HC Deb 19 May 1975 vol 892 cc1163-74

Lords amendment: in page 7, line 4, at end insert: () Sums payable in respect of contributions from air travel organisers to whom this section applies shall be paid by instalments at intervals of not more than three months and no such sum shall be payable before 1st September 1975.

11.1 p.m.

The Under-Secretary of State for Trade (Mr. Eric Deakins)

I beg to move, that this House doth disagree with the Lords in the said amendment.

The amendment would add a new subsection to Clause 4, which deals with contributions to the Reserve Fund. As originally drafted, Clause 4 did not go into any details of rates of contributions and periods of payment. These details will be specified in regulations, in order to provide the greatest degree of flexibility. The new subsection seeks to reduce this flexibility in two ways. First it provides that no contributions to the Reserve Fund shall be payable in respect of any period before 1st September 1975; second, it provides that contributions shall not be payable in respect of any period longer than three months.

I recognise the reason for these two propositions. They stem from the fears of the travel trade which is concerned at the possible effects of the payment of contributions on the availability of working capital. However, this problem was fully recognised by the Government and we have already taken it into account. It was for this reason that the increase in the bonding levels was made in two stages, the first in October last year and the second more recently on 1st April. Similarly the levy to the Reserve Fund will be introduced in two stages, 1 per cent. initially and 2 per cent. from April 1976.

But let me now consider the two propositions contained in the new subsection. First, as was stated in another place, if the Bill receives Royal Assent before the end of this month, contributions cannot become payable before 1st August at the earliest. Hence the amendment would enforce a delay of one month. I appreciate that even a short deferment such as this could be welcome to some firms, and I can therefore give a firm undertaking that, whatever the House may decide on the Lords amendment, contributions will not be payable before 1st September and the regulations will be drafted accordingly.

The other part of the amendment would in practice result in contributions being paid quarterly. This produces a practical difficulty, because one contribution will be due in midsummer, at the height of the holiday season. The payment of the contribution is a condition for obtaining, or for continuing to hold, a licence. If the contribution was not paid, the air travel organiser would be in breach of his licence conditions and the Civil Aviation Authority would therefore have to consider whether to suspend the licence. The authority would naturally be reluctant to do this in midsummer simply in order to enforce payment of the contribution, because of the risk of stranding large numbers of holidaymakers overseas. The same problem would not arise to the same extent in April and October, since the number of holidaymakers overseas who would be affected by the suspension of a licence would be much less. It is for this practical reason that we still prefer payments for six months.

Nevertheless, although I cannot enter into any firm commitment that the proposed period of six months for paying contributions will be changed, I can undertake that the Government will hold further discussions with the travel trade and will consider this point further.

Finally, I emphasise a point which I made earlier, namely, that the rates of contributions, and the periods for which they will be payable, will be specified in regulations which must be laid before the House. Therefore, hon. Members will have another opportunity to consider this question. For that reason, I cannot agree with the amendment.

Mr. Terence Higgins (Worthing)

As the Under-Secretary has said, there are essentially two points covered by the amendment—first, the interval at which various payments to the fund should be made, and secondly the question of the starting date. I think that we can welcome the hon. Gentleman's assurance on the second point, although it would have been more appropriate if he had accepted this point earlier so that it could have been written into the Bill rather than that we should have to wait until the regulations are made.

I should like to pursue a number of points with the Under-Secretary. First, I wish to take up a point made by the Government spokesman in the House of Lords. Lord Beswick said: Unless I am a very innocent character and I have been misled, there is absolutely no question of levying these contributions in order to evade any responsibility in connection with Court Line. That we can eliminate from the discussion altogether. It is within the recollection of hon. Members, however, that the fund which is to be established out of the levy and the Government contribution by way of loan to be made to it will compensate a number of people who lost their money in the Court Line affair last year as a result of a misleading statement by the Secretary of State for Industry.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

The old violin.

Mr. Higgins

The old violin apparently had not reached the Government spokesman in the House of Lords, because he said: there is absolutely no question of levying these contributions in order to evade any responsibility in connection with Court Line". It is clear that some of the contributions will go to compensate people who lost money in the Court Line affair last year. I should like the Under-Secretary to clarify the position on that point because it seems to me a remarkable statement for the Government spokesman in the House of Lords to have made.

My next point concerns the date of payment and the intervals. If the date in the regulations is 1st September, as the Under-Secretary suggested it will be, some companies may still have to levy the additional surcharge at the airport. I am not sure whether that is so. Perhaps the hon. Gentleman will confirm whether the companies will not need to levy the amount at the airport. Presumably it depends to some extent on the time period of individual companies. If the date is 1st September, will the hon. Gentleman say whether any company will find it necessary to levy the amount at the airport?

The British Airport Authority has said that it is very disruptive for tourists to find that they have to pay a charge when proceeding on their journey when they are under the impression that they had paid the full amount on completing their booking or before leaving for the airport.

The main problem on this whole question concerns cash flow. A very heavy burden is now to be placed on travel firms because there is a bonding arrangement which, as the Minister said, has been increased. In addition there is to be a payment into the fund by way of levy. Companies which are perfectly viable, sound and reputable may still have considerable difficulty in raising in liquid cash the considerable sums which may be required under the levy arrangement. This was one of the factors which led us to believe that the three-month period might be more appropriate than the six months mentioned by the Minister.

It was remarkable that the argument about the scale of levy should have been advanced in another place and again by the Minister this evening. That argument was never raised in Committee. This evening the Minister said that the levy was being created and that it would amount only to 1 per cent. initially and subsequently 2 per cent. In another place, and apparently by implication this evening, the argument was advanced that this variation will go some way to meet the amendment which their Lordships have put to us because the rate of levy will be halved initially. That is an odd way of putting the point. Our understanding throughout the Committee stage was that the levy was starting off at 1 per cent. and was then to be doubled.

The argument can be advanced either way. The most peculiar argument, however, and one which we did not hear in the Commons, was advanced in the other place. Lord Beswick said we have agreed that the first contribution will be a smaller one than any actuarial estimate would suggest. We suggest here—and, as it happens, we have taken the 50 per cent. cut which the noble Lord, Lord Belstead, is suggesting".—[Official Report, House of Lords, 13th May 1975; Vol. 360, c. 647, 653.] In the long debates we had on Second Reading, in Committee and on Report, I cannot recall any actuarial estimate of the 1 per cent. or 2 per cent. being given. This fund is concerned with travel firms which run into financial difficulty. I cannot conceive of any precise actuarial basis on which the 1 per cent. or the 2 per cent. figures should be based.

As far as I know, there is no actuarial estimate in the insurance sense on which to base such a calculation. However, suddenly, once the Bill reached another place, that estimate appeared. I hope that the Minister will be able to say whether such an estimate exists.

The timing of the payments is extremely arbitrary because many people whose holidays have long since been disrupted will be compensated from the fund. The levy will be imposed quite arbitrarily on those taking their holidays this year or next year. It appears that those who take their holidays this year before 1st September will not pay into the fund. Perhaps the Minister will clarify that point. It is obviously of interest to those who are going on holiday this year.

11.15 p.m.

There is also the question of whether there is to be any retrospective payment and whether payments will be levied before the Bill becomes law. This aspect gave cause for concern in another place. We should be grateful for the Minister's elucidation of the precise situation. We are grateful for his statement about the date of 1st September, but we would have preferred to have it in the Bill rather than to do it by order. I see no reason why the original situation should not have been specified in the Bill with provision to amend it by order.

On the question of arrangements for three-monthly or six-monthly payments, I understand the point the Minister made about the peak season but he feels that he needs the sanction of the ability to withdraw a licence in the case of a firm which wilfully withholds the levy. It is curious to say that such a situation would be dealt with by withholding the licence. If the firm could not pay the levy, this would give cause for concern and, presumably, would give rise to a payment out of the fund rather than a payment into it.

We understand that the Minister is to have discussions with the trade on this matter. In view of the assurances concerning the starting date, I do not advise my hon. Friends to press the amendment to a Division.

Mr. Michael Neubert (Romford)

As it is three months since the Second Reading of the Bill, I record my interest again. For the greater part of my professional life I have been an air travel organiser—the category of person specifically affected by the provisions of the Bill.

It is a great pleasure to welcome the Under-Secretary back to consideration of the Bill, in which he has not taken part since he replied for the Government on Second Reading. I do not know whether his return is associated with the fact that we have a glimpse of a concession in such a desert of inflexibility, but it is welcome.

Throughout consideration of the Bill Ministers have set their faces like flint against any question of amending it or conceding anything. Amendment after amendment has been moved without success. Even as recently as this afternoon, the noble Lord speaking for the Government in another place got quite shirty that noble Lords should have had the temerity to pass an amendment and cause a late night vigil here to consider it further.

This is a reasonable amendment on which advice could be taken from the industry, and I appreciate the Government's undertaking to consider the matter further with the industry, particularly in relation to the frequency of payments. Until now, such was the inflexibility of the Department of Trade, I had begun to think that ministerial edicts were engraved on tablets of stone, immutable and not to be altered in any way.

It would be helpful if the starting date for payment was 1st September. Charter operators require clients to make payment of the balance by eight weeks before departure. This means invoicing clients 10 weeks before departure. Therefore, two and a half months is the minimum period which is necessary if the levy is to be shown as a separate item on the invoice.

The alternatives are to invoice this item separately, which would be costly in postage, a burden on the administration and an irritation to the traveller just before his holidays, or for a surcharge to be paid at the airport. This is so undesirable that I believe that the British Airports Authority has banned it. It is not very satisfactory for passengers who are about to embark on a holiday for which they have saved and looked forward to for a long time to be asked for a cash payment at the departure desk at the airport. If those two alternatives can be avoided, it will be very much in the interests of the travelling public and the holiday companies alike.

The frequency of the payments is perhaps a much more serious matter than the Government have realised. Perhaps I may exempt the Ministers present from that comment, but the noble Lord in another place had a strange misconception of what the levy is in practical terms. He said that paying at quarterly intervals did not mean paying any less. That is what it means, however, to the tour operator. The levy is on the tour operator. He has to recover it over a period of months from his clients. During the period when he has not recovered it he is paying a temporary tax.

When the total is about £ 680,000 for a summer season and £ 320,000 for a winter season for the largest company, it is a substantial sum. Although it diminishes progressively over six months, that sum is out of the company's keeping and it is losing the interest on it. It has to find the money in the first place. The noble Lord suggested that it can accumulate the money. It can accumulate it from its own resources, but it cannot anticipate the recovery of the levy. It must wait until the starting date before it can start to get the money from its clients. This is quite an imposition, following a number of others. The bond has been not simply increased but doubled, which means an extra £ 21 million in the case of the largest company.

Companies are also under increasingly stringent financial requirements from the very circumstances of holiday operation these days. They get their money later, because of the excess capacity in the market, which encourages people to book close to the date of their intended departure, because they know that they can get the holiday of their choice. That was not so in earlier years. The excess of capacity is one of the worst factors in the market at present. The companies also have to make advance payments to airline operators and hoteliers.

All these matters are tightening the financial belt. Therefore, it is of the utmost importance that the frequency of the payments should be eased so as not to require such a large sum to be stumped up by the company every six months. I hope that there will be a successful outcome to the discussions.

I take the Minister's point that the change would require one of the quarterly payments to be made at the height of the summer, but I do not regard 1st June as the peak of the summer season. I do not mean that solely in a meteorological sense, although after the weather last weekend, the third weekend in May, I do not think that anyone would describe 1st June as likely to be the height of the summer. It is certainly not the height of the travelling summer either. The peak weekend is normally taken to be the last weekend in July, when schools have broken up and parents take their children away on holiday. A reasonable height of the summer would be July—August rather than June. I would hope that there would be ample time to organise a safety operation and redispose clients if a company were in trouble at 1st June.

Having two six-monthly payments puts a great onus of responsibility on the Civil Aviation Authority. If the risk could be avoided by quarterly payments, that would be to everyone's advantage.

For these reasons I very much welcome the indication of attitude shown by the Minister tonight. I hope he will recognise that the Bill, as a second line of defence, is just one of several such measures. If one goes so far as not only to lock the stable door after the horse has gone—which, it is accepted, is what we are doing—but to batten up the hatches all round, the horse is in danger of not being able to breathe, let alone escape. As the traveller's interest is in a profitable travel industry, I hope that due weight will be given to these points of concern which have been expressed both here and throughout the industry.

Mr. Michael Shersby (Uxbridge)

I was sorry to hear the Under-Secretary of State propose that the House should disagree with the amendment. In recent months when I have listened to one Government spokesman after another suggesting that we should disagree with Lords amendments, I have often thought that the House could perhaps learn from the collective wisdom of another place.

The amendment has several attractions. The main attraction is that it provides for the contributions to the Air Travel Reserve Fund to be paid by instalments. That would be a valuable concession to the trade. My hon. Friend the Member for Romford (Mr. Neubert) who is in a unique position because of his specialised knowledge, has drawn attention to the benefit which would flow to air travel organisers from an instalment payment basis. He also dealt with the point raised by the Under-Secretary about the payments becoming due at the height of the summer season, and he has perhaps taken away some of the concern which the Under-Secretary of State rightly expressed about the difficulties which may occur.

I welcome what the Minister said about further consultations with the travel trade. I look forward to hearing the outcome and hope that there will be an opportunity to discuss it when regulations are laid before the House. In those discussions I hope that the Minister will have in mind the way in which the quarterly payment basis will work. As I see it, the payment would be on the basis of the total takings of the air travel organiser during the preceding three months, based upon the estimated amount payable during the ensuing three months. That arrangement could do much to relieve the cash flow problem. We all know of the tremendous cash flow difficulties experienced by firms throughout the country, and I hope that the Minister will have them in mind when he talks to the air travel organisers.

I am glad to note that the first payment will not be due until 1st September this year. I assume that it will be based upon the takings of the preceding three months, but perhaps the Minister will confirm that.

This debate brings to a conclusion our long discussions on the Air Travel Reserve Fund. It brings to a temporary halt the long discussions on the Court Line case last year. Perhaps the Minister will give the House a clue as to when the Ombudsman's report on the Court Line affair will be forthcoming. It is a matter of particular interest to all hon. Members who participated in the debate on the Bill and of general interest to the House.

Mr. Deakins

The hon. Member for Worthing (Mr. Higgins) made several comments, one or two of which related to the Lords debate. I assume that on this occasion I am in order in referring to the debate in another place.

My noble Friend Lord Beswick, the Minister of State, Department of Industry, said that contributions were not levied in order to evade any responsibilities in connection with Court Line. We stand by that statement because the issue of responsibility is still to be decided in the light of the report by the Parliamentary Commissioner for Administration and the Companies Act inquiry. The contributions will be used by Court Line customers, but that is a different point and compatible with Lord Beswick's statement.

The hon. Member for Worthing and the hon. Member for Romford (Mr. Neubert) commented on payments at airports. According to ABTA, travel organisers need three months' notice to charge the levy and to invoice. If a start is made on 1st September, that period of notice will be given. That is true of most travel organisers. There may be exceptions, but one hopes that there are not more than one or two.

11.30 p.m.

The estimates made for the 1 per cent. levy this year and the 2 per cent. levy next year were made by the Department of Trade, in consultation with the Treasury, so as to strike a balance between the need to build up the fund and the need to avoid an excessive burden on the trade. I can confirm that there will be no retrospective payment of contribution for periods before the Bill becomes law.

Mr. Higgins

The Minister was going a little fast, but I understood him to say that there is not an actuarial system. That is not what was said by the Minister in another place.

Mr. Deakins

I am not responsible for every word used by my noble Friend in another place. We have to consider what has been said in this place on behalf of the Government. I can confirm the point about there being no retrospective payment.

Mr. Higgins

As I understand the convention of the House, we can refer to statements made by Ministers in another place because Ministers are assumed to be homogenous in their views on a particular issue. Perhaps it is a convention that has been tainted lately, but that is the general view on these matters.

If we are considering their Lordships' amendment and considering the argument for its not being accepted, I do not think we can go along with the proposition that because a Minister in this place does not agree with the Minister in another place we should not accept the Lords amendment. That would be a curious view. The Minister in another place, basing his argument on the question of reducing the 1 per cent. in the first instance, said that the levy was a smaller one than was suggested by the actuarial estimate. However, it seems that there is no actuarial estimate and that the noble Lord should not have used the expression.

Mr. Deakins

I can confirm that there is no actuarial estimate whatever my noble Friend may have said in another place. However, he was correct in the point he was making.

A point was raised by the hon. Member for Romford (Mr. Neubert) about a company in trouble having its licence suspended at the height of the holiday season. The hon. Gentleman suggests that that is something with which we have to live. We certainly have to live with it. But we are concerned about a company which is financially sound but which does not pay its contribution. It would be a very stony-hearted or hard hearted CAA that would suspend the operating licence of a major tour operator merely because it had not paid up on 1st June at the height of the holiday season. That is the sort of problem we want to consider in our discussions with the travel trade.

The hon. Member for Uxbridge (Mr. Shersby) made a number of points, but I think he realises that we are doing our best and seeking to meet the difficulties of the travel trade in this regard. However, we must bear in mind the problem that I have already voiced twice this evening about licence suspension at the height of the holiday season. If we can overcome that difficult I am sure that the regulations will meet the views of both sides of the House.

Question put and agreed to.

Committee appointed to draw up reasons to be assigned to the Lords for disagreeing to their amendment to the Bill: Mr. Thomas Cox, Mr. Clinton Davis, Mr. Eric Deakins, Mr. Terence Higgins and Mr. Michael Shersby; Three to be the quorum. — [Mr. Deakins.]

To withdraw immediately.

Reason for disagreeing to the Lords amendment reported and agreed to; to be communicated to the Lords.

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