§ The Parliamentary Under-Secretary of State for Technology (Mr. Edward Leigh)
I beg to move,
That the draft Package Travel, Package Holidays and Package Tours Regulations 1992, which were laid before this House on 1st December, be approved.
The regulations are intended to implement in United Kingdom law the EC directive of the same name. This is an important landmark in the development of consumer protection in this area.
The directive and regulations have three main objectives. The first is to ensure that organisers and retailers of packages maintain proper professional standards in their dealings with their customers. The second is to require organisers and retailers to take full responsibility for the proper performance of their contract. The third is to ensure that organisers and, in some circumstances, retailers have security for the refund of any advance payments made by consumers, including the cost of repatriation in the event of insolvency of the organiser or retailer. It may be for the convenience of the House if I indicate very briefly how the regulations address these objectives.
Regulations I to 3 deal with definitions and application. Basically, the regulations would apply only to packages sold or offered for sale after 31 December 1992, but the provisions regarding protection against insolvency affect all contracts in place on 31 December 1992 which remain to be performed in whole or in part. This means that organisers or retailers must on that date have security for all prepayments that they hold. It would clearly be unacceptable if a tour operator became insolvent at, say, the end of January, and those customers who had entered into contracts subsequent to 31 December were protected, while those who had entered into contracts before that date were not.
Regulations 4 to 6 deal with requirements as to brochures. Brochures must not contain any misleading information, must contain—in so far as it is relevant to the package—at least the information contained in schedule 1 and, subject to certain qualification, will be binding on the organiser.
Regulations 7 and 8 deal with information to be provided before the contract is concluded. This includes, for example, passport and visa requirements, details of travel arrangements, and the name, address and telephone number of the organiser, or a representative of him, whom the consumer can contact if necessary.
Regulation 9 deals with the content of contracts. The contract must contain at least the elements spelt out in schedule 2, unless these are clearly irrelevant to the package in question, and the consumer must be given a copy of the contract in writing.
Regulation 10 gives the consumer certain rights to transfer a booking.
Regulation 11 deals with the important question of surcharges. Surcharges are permitted only under certain restricted circumstances: specifically, to deal with variations in the price of fuel, fluctuations in exchange rates or increases in certain dues and taxes.
§ Mr. Malcolm Bruce (Gordon)
On surcharges, does the hon. Gentleman not think it a little odd that this statutory instrument is labelled "Consumer Protection" when most 1075 consumers in this country wish to be protected from the existence of surcharges at all? He is legalising a practice that most people want to see abolished.
§ Mr. Leigh
This is a very interesting point and it has been a difficult balance to strike. The package holiday industry is highly competitive and the view held by Government is that generally the consumer gets an extremely good deal. It would be possible, of course, for the Government to outlaw surcharges. If we were to do that, the only result for the general consumer would be to push up prices. I repeat that the consumer in this country generally gets a very fair deal and very good value holidays. We believe that we have struck the right balance. We do not believe that it is opportune to change long-standing practice in this country.
In this case, therefore, we have gone beyond the strict requirements of the directive to provide that the organiser must absorb the first 2 per cent. of any increase. I hope that that will go some way to allay the concern expressed by the hon. Member for Gordon (Mr. Bruce). This mirrors the current requirements of the code of practice of the Association of British Travel Agents.
Regulation 12 permits the consumer to withdraw from the contract without penalty if there is a significant alteration to an essential term of that contract, and regulation 13 spells out the consumer's rights in this situation and also in the event of cancellation by the organiser.
Regulations 14 and 15 deal with the rights of the consumer while the contract is being performed. Under regulation 14. a duty is placed on the organiser to make alternative arrangements if a significant proportion of the services contracted for are not provided. It also provides the consumer with a right to compensation where appropriate and a right if necessary to be returned to his point of departure.
Regulation 15 is important and makes the organiser, or possibly in certain circumstances the retailer, strictly liable for the performance of the contract. This means that it will no longer be open to the organiser to disclaim responsibility if, for example, a hotel is not of the standard, or does not offer the service, which has been promised. There are certain qualifications. For example, the organiser is not liable for a failure due to an event which he could not even with all due care have foreseen or forestalled, and liability other than for death or injury may be limited, so long as that limitation is reasonable.
This brings me to regulations 16 to 22, which deal with security for prepayments and against the possible need for repatriation in the event of insolvency. I would like to take a moment or two to explain our approach to this very important provision in the directive.
The first point to stress is that the number of organisers or establishments in the United Kingdom that offer packages is extremely large. There are no statistics, and any estimate can only be in the nature of an educated guess, but we believe that the total number is between 10,000 and 20,000, not counting the many people who organise packages on a voluntary basis. Many of those who offer packages are not tour operators at all, but hotels and similar establishments which offer a tourist service—perhaps golf, or fishing—in addition to accommodation. Among tour operators proper, the range varies from 1076 the giants of the package travel trade to one-man—or, frequently, one-woman—companies exploiting some niche in the market.
Faced with this diversity, the philosophy that we adopted was to offer the widest possible range of choice for meeting the requirements of the directive. These choices are spelt out in the regulations.
Regulation 16 is a general provision and contains exceptions for packages covered by the existing air travel organisers licence system—which will not, of course, be affected by the regulations—or by arrangements in force in another member state. There are two particular points about this regulation which I would like to draw to the attention of the House. The first is that we have not provided how the requirement to have arrangements for repatriation should be met. This is because there are a great many possible ways of meeting this requirement, and it would have been over-prescriptive for us to try to list them all. The second is that we have provided that, for a period of three months following entry into force of the regulations, organisers will not have to have in place one of the specific forms of protection spelt out in regulations 17 to 21, though they will still be committing an offence if they do not have sufficient security to protect consumers if they became insolvent. This is because the interval between approval of these regulations and their date of entry into force is likely to be very short indeed, and we needed to give the very large number of operators who currently have no protection time to make appropriate arrangements.
In addition to meeting the general requirements of regulation 16, organisers of packages will need to meet one or other of the alternative provisions set out in regulations 17 to 20 or, if they are not acting in the course of business, regulation 21. Regulations 17 and 18 provide for organisers who wish to follow the well-established bonding system which is already mandatory for holders of air travel organisers licences and is operated on a voluntary basis by the main trade associations in the industry. It is envisaged that most, if not all, of those trade associations will become bodies approved under the regulations by the Secretary of State as having bonding arrangements in place which will meet the requirements of the regulations.
Regulation 19 offers an alternative to bonding in the form of insurance, and is designed primarily for those organisers who are either unable or do not choose to join one of the "approved bodies" provided for in regulations 17 and 18.
Regulation 20 provides that organisers may, if they wish, meet the requirements of the directive by placing pre-payments in a trust account from which they can be withdrawn only on completion of the contract. This option is designed primarily for hotels and similar establishments, which take only a relatively small proportion of the cost of a package by way of pre-payment.
Finally, regulation 21 makes special provision for the voluntary sector. The effect of this regulation is that an organiser not acting by way of business need ensure only that any payments that he receives are kept separate from his personal bank account so that they cannot he seized by his creditors in the event of his insolvency.
I can pass over the remainder of the regulations very quickly. Regulation 22 deals with offences arising from breach of regulations 20 and 21. Regulation 23 calls up the enforcement schedule, regulation 24 provides a due 1077 diligence defence against any breach of the regulations which carries criminal penalties, and regulation 25 makes rules regarding the liability in the case where a person commits an offence under the regulations as a result of an act or default committed by some other person. Regulation 26 deals with prosecution time limits. Regulation 27 provides that no contract shall be void or unenforceable, and no right of civil action shall arise, by reason only of the commission of an offence under the regulations, while regulation 28 provides that an organiser cannot escape his contractual requirements under regulation by making contracts subject to a law other than that of the United Kingdom.
The regulations will for the first time provide a thorough and comprehensive framework for the protection of customers of packages. In most places, they follow closely on the provisions of the directive. They aim to strike a balance between the legitimate expectations of consumers and the need to ensure that competition is not restricted and that consumer choice is not reduced by overregulation.
I stress that, in preparing the regulations, we have sought to place the minimum extra burden on industry consistent with proper implementation of the directive and proper protection for the consumer. It was not an easy balance to strike. Many people would have had us go further while others did not want us to go so far.
§ Sir Michael Neubert (Romford)
If, as he says, the Minister is anxious not to impose undue burdens on the industry, why has he sought to add additional requirements to those required by the directive which this measure enforces?
§ Mr. Leigh
In fact, the additional requirements that we have added are very small. They deal with surcharges, a point with which I dealt in response to the hon. Member for Gordon. When I was responsible for consumer affairs, which have subsequently become the responsibility of my noble Friend Baroness Denton, I was determined to ensure that while we carried out the spirit of the directive—if we did not do so, we could have been taken to the European court—we did not want to impose any more burdens on British industry than was absolutely necessary. It is essential that the Department of Trade and Industry abides by that principle. We have been wholly loyal to the spirit of the directive and concerned to implement it properly in the United Kingdom, but we have also been concerned not to impose any unnecessary burdens on industry.
I recognise that some aspects of the regulations are controversial. It would not have been possible to please everyone and we have not tried to do so. Nevertheless, I believe that we have got the balance about right and that the new regime which will be created by the regulations will bring valuable benefits to the consumer. I commend the regulations to the House.
§ Mr. Nigel Griffiths (Edinburgh, South)
The Minister is not only at the Dispatch Box but in the dock. For three years the Government have refused Labour's pleas for better protection for holidaymakers. Now Ministers are being forced to take action by the European Commission, 1078 but they have left it until the very last minute. They have conducted the minimum of consultation with business and others and have ignored critical representations by those who know far more than them—travel agencies, enforcement departments and the consumer movement.
We have forced a debate on the Floor of the House because of widespread criticism of the Government's legislation: the Association of British Travel Agents has told the Minister that the legislation is unworkable; trading standards officers say that it is unenforceable; and the Consumers Association said in a letter:These provisions are so flawed that the government will be actionable in the European court for failing to implement the Directive and adequately protect consumers.For three years, since the directive was published, the Government have dragged their feet and failed to introduce tough controls over rogue elephants in the travel trade. They have dragged their feet time and again and their inaction has allowed disreputable companies to print misleading brochures, to lie about holiday facilities available and to avoid paying any compensation for that, to cancel flights, to change arrival and departure times at will, to impose surcharges and, worst of all, to take customers' money without holding any insurance against insolvency.
Tens of thousands of holidaymakers have been taken to the cleaners in the past year alone because the Government have refused to act until forced to do so by the European Community. The European Commission is now forcing them to introduce this measure by 1 January. However, the Government's proposals are so weak that some of the abuses that I have listed will continue virtually unabated. Because the measure is being introduced at the last possible minute, it is riddled with loopholes and is weaker than the current voluntary code of the Association of British Travel Agents. With 21 days to go, key sections of the travel industry have no time to implement the legislation. It is a recipe for chaos.
Let us consider one key aspect of the measure—bonding, or insolvency insurance. Three years ago this month, the Minister's predecessor, the hon. Member for Mid-Worcestershire (Mr. Forth), said that the financial provisions were the guts of the measure. No wonder the current Minister skipped over that so quickly. He cannot find anyone outside the Government who believes that the bonding regulation will work.
In a report dated 8 December, Keith Betton, speaking for ABTA, told the Minister:The present Regulations will result in piecemeal protection for consumers without there being any guarantee of refund or repatriation where insurance or trust options are adopted by an organiser that subsequently fails … the government appears to have failed in its obligations to properly implement the Directive.That is a point I made earlier with reference to the Consumers Association.
The Minister also knows the views of the people whom he wants to police the measure. Mr. Bob Wright, who chairs the key sub-committee of the Institute of Trading Standards Administration, told the Department of Trade and Industry:The present draft regulations are seriously flawed and should be redrafted if they are to be meaningfully enforced".These seriously flawed enforcement powers are set out in paragraph 3(1) of schedule 3.
Keith Hale, a senior executive officer of the Local Authorities Co-ordinating Body on Food and Trading Standards, which co-ordinates consumer enforcement on 1079 the Government's behalf, said in his submission to the Minister that this measure gives enforcement officers powers to inspect bonding documentation onlywhen there are reasonable grounds for suspecting that an offence has been committed.He asks what grounds are likely to be considered reasonable and concludes:The obvious answer is of course when a company goes to the wall … in other words officers will only be able to act when it is too late".That is the view of people whom the Minister expects to enforce the measure. That advice has been ignored by the Minister, by the Government and by his party.
There are not enough enforcement officers to carry out checks on rogue travel companies. The Minister should know that trading standards officers are currently 10 per cent. understaffed and have more laws to enforce than ever.
By ignoring the views of people in the travel business, the enforcement agencies and the consumer movement, the Government are leaving many travellers far worse off. By bonding without licensing, the Minister is giving thousands of consumers a false sense of security. Bonding without licensing will be unenforceable. The trade says that it will not work—the Minister says that it will. The enforcement officers say that it will not work the Minister says that it will. The consumer organisations say that it will not work—the Minister says that it will.
Clearly, the Minister trusts no one else's judgment, but the fact is that no one trusts the Minister's judgment. The Minister has a track record and, because of that record, it is not difficult to understand why no one trusts his judgment. He is the Minister who received a letter from the Boston Conservative club which alerted him to the case of Land Travel, a travel company whose director failed illegally to file the books. The company ran at a £2 million loss, its auditors heavily qualified the accounts and the director had previously run a travel company which went bust. The Minister failed to take appropriate action and one year later the company went bust, leaving 40,000 people without their holidays and their money. Tonight he asks us to accept his assurances but not those of ABTA, the Consumers Association, LACOTS or trading standards officers.
Under these regulations the bonds will be worthless in many cases. In spite of calls from ABTA and others for a licensing scheme, the Government refuse to license any travel companies. For non-ABTA members licensing is the best way to ensure that a bond is not worthless, but the Government refuse to license, in spite of being told that that is the only way of guaranteeing protection to consumers. ABTA, the trade body whose members provide 90 per cent. of holidays, already requires bonding and polices vigorously its own scheme. However, more than 1 million people travel with non-ABTA companies. From 1 January Arthur Daley companies will simply sign a certificate claiming to be bonded, but no one will be checking them. As the Minister knows, local government trading standards officers cannot undertake that work.
So much for bonding. Let us look at other flies in this unsavoury ointment. There are several other flaws which disadvantage consumers. The Minister is prepared. as he has admitted, to allow surcharges to continue. I have never understood why, when a holiday is paid for in advance, the holidaymakers' payments should be given to the airline, bus company, hotel, or other suppliers of services at the 1080 price agreed, and that when payment is made they can have that payment revised and additional demands made on them. In some circumstances, some of these surcharges amount to little short of extortion.
Now the Government are proposing even weaker controls on surcharging than ABTA imposes on its members. The current ABTA scheme permits surcharges in some cases, but only after the company has absorbed 2 per cent. and only after every component of the cost increase has been written down and vetted by ABTA's inspectors.
§ Mr. Malcolm Bruce
Does the hon. Member not also think that it should be borne in mind that in many cases companies that buy forward make excess profits from currency speculation and use of the money from the people who have paid for those holidays and in no circumstances and on no occasions is that excess profit shared with the customers?
§ Mr. Griffiths
That is indeed the case and in 1988 I understand that 5 million holidaymakers in this country had their holidays subject to surcharge. It is important to realise that the Minister has ignored that in framing the regulations. He is permitting the trade to levy a surcharge on the basis of self-certifying that the rise has been properly incurred and that gives yet another opportunity to the unscrupulous trader to make a killing at the consumer's expense. I am reminded by that helpful interjection that it is also the case that when money is taken from cutomers in advance, often thousands of pounds a year in advance, no interest is paid on that and the travel agent and tour operator are able to make a profit on the interest. That has not been addressed at all by the Minister.
When Holiday Which? conducted its last survey in 1991 it highlighted two further key complaints that the regulations fail to address properly—the cancellation and consolidation of holidays. According to Holiday Which?, one in five consumers last year had their holiday arrangements changed by companies after the booking was made. The Government intend to see that continue.
Do the Government and the Minister think it fair that in the 1990s a family booking their annual holiday and paying in full and in advance should have it cancelled because the company has got its sums wrong? That is what he is permitting. Regulation 13 will allow travel companies unilaterally to cancel holidays without compensating, giving the excuse that the holiday was under-subscribed. In effect, the Minister is allowing companies to hold money for months on end, pocket the interest and, at the end of the day, cancel the holiday. It cannot be right that people's holiday plans should be ruined without their getting a penny in compensation.
Can it be fair that the present high incidence of changing flight times and airports is allowed to continue? Hon. Members will know the stress that is caused to people when they have their flights switched from 7 am to 7 pm, not because of any unforeseen circumstances but, again, because the company has got its figures wrong. The last-minute nature of this legislation includes a new requirement on travel companies retrospectively to seek bonding for holidays that have already been booked and paid for, but the trade was told of that only in the past week or so. There is a fear that many smaller companies may falsify their bonds in desperation to comply with the 1081 new regulations. However, the Government would not listen to me when I urged them to warn the trade in advance that all holidays booked this year for 1993 will have to comply with the new regulations. The Government show just how out of touch they are with the needs of business. There are further problems arising with people who make up their own packages and ask travel agents to book them. The Government have given no guarantee at all that people travelling hundreds of miles within the United Kingdom on package holidays from Shetland to Land's End will be taken home at no extra expense if the company they use collapses.
With 21 days to go before the regulations become law, let me remind the Minister that ABTA says:The association is of the view that the following areas remain inadequately addressed by the Government in spite of strong industry representations.It lists financial protection, then surcharges and then tailor-made travel arrangements, organisers' liability insurance and telephone bookings.
In summary, Labour is raising tonight a number of grave concerns: the need to license all non-ABTA travel agents and tour operators to give protection from fraud. We need to tackle consolidation. For too long, customers have seen their travel arrangements changed late in the day and at considerable inconvenience, forcing them to hang around airports for hours. Compensation for cancellations has not been considered and that is wrong. Surcharges have not been properly addressed. The way the Government have handled this measure is deplorable. They are achieving none of the three objectives that the Minister outlined at the beginning of his speech. The Government have lost any respect they had in the travel business and any friends they had among consumers. They will bring in weaker consumer rights than ABTA provides, ineffective policing and chaos in the travel trade.
Sadly, it is now too late for the Government to listen to those who know better. The victims of that arrogance and incompetence are the holidaymakers who continue to be duped by unscrupulous travel operators. This was the chance to put those operators out of business. What a pity that such an opportunity has been missed.
§ 9.1 pm
§ Sir Anthony Grant (Cambridgeshire, South-West)
I shall not follow the somewhat political polemic of the hon. Member for Edinburgh, South (Mr. Griffiths). Nevertheless, I have a serious criticism of the regulations.
I was interested to hear my right hon. Friend the Member for Worthing (Mr. Higgins) tell the Economic Secretary to the Treasury in our earlier debate that the House was discussing an affirmative resolution so it was not possible to amend it. The same seems to apply to the measure before us, but I should be interested to know whether the Parliamentary Under-Secretary of State for Technology will say to me what the Economic Secretary to the Treasury said to my right hon. Friend—that although the regulation cannot be amended there are certain curious ways of implementing it.
I must declare an interest in that for many years I have had the honour of being an adviser to the Guild of Business Travel Agents—a body consisting of about 40 of the largest business travel agents in the country, responsible between them for nearly £3.5 billion in 1082 turnover and for four out of every five business flights to and from the United Kingdom. Those companies employ more than 17,000 people.
§ Sir Anthony Grant
Not nearly enough.
In the light of the Single European Act, the Guild of Business Travel Agents took the initiative of forming the Guild of European Business Travel Agents. About eight countries are involved. Perhaps the Minister will tell us when he winds up whether those other countries are implementing the directive properly and enforcing it.
I emphasise that the guild is distinct from ABTA. I know that my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) will talk about some of the problems involved if he manages to catch your eye, Mr. Deputy Speaker, and in discussions with him I have found that I entirely share his views on the matter. I shall therefore confine my remarks to business travel.
The subject was last discussed in the House on 18 December 1989. I pointed out then that as a trading nation this country essentially depends on exports, so it is vital that we be able to move our business men around the world speedily and economically. That is more important now than ever. Yet the regulations will do nothing but harm to the business travel industry; in fact, they are not strictly relevant to it.
For example, regulation 16 deals with:sufficient evidence of security for the refund of money paid over and for the repatriation of the consumer in the event of insolvency.That is sensible in the case of poor Mrs. Snooks who is stranded somewhere in the Mediterranean. It is vital that she be recompensed and repatriated. But business travel involves people such as ICI employees moving all round the world. Such companies pay the travel agent in arrears anyway. They can repatriate their staff without any difficulty, and they do so.
Much business travel involves incentive travel. Large companies such as ICI and Ford like to send their salesmen and other people abroad for incentive purposes. They instruct a large business travel agent to arrange the trip, but that agent will have nothing to do with the internal organisation, which is arranged by the large company.
The best protection for corporate clients, who are the bulk of the clients of business travel agents, is vigorous competition. During the debate in December 1989 that point of view was well understood by my hon. Friend the present Parliamentary Under-Secretary of State for Schools, who was then the Minister responsible. He made his view clear:It is true that business travel was never intended to be part of the directive",and said that he intended thatthe final text of the directive—will have attached to it a minute statementto the effect that the directive would not cover'business trips which involve separate bookings of transport and hotel accommodation which do not constitute elements of a pre-arranged package, even though they are invoiced simultaneously'That is Community jargon for saying, broadly speaking, that business travel will not be within the directive's scope. I hope that that gives my hon. Friend the assurance that he seeks."—[Official Report, 18 December 1989; Vol. 164, c. 166–67.]
1083 It was—but alas, those hopes were dashed because, due to a curious quirk of Community law, the European Court ruled that such a minute was ineffective to alter a directive. So the whole purpose was thereby frustrated and defeated.
Following the ruling, I had meetings with the Minister and with his officials. We sought vigorously to find a solution, which everyone desired, which would exclude business travel from all the burdens. Unfortunately, none was discovered. We heard nothing further of the results of all the thinking which I assume went on among officials not only in the Department of Trade and Industry but in the Department of Transport. We were never told whether they had come to any conclusion or whether solutions could be found. That caused great uncertainty. It is ridiculous that all the regulations, important though no doubt they are, should apply to business travel. The only effect will be to pass costs on while not providing anything relevant to the vast bulk of business travel.
One solution which I know was mulled over was that a way out would be to decide whether the business travel was allowable for tax purposes. That would be a suitable definition and a way to exclude such travel from the regulation, but we never heard from the Government whether that was workable or not.
Unless the Minister, under this procedure, can express some hope for the business travel industry, I shall continue to believe that the directive is bad for the industry, bad for business travel, bad for exports and therefore bad for Britain.
§ 9.6 pm
§ Mr. Alan Milburn (Darlington)
The hon. Member for Cambridgeshire, South-West (Sir A. Grant) could have added that the directive will be bad for consumers and not only for business travellers. This debate takes place against a background of increasing concern about the state of the travel industry, culminating in the Land Travel affair. That concern arises not only from the industry, which is welcome, but from consumers' organisations, from individual consumers and from enforcement officers.
Recent collapses, most notably the collapse of Land Travel, have prompted some serious questions about the current inadequacies in the regulatory framework for the travel industry. Over the past few minutes, the debate has been dominated by the concerns of business travellers. The hon. Member for Cambridgeshire, South-West is no doubt right to say that there are serious concerns in that regard.
It is as well to remember that the holiday industry also touches the vast majority of members of the public. Every year, millions of people pay large sums, usually in advance, for their annual holidays. Many of them pay not just throughout the year, but for many years, to be able to afford the largest chunk of consumer expenditure undertaken annually. The holiday industry is very important.
Does the regulatory framework adopted by the Department of Trade and Industry deal with the consensus of concern that we have heard from the Association of British Travel Agents, from the Consumers Association, from my hon. Friend the Member for Edinburgh, South (Mr. Griffiths), from individual consumers, from the Liberal Democrats and from others? The answer is that it probably does not. The proposals are both too little and too late to deal with the majority of consumers' concerns.
1084 I shall illustrate those rather sweeping remarks by the example of the recent collapse of a travel company in my constituency—Scotts Greys Travel Ltd. The Minister may be acquainted with the case because I recently wrote to the President of the Board of Trade about it. Scotts Greys was a well-established, Darlington-based company which had been trading for many years. It provided travel arrangements within Britain and abroad. The company collapsed in September, leaving many hundreds of holiday makers in Darlington and in the north-east not only short of an annual holiday, but desperately out of pocket to boot.
I have been collecting some information about the sort of grievances that some of my constituents have about Scotts Greys. To date, I have been contacted by 218 people in and around Darlington who have lost out to the tune of £24,335—more than £100 per head—as a result of the company's collapse. Not a penny has been forthcoming in compensation, for reasons to which I shall allude in a moment.
I will give the House some examples of the innocent victims of that collapse. Morag Williamson, who is running a campaign to ensure that compensation is paid to the victims, is herself a victim. She had arranged for a party of seven people to visit EuroDisney in Paris. She paid out well over £1,000. To date, Morag Williamson has seen neither EuroDisney nor a penny of her deposit back.
Mrs. Grey, who is 81, has not had a holiday since her husband died eight years ago. She stands in marked contrast, perhaps, to some of the ICI executives to whom the hon. Member for Cambridgeshire, South-West paid so much attention in his speech. She arranged to take her sister, aged 85, to Blackpool. She paid a deposit of £28—perhaps not a large sum to hon. Members but a very large sum to an old-age pensioner with no other income. Mrs. Grey lost both her £28 and her holiday.
For more than 12 years, Mrs. Denny regularly organised party bookings through Scotts Greys for her family, friends and work mates. She booked a holiday for a party of 26 people who, for many months, had been saving £10 a month for their trip to Belgium. Mrs. Denny paid out £900 the week before the company closed its doors to the public, and had the difficult task of informing her 25 friends that their holiday would not be happening.
Those people are the innocent victims of the collapse of what appeared to be a well-established, credible local travel operator with a solid reputation. The company was not ABTA bonded, but it was a member of the Bus and Coach Council. As hon. Members may realise, the BCC operates a very good bonded scheme. Scotts Greys took advantage of its membership of the BCC, displaying the council's logo prominently on its letterhead and claiming its membership in advertising material. The company never once pointed out, however, that it was not a member of the BCC bonded scheme.
I repeat that, to the majority of holidaymakers, the company appeared to be a reassuringly credible, well-established local operator. In fact, Scotts Greys resigned its membership of the BCC in July. Needless to say, it did not bother to tell any of its customers of that fact. No one—least of all the holidaymakers—knew that it had resigned.
That was only one of a series of warning signs in connection with the company's standing. In fact, far from being a credible, financially secure and reputable company, it was in deep financial trouble. All the evidence 1085 was there. The problem was that no one bothered to look—indeed, that no one was empowered to look—for that evidence, even though it was staring people in the face.
I will give some of that evidence. My research has revealed that Scotts Greys consistently filed late accounts with Companies house. Hon. Members will know that every company has a duty to file accounts with Companies house within 10 months of the end of its financial year. The end of Scotts Greys' financial year coincided with the end of the calendar year, 31 December. Yet over the past six years not once did Scotts Greys manage to get its returns into Companies house on time. It filed eight, nine, three, three and three months late. Remarkably, in 1990, its performance improved and its returns were only eight days late.
However, the last set of accounts contained a clear health warning from the company's auditors who said that the financial statements had been drawn up on a going concern basis on the assumption that the company would continue to receive the support of its bankers and other group members.
Those right hon. and hon. Members who know a great deal more about accountancy than I do will realise that that was a serious health warning that the company was not a going concern and was in deep financial trouble. That was not surprising because during the previous 12 to 24 months the company had been disinvesting from its bus and coach fleet. It had been flogging off its assets. The December 1990 accounts showed that the company, rather like Land Travel, had rather more liabilities than assets.
In addition, there was a final health warning that no one bothered to spot. In 1987, Scotts Greys took advantage of sections 247 and 248 of the Companies Act 1985 which allow small companies to file only the most rudimentary set of accounts. An unscrupulous company, such as Scotts Greys, is thus able to hide its financial dealings and financial ill health.
Hon. Members will agree that there were any number of warning signs of Scotts Greys' vulnerability. Yet no one in Companies house even raised an eyebrow. Certainly no Minister or civil servant at the Department of Trade and Industry bothered to heed any of the warning signs which were clear to so many people. As a consequence, hundreds of people, not just in Darlington but throughout the north-east, lost their holidays and a great deal of money to boot.
I have asked the President of the Board of Trade to conduct an investigation into this shambolic affair and, in particular, into the role of Companies house and his Department. It is not the first time that the right hon. Gentleman has been asked to conduct such an investigation. I hope that the victims of the Scotts Greys fiasco receive a better response than the victims of the Land Travel fiasco. The two have certain similarities.
I have also asked the President of the Board of Trade to consider reviewing the Companies Act 1985. It is wrong that a company, purely on the basis of its size, can get away with filing only the most basic of financial information. Surely a consumer safeguard should be built into the Act to ensure that the companies trading with many members of the public as travel operators do should have to file fuller financial information than the Act requires.
1086 Quite simply, the Department of Trade and Industry and Companies house are culpable, but none of that helps any of my constituents who, frankly, were fleeced by a company which was still taking money and bookings on the day it closed its doors to the public in Darlington. The company directors knew that it was going down the tubes. They had known it for months, possibly years, yet they unscrupulously filched from members of the public in the north-east and were allowed to get away with it.
The Scotts Greys affair proves the need for regulation and for more effective and regular monitoring of the travel industry before a problem arises. The major problem with this measure is that it does not allow that. It will allow problems to be spotted once they have risen and once holidays and money have been lost, but not before.
The regulatory framework is inadequate and the proposal will create a great deal of confusion in the public mind about whether a company is bonded, has insurance or is financially viable. The proposal allows too much room for the cowboys in the industry. Thankfully they are a small minority, but they can have a devastating effect on so many members of the public. The measure will allow the cowboys to bypass a system which remains so lax that it amounts to licensed theft.
My hon. Friend the Member for Edinburgh, South alluded to the role of trading standards officers. I have here a letter from one officer, who says that, although they would like to be able to police the measure, they are under-resourced as there are 10 per cent. too few of them. However able or willing trading standards officers are, and however much expertise they have, they will be unable to monitor and police the system because the resources are not being made available for them to do so.
In some ways, other proposals that the Minister and the Department are producing will only make matters worse. I understand that one proposal will allow even more small companies to file only the most basic financial information. Once again, more loopholes are being created which will ensure that proper regulation of the travel industry is not implemented. I am afraid that the result will be that yet more people will lose out.
§ Mr. Richard Page (Hertfordshire, South-West)
May I declare an interest, as I am a parliamentary adviser to the Association of British Travel Agents. In that capacity I have witnessed numerous discussions and debates during the past three years, as the Department of Trade and Industry has laboured to translate the aims of the directive into workable legislation.
I disagree with the comments on consultation made by the hon. Member for Edinburgh, South (Mr. Griffiths), who led for the Opposition. Through the Minister, I should like to express my appreciation for the detailed way in which the travel industry and ABTA were consulted by Department officials when producing the legislation. Not everyone has got what they want, and everything has certainly not been translated into this regulation. The case for a full and statutory licensing authority has been argued, but the cost of setting up such a body seems to have been conveniently forgotten. I understand the Government's natural reluctance in that matter, and I wonder how much of the cost would be translated into a cost on each holiday if it ever came to pass.
1087 There is no doubt that, despite the remarks of the hon. Member for Darlington (Mr. Milburn), the directive will provide an overall increase in protection for holidaymakers not already covered by booking through certain of the trade associations. Even so, some holidaymakers face loopholes through which they might still fall.
It has correctly been said that many variables exist in relation to repatriation. I shall speak primarily about the costs and mechanisms of repatriation in the event of tour operator failure. That is made more important these days by the growing trend of long-haul holidays. No longer is it a question of dragging back a coachload of lager louts from Spain. We could easily be faced with a plane load of Himalayan hikers as a problem to resolve.
We must feel concerned lest, when a tour operator fails, insurance policies do not provide a 24-hour repatriation service. It is not enough to require a client to finance his own repatriation, with only the prospect of possible reimbursement on his return. Many clients will not have sufficient funds and others will not have the knowledge of travel procedures to repatriate themselves. I should like to go into the matter in detail, but, because several hon. Members wish to take part in the debate, I shall truncate my remarks.
I come to telephone bookings and the serious problem of late bookings. The regulations place an obligation on organisers and retailers to give the consumer information before a contract is made and about the communication of the contract. The consequences of failure to comply are criminal in regard to regulation 7 and civil in regard to regulation 9.
The Minister will be aware that a vast amount of business is transacted by telephone, particularly in the travel industry. Indeed, some companies in the industry reckon that they do 90 per cent. of their business that way. That especially applies to business travel, and my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) raised an important point when he spoke of the possibility of the business traveller being caught by the directive. As we know, it was not the original intention to bring business travellers into the net.
The Minister will appreciate that it will be difficult to comply with the directive in relation to late bookings. Will he give guidance on the period within which contractual details under regulation 9 need not be communicated in full before the contract is made where, for example, the booking is made very close to departure? Perhaps I might open the bidding by suggesting 14 days. Clarity, as ever, is vital to the industry and the consumer.
I also am concerned, because it affects the whole business community, about the principle that anyone trading—I am thinking particularly, in connection with the directive, of those who are organizing—should be responsible for the services that are sold. Such an imposition of liability can be effective only if there is a legal requirement for organisers to insure themselves against liability. Under its code of conduct, ABTA now requires all its members to carry that liability insurance.
Consider what might happen if an organiser is not obliged to take out insurance and does not do so. For example, if somebody went on holiday and had a serious injury, he would be left without a remedy if the organiser failed. I have raised that issue previously. I hope that avenues can be explored to see whether, at a later stage, the problem can he resolved, not only for the travel industry but for trading generally.
1088 I shall not respond to the point made by the hon. Member for Edinburgh, South, who got much of the matter completely and utterly wrong, but shall simply ask for clarification. Will VAT increases be encompassed within regulation 11 so that, if the organiser wishes, he can pass on those increases?
§ Mr. Page
With respect to the hon. Gentleman, several other hon. Members wish to participate in the debate and time is squeezing on. I am prepared to give the hon. Gentleman an education in the travel industry later.
Surprisingly, I agree with the hon. Gentleman about the fact that an increase in the duties of trading standards officers in policing that directive will be considerable. I hope that they will be equal to the task. Hotels that provide activities will be brought into the scope of the directive. The size and volume of the task has not been adequately appreciated.
People are apprehensive that the monitoring will. of practical necessity, be difficult. Some in the travel industry may not willingly comply, to the consumer's disadvantage. It may be necessary, at a later stage in the light of experience, to tighten up the monitoring of those travel agents and tour operators who are not covered by those other organisations.
I realise that I have presented my comments in a staccato fashion, having distilled them from representations and views put to me by those in the travel industry. I hope that my hon. Friend the Minister will be able to respond in the short time left for his reply. I conclude on the same note on which I started, by paying tribute to those who have put so much effort into translating the directive's theory into operational practice.
§ Mr. Malcolm Bruce (Gordon)
As the debate is short, I shall speak essentially about surcharges but shall raise a couple of other points at the outset.
The position of Land Travel has already been mentioned, but it is pertinent that the House should know that my hon. Friend the Member for Liverpool, Mossley Hill (Mr. Alton) received today a letter from the Prime Minister. It says that not only was Companies house aware that the company was trading at£2.1 million adrift in terms of liabilities in relation to assets, but that Ministers were also aware of it and initially denied it. The letter confirms that Ministers were alerted to the problem by the hon. Member for Holland with Boston (Sir R. Body) but nevertheless took no action. That is a sad indictment of the Government's competence in failing to protect consumers.
I have no doubt that there has been sustained and active consultation between the Department and ABTA, but it is important that Ministers understand that dealing with trade associations does not always mean that every corner of the trade is reached. For instance, my hon. Friend the Member for Orkney and Shetland (Mr. Wallace) has received correspondence from a company in his constituency, Shalder Coaches, which said that it learned of the regulations' implications late in the day and will have considerable difficulty in complying with them. It feels that, too often, Ministers concern themselves with 1089 ensuring that the big operators know what is going on, while the small operators are left to struggle to catch up in due course.
The public are greatly concerned about surcharges. Consumers view the practice with hostility and suspicion with good reason, because many of them have suffered what they can only describe as a "rip off" in the past. It is worth pointing out that companies can impose surcharges up to 30 days before departure. The fact that we are getting a 30-day ruling, as opposed to the 20-day ruling in the directive, is a small gesture, considering that we are legalising surcharges. I believe that the directive provided the opportunity to abolish surcharges.
If, by countenance, the consumer wishes to cancel, the penalties imposed on him or her are much more disadvantageous than those that the companies impose on themselves. It is true that in the past few years the issue of surcharges has not been topical, but it will certainly be topical in the coming months.
In the past few weeks, Conservative Members, at least from certain quarters, have been happy to trumpet the great choice of leaving the exchange rate mechanism and the freedom for the pound to float. Consumers will not always be entirely happy with the consequences of the floating of the pound because it will reintroduce perforce the surcharges that the directive will legalise. The simple question is: why on earth should we allow a trade to have such a legal benefit? What is the conceivable justification? I do not think that the Minister has made any case that I regard as sustainable, credible or justifiable. There are few other business sectors that would have the audacity to ask for a legal benefit, or expect it. Terms of trade are terms of trade.
It is a very uneven contract between consumers, who have virtually no bargaining power, and large tour operators, who hold virtually all the trump cards. So that I am not misunderstood, it is right to say that millions of people in the United Kingdom take package holidays and in most cases such holidays offer good organisation and value for money. However, problems arise when things go wrong, and at that point the law must enter the fray and defend the interests of consumers.
Tour operators get money many months in advance. Large operators almost universally buy forward. Therefore, they avoid the risk of losing money as a result of changes in fuel prices or exchange rates. They use the money that they can get their hands on in time. They buy competitively, and they can get good results. They can also benefit from accumulated interest from the use of their customers' money and playing successfully on the foreign exchange markets.
The Minister is saying that those companies, having completely covered themselves against the losses, can nevertheless come within 30 days of departure and say, "Oh dear! The exchange rate has gone in the wrong direction and fuel charges have gone in the wrong direction. The fact that they have not affected our company one iota is irrelevant; we will surcharge you." That is a complete and absolute rip off. Tour companies make an excess profit for which no risk has been taken and no effort expended, and consumers should not be expected to pay for it.
1090 When the boot is on the other foot and companies make substantial benefits when fuel charges fall, as they have done in the past, and when exchange rates move favourably, as they have done in the past, there is no obligation whatever to reduce the price of the holiday 30 days before departure and, indeed, give the consumer the benefit of a windfall spending money to take with him. It is an uneven contract. Frankly, I am appalled that Government Ministers have proposed to enshrine that as a legal justification for a trade. That trade may well have an established practice, but we should not be extending it; we should be stamping it out.
The matter of the 2 per cent. absorption is marginal. A much more effective constraint to prevent companies from introducing surcharges gratuitously would be to allow an absolutely unconditional right of cancellation at any time that the surcharge is being imposed, with full compensation. In such circumstances, it would certainly concentrate the minds of those who run travel companies who would be unwilling to lose the risk of total business for the sake of 3, 4 or 5 per cent., especially when they had not incurred the loss. I know that Conservative Members will say that there will be enforcement provisions. However, it has already been said that it is not possible to enforce such provisions. It is not possible to investigate the detailed mix of surcharges that are being sustained by any one company. It will simply be an excuse for excess profiteering at the expense of consumers.
It was stated in the House of Lords report that in 1988 companies imposed fuel surcharges of up to 20 per cent. In the case of a 737 aircraft, the extra cost was calculated at £2.85 per customer on the price of the package holiday. That is surely an amount which any tour operator could absorb. Indeed, Holiday Which? stated that the amount of money paid over in surcharges was the equivalent of the Brink's-Mat bullion robbery. Robbery is exactly what it was, particularly because fuel charges fell, yet surcharges were still imposed.
A practice has recently developed of introducing second and third brochures with revised prices. Surely that is the way for the industry to move forward. If operators want to say that their prices have increased, those who contract later in the year can pay the higher price. But the price that people contract when they buy their holiday should not be alterable.
To raise a constituency point. holidaymakers from the north of Scotland who go on package tours are effectively surcharged before they start because of the point at which they start. If they face surcharges, for example, as a result of currency changes, the charge is usually a percentage of the holiday price. A substantial part of the higher holiday price for leaving from Scotland is for flying costs across the United Kingdom and is nothing whatever to do with the exchange rate. So a percentage is not valid. There should be an absolute charge which relates to the real extra cost of the holiday. I do not see why people who live in the north of Scotland should pay more than people in London when the cost to the holiday operator is exactly the same. That point has not been addressed.
The Minister could argue that the absence of surcharges could lead to higher costs. I suggest that that is not true. It would certainly not be true in a highly competitive market in which some of the conditions that I have suggested applied. Operators would know that if they 1091 passed on surcharges that were not justified, other operators might not do so and they could lose business, especially if unconditional cancellation were allowed.
Even if there was a marginal increase in price to take account of the insurance provision, most consumers would probably prefer that. They would then know exactly what they had paid and could budget for it. They would prefer that to knowing that they could face an extra £20, £30 or £40 per holiday 30 days before they departed-an arrangement which is unjustifiable.
The debate is entitled on the Order Paper "Consumer protection". The regulations are the exact opposite. They are protection of the industry. They give operators the right to rip off consumers and make profits that they have not earned and to which they are not entitled. I urge the Government to think again. This summer surcharges will be imposed and complaints against the industry will increase. The Government will be responsible for failing to take action to protect the consumer in ways that the consumer would expect the Government to act. I assure all hon. Members that they will feel it in their post bags next year.
§ Mr. Robert Banks (Harrogate)
In a debate of one and a half hours, the Chair should have some discretion to limit the length of speeches so that those Members who wish to make a speech are able to do so.
I welcome this measure to harmonise package holiday legislation within the European Community. I hope that my hon. Friend the Minister will explain exactly what other countries are doing to bring themselves into line with the measure, which is important. Everyone realises the significance of giving the consumer protection from companies that go bankrupt and leave them stranded on their holiday or with a lost deposit. The Association of British Travel Agents has done a good job historically in bringing to the notice of the public the consumer protection that it offers. It has been one of the pioneers in the business. I applaud it for that.
I hope that Britain's lead in Europe was significant in framing the directive. I do not entirely agree with all aspects of it, but it is important that we take measures to protect the consumer. I regret that the industry has not given greater support to the directive and that a way has not been found to obtain its support.
The important consideration is whether the measure will deliver the goods. I have a feeling that it will, but it may not be so good as some of the alternatives that were suggested by the industry, such as universal licensing and its own monitoring and bonding arrangements. That would be a good arrangement, but the costs would have to be examined carefully. I gather that the Government feel that consumers would find the cost difficult to bear.
I am disappointed by the exclusion of package holidays within the United Kingdom. Many people take short-break holidays that cover travel and hotel accommodation, and I see no reason why they should not be protected automatically in exactly the same way as those who are travelling only 20 miles or so across the channel to France.
Obviously, some people make bookings by telephone. One of the strictures of the directive is that failure to provide the person taking the order with the necessary information about the terms on which he is agreeing to the 1092 holiday would constitute a criminal offence. I hope that some common sense can be brought into that. If someone picks up a telephone and makes a fairly short-notice booking with a tour operator, it is inevitable that he cannot provide all the necessary details before the booking is finalised.
I think it perfectly fair for surcharges to be made, given the possibility of unusual developments. Everybody recognises that oil prices can go roaring up, for instance. Under the directive, the company has to bear the first 2 per cent. of increased costs before it can impose a surcharge, which I consider a fair arrangement. VAT can go up by 5 per cent., which could have a significant effect on some bookings.
We are on the threshold of the industry's new year marketing effort. Many of the brochures will have been printed for the 1993 winter holidays, and the summer holidays that will follow; but they will not contain information that it is important for them to contain. I hope that the Minister will appreciate the difficulties that the industry will experience in complying with the regulations when it has already printed brochures but has not made them available to the public. I hope that he will turn a Nelsonian blind eye to any proceedings that may result!
§ Mr. John Denham (Southampton, Itchen)
It is noteworthy that every speaker has been critical of the Government's position, although the Government have had three years to work on it. I am not about to buck that trend.
A number of references have been made to the collapse of Land Travel, the Bath-based company which cost 40,000 people their holidays last summer. Had I more time, I would refer to some of the several hundred of my constituents who have written to me from the south Hampshire area about Land Travel. In any case, the factors involved in its going bust are very clear. It was obvious to many people that it was going under. It was obvious to Price Waterhouse, the auditors, and the state of the company was drawn to the attention of Ministers by Conservative Members of Parliament and local Conservative clubs. Despite that, the company continued to trade. It took money from one of my constituents in April this year and it took more money in June and July, only to deprive that constituent of a holiday in August.
Will this measure leave our constituents any better protected? Will it lead to better protection for one of my constituents who lost £275 on a trip to EuroDisney? She is unemployed and her husband has occasional casual work from an agency. They have lost their first holiday in six years. They are typical of the 40,000 people who lost their holidays through the collapse of Land Travel. Unscrupulous companies target their business on those least able to pay—people who, because they are most vulnerable, need most protection.
The regulations amount to a system of self-policing, which will not be followed by companies such as Land Travel. The absence of a licensing requirement means that such companies will continue to exploit loopholes until they are caught, and people such as my constituents and those of other hon. Members will suffer.
It is desperately sad that, despite having so long to prepare the legislation, the Government have failed 1093 abysmally to protect our constituents. We are told that the obstacle is cost. What estimate have the Government made of the cost of licensing? I suspect that constituents who lost £275 or £500 would have accepted a slightly higher cost if they could have kept their holiday.
§ Mr. Leigh
I am grateful to those hon. Members who have participated in the debate. Others such as my hon. Friend the Member for Isle of Wight (Mr. Field), who came to see me about the regulations, wished to participate but could not do so.
I inform my hon. Friends the Members for Harrogate (Mr. Banks) and for Cambridgeshire, South-West (Sir A. Grant) that under Community law all member states are required to implement the provisions of the directive and must notify the Commission of measures adopted to do so. If a member state fails to implement, infraction proceedings may be taken. We shall keep a close eye on such matters.
In a character istically forthright speech, the hon. Member for Edinburgh, South (Mr. Griffiths) accused us of minimum consultation. My hon. Friends have shown that that is not true. In July 1991, we consulted all ABTA members and members of other trade bodies, consumer groups and other interested parties, including operators who do not belong to trade associations. That meets the point made by the hon. Member for Gordon (Mr. Bruce).
The main thrust of the attack of the hon. Member for Edinburgh, South was why we were not licensing operators. I can only repeat the point that I made earlier: the number of operators who would fall within the scope of the regulations would be significant. Many of the operators would be small and the unit cost of issuing each licence would be high, disregarding the costs of providing protection for repayments. That point was emphasised by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), and we acknowledge the expertise that he brings to these matters. At best, such a licensing procedure would increase cost to consumers; at worst, it would potentially drive small operators from the market and reduce consumer choice.
Any licensing system would have to be paid for by the licensees; there can be no question of any Government money. We believe that more than 20,000 operators would need to be licensed, and the number could be even higher. It would be a massive, frighteningly expensive operation.
§ Mr. Leigh
I have just said that there is no direct evidence of the number of operators, but there could be between 10,000 and 20,000. Any licensing system would have to be paid for by those operators. Many of them are small operators, and the costs would fall on them and ultimately on the consumer. It is impossible for a Minister to say how much it would cost, but if one accepts that there are more than 20,000 operators the cost would be high and it would fall on small operators.
We acknowledge the expertise of my hon. Friend the Member for Cambridgeshire, South-West in relation to business travel and the contribution that business travel makes to the economy. Unfortunately, we cannot exempt 1094 packages which satisfy the definition given in the directive. We must carry out the directive. Many arrangements made by business men are not pre-arranged and offered for sale or sold at an exclusive price, so they would not fall within the scope of the regulations.
I will mention one point to my hon. Friend which I hope that he will welcome. The incentive travel industry was particularly concerned about absorption of the first 2 per cent. of any surcharge. As a result of the representations made to us by my hon. Friend and others, we have now modified this regulation so that it is only individual consumers, and not corporate consumers, who will benefit from this provision. I hope that this meets some of the objections and concerns of my hon. Friend.
Another major thrust of the case put forward by the Opposition was a point made particularly by the hon. Members for Edinburgh, South and for Gordon. My hon. Friend the Member for Harrogate dealt in his speech with the problem of surcharges, but I have to reiterate the great difficulties that anybody seeking to prohibit surcharges would be under.
When prices increase, tour operators can cut into their profit margins, take some form of insurance, or impose a surcharge. I accept that from the consumer's point of view the first is to be preferred, but I hope that the hon. Member for Gordon will accept that that may not always be possible. He recognised that the package travel industry is highly competitive and that costs are generally cut to the bone. A company's capacity to absorb a significant rise in prices which is outside its control is, therefore, likely to be limited.
The other routes also have their costs. Insurance would involve a certain cost, whether it was done by conventional insurance or by building a margin into the price at which the tour was sold. Many tour operators therefore prefer to keep their initial price as low as possible and to cross the bridge of increased cost when they come to it by reserving the right to impose a surcharge if need be. This seems to be a matter of legitimate commercial choice, so long as customers are made fully aware of the terms of the contract they are entering.
Regulation 11 places conditions on the circumstances in which an operator may surcharge, which is similar to the regulations which currently work well from the consumer's point of view.
I shall deal now with a point made by my hon. Friend the Member for Hertfordshire. South-West on telephone bookings. There is nothing in the directive to stop telephone selling, last-minute or otherwise, which is a point that he raised. Except where the booking is last-minute, the customer must be given the terms of the contract before the contract is concluded, and the terms must include those specified in schedule 2 of the regulations. Often, however, the information can be given to the customer via the organiser's brochure, which he will have in his possession.
Another point made by my hon. Friend the Member for Hertfordshire, South-West concerned repatriation. I agree with the comments that he made. We believe that the proper interpretation of this requirement of the directive is that repatriation arrangements should be made on the spot, not simply that the customer may reclaim the cost of repatriation after having made his own way home. The regulations mirror the wording of the directive. We have not defined in the regulations how the repatriation requirement is to he met because there are many ways in 1095 which this could be done and we were anxious not to be over-prescriptive. Of course, failure to have proper arrangements for repatriation will he a criminal offence.
Some of my hon. Friends raised the question whether repatriation arrangements would be needed for domestic packages. The directive does not define what is meant by repatriation and our regulations have not attempted to do so. It is the view of the Government, however, that the repatriation requirement does not extend to domestic packages. I can reassure my hon. Friend the Member for Harrogate, however, that this directive and its implementing regulations apply to domestic packages. A requirement for repatriation within the United Kingdom could be extremely burdensome. A very large number of weekend breaks of which travel forms a part would be caught by the regulations. To require them all, however short the distance travelled, to provide a back-up would be bureaucratic and in most cases unnecessary.
Another point made by my hon. Friend the Member for Hertfordshire, South-West concerned compulsory liability insurance and why we have not made liability insurance compulsory for operators and retailers. We have given careful thought to what we know to be the strongly held view of much of the travel industry that liability insurance should be compulsory, but compulsory insurance would be an additional burden and, as such, undesirable on deregulation grounds. Whether to take out insurance will be a matter of commercial choice. Also, an enormous variety of organisations would he offering packages, many of them quite remote from the mainstream travel industry. It would be unreasonable to require them all to have liability insurance.
The hon. Member for Edinburgh, South and other hon. Members said that all travel agents should be bonded. We believe that if an agent takes money on his own behalf and not on behalf of an organiser, the regulations require him to have protection for any prepayments taken. If the agent puts together a package himself, he would become an organiser and would thus need to have protection in place like any other organiser.
This has been a difficult task for the Government. We have consulted widely, and I believe that it is a major measure of enormous importance to the consumer. We have had an excellent and fair-minded debate. Once again, the Government have shown that they are prepared to act for the consumer but not to load undue burdens on British business.
§ It being one and a half hours after the motion was entered upon, MR. DEPUTY SPEAKER put the Question, pursuant to Order [4 December].1096
§ Question agreed to.
That the draft Package Travel, Package Holidays and Package Tours Regulations 1992, which were laid before this House on 1st December, be approved.