HC Deb 25 October 1984 vol 65 cc809-12 3.30 pm
Mr. Dick Douglas (Dunfermline, West)

(by private notice) asked the Secretary of State for Transport if he will make a statement on the collapse of Budget and Excel Holidays.

The Parliamentary Under-Secretary of State for Transport (Mr. Michael Spicer)

I am grateful to the hon. Member for Dunfermline, West (Mr. Douglas) for giving me this opportunity to make a brief statement on the collapse of Budget and Excel Holidays.

The Budget group of companies went into receivership yesterday, triggered it seems by the refusal by Brittania Airways, owed money by the group, to carry any more passengers booked with it. The consequences of this failure are inevitably upsetting for those who have paid in advance for holidays with Budget and Excel but who have yet to take those holidays. Those currently abroad on holiday must be very worried about getting home. I am pleased to be able to give the House total reassurance on both these points.

Those who have paid for but not yet taken holidays will get their money back in full. The Budget group's financial bonds should be enough to meet all refunds. If not, the air travel reserve fund stands in reserve and has ample funds. Subject to availability, travel agents should be able to offer immediate alternative holidays to those affected at no extra cost.

The Civil Aviation Authority and the Association of British Travel Agents already have arrangements in hand to repatriate those overseas. Last night's flights left on time, bringing home those due to return yesterday. Aircraft have been chartered through to 11 o'clock tonight to return those finishing their holidays today. Further flights are being arranged and both the CAA and ABTA are doing their best to ensure that everyone overseas gets their full holiday. Everyone will be repatriated at no cost to themselves.

It may be helpful if I explain briefly to the House the position of the CAA's monitoring of this group of companies. The CAA began to have serious concerns about these companies a few weeks ago. The authority has also put its own auditors into the group. It was, of course, always faced with the fact that many of the holidays were booked well in advance. In the absence of the group satisfying the CAA, it seems likely that its air travel organiser's licence would shortly have been revoked in any case. It is a matter of judgment whether the CAA should have moved to revoke the air traffic organiser's licence earlier in the season and thus have left stranded even more holidaymakers.

The holiday industry has been going through a difficult period. There have been a number of recent failures brought about by price cutting and a switch to late booking, which has dried up cash flows. The signs are, however, that brochure prices next year will be substantially higher. Despite the recent problems, the financial arrangements of the industry coupled with the air travel reserve fund are such that, as in the Budget and Excel cases, holidaymakers need not fear for their money.

My right hon. Friend the Secretary of State is also considering an independent report by Sir Peter Lane which suggest ways in which the present arrangements might be further strengthened. We are giving this the closest consideration and the CAA is currently consulting the industry on higher bonding levels. I hope shortly to make a further statement about this.

Mr. Douglas

I thank the Minister for that reply, but his last remarks involve considerable disquite. Sir Peter Lane reported in July and one of the recommendations was that the CAA should tighten up the procedures. Has this not been done? What is the total cost of repatriation procedures involving holidaymakers? Will there be any recourse to the funds of the air travel reserve fund? What is the morality of a position whereby holidaymakers pay well in advance—sometimes eight weeks—for holidays, which means that the funds are with the travel company? If such companies collapse, the holidaymakers have to pay again, through an increased levy or by other means. Are those the ethics of capitalism today?

Mr. Spicer

Obviously, it is difficult to get a definite cost, but we think that at the moment it is about £2 million, which would be fully covered by the £3.8 million bonding arrangements. The answer to the question whether there will be any need to draw from the air travel reserve fund is no. That is how we see the position at the moment. The answer to the question whether one can give any total guarantee to holidaymakers that the companies with which they book will not run into financial difficulties must clearly be no. The present guarantees that holidaymakers obtain through the various arrangements must be far higher than those obtained by any other customers who obtain any other form of service.

Mr. Robert McCrindle (Brentwood and Ongar)

Although I regret the inconvenience to which holiday-makers will be subjected, is it not wise to underline the fact that the state of consumer protection for package holidaymakers is such a combination of CAA bonding and the air travel reserve fund means that, unlike the position a decade ago, when considerable financial loss was incurred, the people who are affected now will suffer no more than inconvenience? In the event of further tour company failures, which are being predicted, will my hon. Friend examine the efficiency of the operation of the combined system of bonding and the ATRF and decide whether Sir Peter Lane was not unduly dismissive of the possible alternative of insurance arrangements?

Mr. Spicer

I am grateful to my hon. Friend for what he said in the first part of his question. We believe that holidaymakers are well covered at the moment. We are not, however, complacent about that, as is implied in the second part of my hon. Friend's question. Clearly, there is always room for improvement. If one of the biggest operators went under in the middle of the peak season, there would be pressure on the combined funds. That is why my right hon. Friend the Secretary of State asked Sir Peter Lane to ascertain whether there were ways in which we could strengthen the funding arrangements. That is why we are looking at his report and why we have every intention of doing what we can to strengthen the funding further.

Mr. Paddy Ashdown (Yeovil)

No doubt the House is glad that it has been confirmed that no money will be lost on these occasions, but a great number of holidays for members of the public will be spoilt. The Under-Secretary of State will realise, of course, that Budget Holidays is the leading direct-sell firm in this area and that the collapse involves the failure of not one but four firms—Excel Holidays, Budget America, Bargain Travel and Airsave Travel. The hon. Gentleman will realise also that this year there were two earlier failures—of Ventura Holidays and Vantage Holidays. In the light of those facts, does not the hon. Gentleman believe that there is a need for greater safeguarding of the public? Does he realise that many have thought that his earlier statement did not convey the kind of urgency that is required in these matters?

Mr. Spicer

This is not, of course, a happy event for holidaymakers. It is a matter not just of their being threatened with losing money—they have not—but of having their holidays disrupted. As I said in my statement, we are doing everything that we can to ensure that those who wish to continue their holidays can do so for the next few days of those holidays. We accept that there may be a case for strengthening the arrangements. There will always be a case for strengthening the arrangements. We are certainly doing everything that we can in that respect. We shall shortly publish a statement about that matter.

Sir Kenneth Lewis (Stamford and Spalding)

Is my hon. Friend aware that, short of nationalising all the people involved in the travel business, there is no way in which one can guarantee that companies will not go bust? I should not have thought that that would appeal to my hon. Friend, and I do not think that it would appeal to the people as a whole to have nationalised holidays. This industry gives better cover to its consumers through the two plans that are available than is available to any consumer of any other industry.

Mr. Spicer

I could not agree more with my hon. Friend. The fact is, of course, that this is a dynamic industry which during the past few years has grown from 600 to 700 operators. In those circumstances, from time to time there will doubtless be some companies that are not financially prudent. Bar the kind of ghastly alternative that my hon. Friend has suggested, there is no way that one can give a complete guarantee; it does, however, give the best possible customer protection of any industry.

Mr. David Young (Bolton, South-East)

Are not the Government now becoming over-complacent? The Opposition are not asking for the nationalising of the industry; we are asking that the operators be responsible to the consumers who pay their wages. Will the Government tighten the requirements and ensure that operators provide resources to cover their commitments before they soak customers?

Mr. Spicer

There is no question of complacency. That is why my right hon. Friend initiated the strengthening of this protection in the summer by asking Sir Peter Lane to make a report. We shall be making an announcement about that soon.

Mr. Bill Walker (Tayside, North)

While accepting that there is always need to strengthen requirements and protection, this industry has substantial protection. Does my hon. Friend agree that many hundreds of thousands of people in the United Kingdom have enjoyed what can only be described as bargain holidays over the past 18 months because of the price cutting that has been going on? That is the plus side for all those people who had bargain holidays. It is an industry that employs a great many people and provides work for our airline operators as well as the tour operators. We must therefore always look carefully at the plus as well as the down side.

Mr. Spicer

I agree entirely with my hon. Friend. People certainly would not obtain bargain holidays from a nationalised industry.

Mr. Bryan Gould (Dagenham)

Does the Minister accept that it is disturbing that there should have been a further major failure in the travel industry, which inevitably causes great inconvenience and disappointment, particularly when it follows a number of other failures in the industry in recent weeks? We accept, of course, that when the Government's economic policies are doing such enormous damage to the economy and producing so many record insolvencies, it would be unrealistic to expect the travel industry to be immune. We are worried about the fate of those who are disadvantaged by these failures. In that context, I wonder whether the Minister could say a further word about the estimated 2,000 holidaymakers who booked their holidays with Excel Holidays after 16 October. Given that the Association of British Travel Agents' protection offered by that firm expired on that date, can he say what steps were taken to draw to the attention of holidaymakers who bought holidays after that date the fact that the protection no longer existed? Finally, will he say whether he is satisfied that adequate consular protection will be available to those holidaymakers already abroad whose holidays have been disrupted?

Mr. Spicer

On the second point about consuls, I shall certainly ensure that my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs is made fully aware of what the hon. Gentleman has said. The position is that funds are fully available for protecting all those who have any money at stake.