My Lords, the UK has one of the most innovative and advanced holiday sectors in the world and one of the biggest markets in Europe. That is something that we should be immensely proud of. The UK has been a leader in this sector, going back some 175 years, when Thomas Cook first had the foresight to offer a one-day excursion on a steam train. I am pleased to say that the UK continues to lead the way. Overall, tourism now contributes close to £121 billion to our economy annually, with outbound tourism contributing around £30 billion. The sector supports millions of jobs and involves
thousands of companies, from small businesses to large multinational brands, both online and on the high street.
Strong consumer protection is vital to underpin confidence in this important sector. As the Minister of State for Transport said in the other place, this is a Government who recognise the value of providing UK businesses with the best possible opportunities to grow. We also recognise the value in ensuring that consumer protections keep pace with the new ways in which people book their holidays. These points ring as true now as when they were made earlier this year. That is why I have introduced to the House the Air Travel Organisers’ Licensing Bill, which will ensure that consumer protection for holidaymakers is modernised to match developments in the travel market. I very much hope that the debate we have today will match the very positive discussion in the other place. I would go as far as to say that there was cross-party support for ensuring that consumer protection reflects the changes in the travel sector.
Consumer protection is an important pillar of the holiday sector, due to a number of characteristics of the market. Holidays are frequently booked and paid for many months in advance of travel, and the consumer may often be unaware of the financial stability of their holiday providers.
The impacts from a failure of a travel company can be twofold. Consumers may experience a financial loss from a cancelled holiday or significant difficulties from being stranded abroad.
The ATOL scheme was originally set up in the 1970s to provide protection in such situations. It does this in two ways. First, travel firms that sell flight packages in the UK must hold an ATOL licence, issued by the Civil Aviation Authority. This helps to regulate entry into the market and filter out any companies that are not financially sound. The scheme also acts as a fund to compensate consumers who might be caught up in a failure. ATOL-licensed companies must pay a small levy—currently £2.50—for each person protected by the ATOL scheme. This money is then held in the Air Travel Trust Fund and used by the CAA to ensure that consumers are returned home or refunded when a company fails.
The scheme plays an important role in the UK travel sector, providing peace of mind to more than 20 million people every year. Since the 1990s, it has also been a key way in which the UK has implemented the European package travel directive. Fortunately, failure of travel companies is relatively rare, but it does happen. In the last financial year alone, 19 ATOL holders collapsed. In each of these situations, the Civil Aviation Authority stepped in to deliver protection to consumers through the ATOL scheme.
I am sure that many noble Lords will also be aware of the failure of the Spanish online travel agent, Lowcost Holidays, last summer. When this company failed, it was reported that there were 27,000 customers on holiday and more than 100,000 customers who were yet to travel. Although many of these customers were from the UK, the company did not have ATOL protection as it was regulated under the Spanish regime.
The collapse of companies such as Lowcost Holidays is an important reminder of the need to ensure that consumer protection keeps pace with the way people book their holidays now. While many people still enjoy booking a holiday in their local high-street travel agent, the market has diversified considerably with the growth of the internet and smart technologies. Indeed, a recent ABTA survey estimated that about 75% of UK consumers now book their holidays over the internet.
The growth in online trade means that customers have a much wider choice of providers, including those based overseas. However, it is clear from the Lowcost Holidays situation that not every travel provider is currently covered by the same level of protection, and inconsistencies apply across borders.
That is why the Government and the CAA took initial steps in 2012 to update the ATOL scheme. This introduced the ATOL flight-plus category to bring ATOL protection to the many consumers who book mix-and-match holidays online, in addition to those who buy traditional package holidays on the high street.
We also introduced the ATOL certificate, so that consumers know when they have booked an ATOL-protected holiday and who to contact if their travel provider fails. These interventions have had a positive impact in extending consumer protection, levelling the playing field for businesses and improving clarity for all.
It is important that we continue to build upon these changes, and I am pleased that a similar view is now held across Europe. In particular, a new EU package travel directive was agreed in 2015 to bring similar improvements to consumer protection across the whole of the EU. This will need to be implemented into the UK’s package travel regulations by 1 January 2018.
Your Lordships may ask why the Government are implementing these changes, given that we will shortly be leaving the European Union. First, this Government have continually supported the rationale for updating the package travel directive. Secondly, and of equal importance, is the fact that the UK is of course still a member state of the European Union and continues to honour all of its rights and obligations.
The measures in the Bill will benefit businesses and consumers alike. For consumers, it will update the protection of holidays, and for businesses it will ensure that there is a consistent approach across Europe, making it easier for British companies to trade across borders. Broadly speaking, it will mean that the protection offered across Europe will be closer to the protection that we have had here in the UK since 2012. It will also extend the scope of protection to a new concept of linked travel arrangements, which is designed to provide protection for consumers even when they make less formal holiday arrangements—for example, when one trader sells a flight, and they then direct the consumer to another trader to complete the booking of a hotel. These are not pre-arranged packages, but they often compete closely with traditional package deals.
Overall, the new directive has the potential to provide protection to a greater number of UK consumers, whether they purchase from a company established in
the UK or overseas. This will also help to level the playing field for companies, whether they are based in the UK or overseas and whether they operate on the high street or online. The broadened scope will be underpinned by information requirements, so that consumers have better information about their holiday and how they are protected.
This Bill is the first step in updating the UK’s regulations to bring the new directive into force by July 2018. The four clauses will enable the ATOL scheme to be aligned with the updated package travel regulations and ensure that UK consumers and businesses can enjoy the benefits from these changes. Combined, the clauses will mean that UK-established companies are able to sell holidays more easily throughout Europe; they will be able to protect these holidays through the ATOL scheme, so they do not need to comply with different schemes in each country. The Bill will also extend the Civil Aviation Authority’s powers to request information from businesses, so that they are more able to regulate the scheme and this cross-border activity more effectively.
Finally, the Bill will allow the scheme to be able to adapt more effectively to changes in the travel market. At present, the ATOL scheme is based around a single fund, the Air Travel Trust. While this one-size-fits-all approach has worked well to date, it may not always be the best approach in future. The Bill will provide more flexibility to set up new trust arrangements to respond more effectively to an increasingly diverse pool of risks. But I can be clear that this power will not provide Ministers with a blank cheque. Any regulations brought forward would require extensive consultation and ultimately an affirmative resolution procedure, so that both Houses have an opportunity to scrutinise their content and effect.
Overall, the updates that we are making to the ATOL and package travel regulations will mean consumer protection can extend to a broader range of holidays. It will mean that protection can be provided for traditional and online package holidays, and also looser combinations of travel, which have previously been out of scope.
Of course, we also need to be mindful that the regulatory landscape will need to be able to adapt to future changes in our relationship with the European Union. This measure is entirely in keeping with that principle; it will enable the ATOL scheme to be aligned with the package travel directive in 2018, with minimal impact for UK consumers and businesses. But the ATOL legislation and protection will continue to exist and remain in place as we leave the EU. ATOL is enshrined in an Act of this Parliament, and only this Parliament can change that. As I mentioned previously, the travel sector contributes significantly to the British economy. Implementing the PTD will support British businesses to trade across borders and provide the best deal for our consumers. By extending the scope of ATOL, UK businesses will be able to provide ATOL-protected holidays across the whole of the EU. Consumer protections are a key priority for this Government, and this Bill will further this aim, an aim that transcends the Brexit negotiations. In short, we are legislating now to ensure that we continue to have strong consumer protections in place as we leave the EU.
The UK has always been a leader when it comes to providing protection for holidaymakers, and this Bill will ensure the UK continues to be a leader when we leave the EU. The Bill will provide UK businesses with the opportunity to expand and grow, and provide a framework to ensure that ATOL can remain flexible enough to cope with future trends. But most importantly, it will ensure that the UK’s consumer protection for holidays can keep pace with changes in the travel market. I beg to move.
3.29 pm