assent, but the hon. Gentleman is right about the need for regular review, particularly in the light of Brexit.

Photo of John Hayes John Hayes Minister of State (Department for Transport)

There are many reasons to be proud to be British and to be subjects of the United Kingdom—I think all members of the Committee would agree with that. One of them is that we have done rather well in respect of protecting those who book holidays. The regime we have developed over a long time has afforded considerable protection to people who book holidays and then, through no fault of their own, find themselves in some difficulty. There is nothing worse than a much hoped for and anticipated holiday being spoilt by an eventuality over which one has no control.

However, it is important that we also recognise that the way in which people book holidays is changing. Essentially, the purpose of this part of the Bill, and the consultation that preceded it, is to bring the arrangements up to date, to take account of those different patterns of behaviour and those different business models. The hon. Member for Birmingham, Northfield is right to probe these matters in the way he has, because although we have consulted widely—I will refer to the consultation in my response—we are making changes that will have an important impact; otherwise, we would not be making them. It is essential that we do so with care.

I fully support the purpose of the amendment. Indeed, the relative level of protection offered by European economic area-based companies was one of the concerns about which the Government sought views in the consultation. Our conclusion was similar to that expressed by John de Vial of ABTA in the evidence session. Members of the Committee will remember that he drew attention to the issues that we have begun to consider, namely that the changes proposed through the package travel directive will improve the position for UK consumers. That directive will raise the bar across the board, which he said

“can only be a good thing.”––[Official Report, Vehicle Technology and Aviation Public Bill Committee, 14 March 2017; c. 64, Q147.]

However, I fully agree with the sentiment of the hon. Gentleman’s amendment that we must keep the situation under review.

It is fortunate, therefore, that the current legislative framework already requires the Government to review the impact of any regulation made under the Bill within five years of its being laid. I mentioned earlier in our consideration the Small Business, Enterprise and Employment Act 2015. It is one of the few Acts of Parliament that I did not take through Committee, and is notable for that fact alone. It is also an important protection of the kind sought by the hon. Member for Birmingham, Northfield. That Act requires the Government to conduct and publish reviews of any secondary legislation.

Perhaps the Committee will allow me to say one or two more things about the consultation that we have conducted. Consultation documents are available to the Committee—both the consultation and the Government response; but I shall highlight one or two aspects of it. We held a number of workshops to seek views, and they were attended by a large number of insurers, airlines, online travel agents, credit card and transaction systems operators, accredited trade bodies and consumer groups. I shall not read out the list of consultees as it is very long, but it includes all the relevant people that one might expect, from consumer groups, business organisations, airlines, travel organisations and so on.

One of the key considerations was the protection, Europe-wide and beyond—worldwide—for travellers. Given the consultation, we asked questions of the kind that the hon. Member for Birmingham, Northfield has put, and received the encouraging view from consultees that it was very important to move the scope of ATOL protection from a place of sale to a place of establishment. That is to reflect the change I have described in the way in which holidays are sold and, therefore, the way in which they are bought. It is important to update the regulations, which means continuing to review them in the way the hon. Gentleman set out. It may be that the change is a trend change, and the way people book holidays will continue to alter over time. I personally—rather like you, I suspect, Mr Gray, although I do not know—go along to my Co-op travel agent in Spalding and book my holiday by conventional means. I find that most satisfactory; but there are people who prefer a more modern approach to these things, and, while modernity is not always to be recommended, it is, however sadly I say it, a reality. As a Minister, I have to deal in reality, whereas in my private life I can indulge in all kinds of magic.

Moving quickly from magic to fact, we will continue to review things as the market develops, in precisely the way the hon. Member for Birmingham, Northfield has recommended to the Committee. It is worth noting that these changes will come into effect across Europe only from 1 July 2018, which, 12 months after Royal Assent, will mean that at most we will have seen only nine months for the changes to take effect. I doubt whether any significant volume of people will have bought holidays from EU-based companies over that time. Most companies will be very likely to stay within local arrangements that their consumers know, at least for the time being—because, of course, the reason I go along to the Co-operative travel agent is that I know and trust it, and most people who are booking holidays want that kind of reassurance.

Those who do, however, want to take advantage of flexibility, will be likely to take time to assess how the new arrangements bed down before they change their own practice. Given those uncertainties about pace and scale, which will of course only be added to by what we do not yet know about the outcome of Brexit negotiations, I suggest a flexible timetable for further review; five years seems appropriate, which is why the Government are legislating accordingly. That is also what we are currently in the process of for the 2012 changes, by the way, because we are now considering a set of changes that were obviously made in 2012.

Eagle-eyed Members will have noticed that part of last year’s ATOL consultation was evidence gathering on those 2012 changes. The consultation was both about reflecting on the differences that those earlier changes have made, as well as anticipating the next stage of development of this important marketplace. In the light of the fact that a provision to review the regulations already exists in legislation, and that we are engaged in a process of review, which is illustrated by the consultation on the previous changes and our response to it—there is a precedent of good practice—and the commitment I gave that that will continue at the next stage of this process, I hope that the hon. Member for Birmingham, Northfield will withdraw his amendment.

Mr Marris, you may wish to go slightly wider than the precise amendment.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I am grateful for your indication that you might consider stand part remarks to go along with this, Mr Gray; the Minister, also with your permission, cast his remarks rather more widely. I have sympathy with the Minister when he does his private magic and pops along to the Co-op travel agency and trusts it. When I book my holidays, I book my rail tickets using a credit card; that is a debtor-creditor-supplier agreement of more than £100, so I am protected there. Since I do not fly, and have not flown for a decade, I do not do this ATOL stuff, but I understand, as does the Minister, that people live their lives differently and that many people fly.

He has given us some background, but I hope that the Minister will say a little bit more on the change from place of sale to place of establishment to which he referred. On internet sales more generally, we have a problem, for example, on tax measures, which I realise do not yet fall within the Minister’s remit. Companies such as Google book all of their sales in Dublin to avoid paying tax that they otherwise would were they to book their sales here. That may be happening with those offering travel arrangements—flights, accommodation and so on.

If he catches your eye, Mr Gray, I hope that the Minister will address this a little more widely on the Brexit issue. The package travel directive 2015 is due to come into force on 1 July 2018. In the light of recent legislation, it is within the Prime Minister’s gift, but on current indications, on 29 March 2019—nine months after that directive comes into force—the United Kingdom will no longer be a member of the European Union. In terms of some carry-over protection, a consumer booking a holiday in April 2019 for that summer or winter, for example, will need to know what their protection is, given that, at the point they take their holiday, we will no longer be in the European Union.

Paragraph 62 on page 12 of the explanatory notes, says:

“Once the Directive is in force, any business established in the United Kingdom and licensed under ATOL for sales within scope of the Directive, will no longer need to comply with the different insolvency protection rules of other EEA States”.

That suggests to me—I hope that the Minister can set my mind at rest on this—depending on what is in the great repeal Bill, that the directive will no longer be in force nine months after having come into force in the United Kingdom. We might, for example, be seeking to reassert our membership of the EEA, but it appears that clause 18 will see us stepping outside of that directive, therefore potentially leaving consumers with less protection than they might otherwise have. I appreciate that that is not the Minister’s or the Government’s intention, but in relation to clause 18 and the following clauses relating to flight providers, will he tell the Committee a little more about how he envisages continuing protection under ATOL and ATOL-like arrangements unfolding after the United Kingdom leaves the European Union, both in the case that we remain in or reassert our membership of the EEA and the case that we do not? What will the protection regime look like?

Photo of John Hayes John Hayes Minister of State (Department for Transport)

Mr Gray, I will try to respond in certainly no more than seven minutes, and ideally in less time.

Consumers are clearly a priority for the Government. In December 2016 the Secretary of State for Business, Energy and Industrial Strategy chaired a roundtable of representatives of a range of consumer bodies, charities and academics to discuss, among other issues, the impact of EU exit on consumers. As I said at the outset of this short debate, British consumers enjoy strong protections, and there is an effective consumer regime to help them to get the best deal. Sometimes markets fail and competition is not strong and consumers suffer, and it is important that the Government do not hesitate to step in and strengthen competition and/or protect those affected. In that regard, there is absolute clarity in my mind about the purpose—and, by the way, the efficacy—of the Government. It has now become fashionable—once again, thank goodness—to recognise that Government can do good. That is something I have always known and believed, and it is now back in fashion, as are so many of my long-held views.

So why is the legislation needed? The new travel package directive, which was published in December 2015, was introduced to ensure that consumer protection kept pace with modern travel habits and the modern market. The UK Government will need to transpose it into UK law before 1 January 2018. Primary legislation is needed to amend the powers of the Civil Aviation Act 1982 to update the ATOL scheme and align it with changes to UK and EU regulations, but a perfectly reasonable question, as asked by the hon. Member for Wolverhampton South West, is: how is all that affected by Brexit?

Until the negotiations are complete we, of course, remain a member of the European Union. The new EU package travel directive was agreed, as I said, in 2015. The measures in the Bill will ensure that the ATOL regulations and the revised package travel regulations are properly aligned in the short term, but retain the ability to adapt the scheme when the UK leaves the EU. In any event, the Government believe that the changes brought about by the new directive will have a positive impact on UK businesses and consumers, raising consumer protection standards across the EEA. That view was reflected in the consultation, with the majority of correspondents believing that the proposals will allow greater harmonisation of protection against the European market, which will ultimately benefit the consumer and businesses. To put it bluntly, I think that this is an example of where something has been agreed across the European Union for good reason and with good purpose. Although I cannot anticipate the negotiations, my view is that incorporating the provisions into British law will provide a baseline of support, which we would hesitate in any way to undermine.

I hope that I have satisfied all members of the Committee about the Government’s absolute determination to protect the interests of the consumer and to make the regulations fit for purpose in the modern age.

Photo of Richard Burden Richard Burden Shadow Minister (Transport)

Although the Committee might be remembered for the term “The Hayes hook-up”, it certainly will not be remembered for referring to the Minister as “Skyscanner Hayes”.

The Minister has spotted the inadequacy in the amendment, regarding the request for a review after one year. The timeframe is out of kilter because of when the package travel directive comes in and the Bill receives Royal Assent. On that basis, I will not press the amendment to a vote, but there are still issues that the Government need to consider. I am grateful to the Minister for committing to a review of the provisions. I am pleased about that, but the fact is that none of us really knows what the impact of Brexit will be.

The Chair adjourned the Committee without Question put (Standing Order No.88).

Adjourned till this day at Two o’clock.