§ The MINISTER of STATE, DEPARTMENT of INDUSTRY (Lord Beswick)
My Lords, I beg to move that this Bill be read a second time. This Bill is concerned with the travel trade and in particular with people travelling abroad by air. It will affect a large number of people, for it is estimated that in 1973 United Kingdom residents made over 10 million visits abroad, of which some 70 per cent. used air travel.
Package tours originated in this country and have in large part been responsible for the phenomenal growth of post-war foreign holiday business. The development of larger aircraft made it possible. This possibility was exploited by enterprising travel firms making all the necessary arrangements and reducing costs further with long-term block booking of hotel accommodation and aircraft seats. This reduction in costs was helped by the method of payment, under which the tour operators receive the customers' money in advance, usually six or eight weeks in advance. This money is available for working capital, so that tour operators need to raise less capital at high interest rates. As a result of all these developments the number of Britons who went abroad on package tours rose from less than 60,000 in 1957 to over 3 million in 1973.
1155 But there were risks. Besides the sub-stantial forward commitments with hotels and aircraft there was expensive forward advertising and the need to reduce prices to the absolute minimum to meet competition. There was therefore a very limited safety margin. If a tour operator failed, holidaymakers who were already abroad might be stranded, and might even find themselves evicted from their hotels with no available return flight, Or those who had not yet departed would find their holiday cancelled, with only slim prospects of recovering their money.
So long as the international situation remained calm, the travel trade continued to expand, and these risks remained theoretical. But in 1974 the oil crisis, economic problems, and political difficulties in popular holiday resorts (like Portugal, Greece and Cyprus) all led to a marked fall in the number of summer bookings. As a result, five air travel organisers besides Clarksons, Horizon and Air Fair in the Court Line group, were unable to meet their commitments to the travelling public. Approaching 170,000 or 180,000 people all told lost all or part of their holidays or, having completed their holidays, had to be repatriated under special arrangements. The disappointment and distress this involved—not to mention the damage to our business reputation abroad —can be imagined.
The timing of these failures was significant. Most occurred at the height of the season, when the cashflow is at a maximum—the very time when failures had been considered least likely to occur. Moreover, they occurred at the time when other operators were stretched and when there was the minimum spare aircraft capacity available. In view of these circumstances, the travel trade's success in bringing everyone home was most impressive, and I should like to recognise the work in this connection. But having said that, the problem still remains.
In 1970 the Tour Operators Study Group introduced a system of bonding whereby each member was required to provide a bond, originally set at 5 per cent. of his annual turnover, which could be called upon if he ran into financial difficulties, and all members agreed to help with the repatriation of those abroad. Then from March 1972, all tour operator members of the Association of 1156 British Travel Agents were required to provide a similar bond, as a condition of membership. These arrangements worked satisfactorily when some small firms failed. But they had no statutory backing, and were not intended to cope with a major failure at the height of the season.
The Civil Aviation Act of 1971, provided powers for the licensing for air travel organisers as well as for the licensing of airlines. The consequent regulations—the Air Travel Organisers' Regulations of 1972—require the Civil Aviation Authority to be satisfied that an applicant for a licence is a fit person and has adequate financial arrangements for discharging his obligations. Under the regulations, the CAA extended the system of bonding; from May 1973—when licensing was introduced—all licence holders were required to provide a bond which was to protect passengers in the event of financial failure. These bonds were fixed at 5 per cent. of turnover for members of ABTA and 10 per cent. for others. This differential takes account of the assistance the Association is able to provide for its members if one of them finds himself in financial difficulties.
This level of bonding appeared reasonable at the beginning of 1974, but the subsequent events of the summer of 1974 showed that additional safeguards were necessary. It is perhaps fair to note that the bonds provided by the largest two of the companies which failed—Clarkson Holidays Limited and Halcyon Holidays Limited—were more than sufficient to pay for the repatriation of holidaymakers who were abroad at the time of the collapse; but the monies remaining from the bonds —although substantial—are insufficient to repay those holidaymakers who had paid in advance and had not departed. Hence the problem of how to provide adequate protection for holidaymakers and others against the financial failure of their air travel organisers still remains.
The Bill does three things. First, it will set up a new Air Travel Reserve Fund controlled by a new statutory body, the Air Travel Reserve Fund Agency. Secondly, it will empower the Civil Aviation Authority to collect contributions from air travel organisers and to pay these levies to the Agency. Thirdly, it will empower the Agency to manage the Fund and to make payments not only in 1157 respect of future losses but for those suffering from certain financial failures last year.
Clause 1 establishes the Agency, and the Reserve Fund. Members of the Agency will be appointed by the Secretary of State for Trade after consultation with the Civil Aviation Authority. The Bill does not specify how many members will constitute the Agency, but it is intended that it will include persons from the industry as well as representation of consumers and of the Civil Aviation Authority. The Chairman will be independent. The Secretary of State for Trade will have powers to give directions to the Agency on the management of the Fund and I have no doubt that he will keep closely in touch with its task at all times —as will the Civil Aviation Authority. If there are collapses involving a call upon the Fund, the Agency will be faced with intensive activity and may well have to engage professional services for short periods. Apart from this, I would not expect day-to-day work to call for permanent full-time staff.
Given improved economic conditions, I hope there will be very few, if any, calls upon the Fund. We do not want the Fund to outgrow or outlive its useful functions. This can be avoided by reducing contributions levied from licensed operators under Clause 4—or even by winding up the Fund under Clause 6 if, for example, some new and wider scheme should subsequently be introduced. The Agency will be financed by the air travel industry. This aspect also is dealt with in Clause 4, so I will deal with that now, and will return to Clauses 2 and 3 later.
My Lords, I should emphasise that I am using the term "air travel organiser" in the sense of a person required to hold a licence under Statutory Instrument 223/1972. With certain exceptions, an air travel organiser is a person who charters seats from an airline and offers them to the public. All such air travel organisers must hold a licence from the Civil Aviation Authority, who may stipulate conditions for holding a licence. I have already referred to one of the existing conditions; namely, the requirement to provide a bond.
Clause 4 will empower the Secretary of State to make regulations after consultation with the Authority, and subject to 1158 Affirmative Resolution of both Houses, to require as a fresh condition of obtaining or holding a licence that an air travel organiser shall pay a contribution to the Fund. This contribution will be a percentage of the relevant business of the air travel organiser in question. It will be paid in advance, and will be based on an estimate of the expected turn-over. Provision is therefore also made for the contribution to be corrected up-wards or downwards when the actual turnover is known. Our present intentions are that the contributions will normally be paid twice yearly, in April and October. The Authority is already making the necessary preparations for the introduction of the new system, subject, of course, to passage of the Bill. The first contributions will be collected after an Order has been approved by both Houses of Parliament. I hope this will be possible within a few weeks of Royal Assent.
These initial contributions are likely to be at a rate of 1 per cent. and to be increased to 2 per cent. from April 1976. These proposed rates take into account the effect on the travel trade of the higher bonding required by the Civil Aviation Authority and the need to give travel organisers time to recover from the difficulties they experienced last year. The initial rate of 1 per cent. should give the industry some time to make the necessary preparations. But the higher rate will become payable in respect of the first full summer season after the passing of this Bill.
None the less, it will take some time for the Fund to be built up. Since it must be in a position to cope from the start with major collapses where the bonds are inadequate, and since there is also the need to provide for last year's victims, it is intended that the Government should help the Fund off to a reasonable start. Clause 5 of the Bill permits the Secretary of State to lend to the Agency from public funds up to a limit of £15 million. It is expected that, by September 1977, the levy contributions should have built the Fund up to an adequate level and no further loans will be permitted. After an initial breathing space, we shall seek repayment, and it is expected that this will begin in October 1976.
1159 The greater majority of passengers travelling on charter aircraft overseas, or on a so-called "part charier" on a scheduled service will be covered. There will be a small minority of people travelling on a package tour who will not be covered, because the type of tour does not require a regulatory licence and the special protection which goes with it. But these are a minority. A significant number of travellers will also benefit who are travelling independently—for example, those who are travelling on Advance Booking Charters—because their journey has been covered by the protective system of licensing and bonding. Clause 2 of the Bill describes all these people who will be covered by the Bill.
I have tried to describe in very broad terms who will be protected by the Bill. In any particular case the losses and liabilities they have suffered will be affected by the exact contractual arrangements which are varied and adapted to meet changing conditions. It has been crucial to the trade's development of new types of contract, and fares have constantly been developed. We do not want to introduce unnecessary rigidities, but there clearly must be some precision so that the trade and customers can see where they stand. This precision will be given in the benefit rules to be prepared under Clause 3 by the Civil Aviation Authority, subject to the approval of the Secretary of State.
Finally, I turn to those who were affected by the failures which occurred from 1st April 1974 and before the publication of the Bill. I emphasise that many of these were, in fact, looked after under the bonding arrangements current at the time and were able to complete their holidays. Even in the case of Clarksons and Horizon this was so. The bonds were called up to finance an extremely successful repatriation operation. Substantial sums still remain in these bonds and must be paid out before the Agency can step in under Clause 2. We are already holding discussions with the holders of the bond monies, and the liquidators of the companies concerned, concerning the arrangements for identifying and verifying outstanding claims with all possible speed. That is the position with regard to the past. The future will 1160 depend upon this Bill being passed. I am pleased to move that it now be given a Second Reading.
§ Moved, That the Bill be now read 2a. —(Lord Beswick.)
Lord BALFOUR or INCHRYE
My Lords, before the noble Lord sits down, may I ask him to clarify one remark he made? In speaking of the difficulties of tour operators, he used the words, "You will see, therefore, there was very little margin for safety". I am sure, and I know that your Lordships' House as a whole will realise, that the Minister was referring to economic factors; but as we are dealing with aviation we do not want any misunderstandings to arise outside. Would the Minister be good enough just to make it clear that there is no question of air safety here, and that he was talking about economic safety?
§ Lord BESWICK
My Lords, I am grateful to the noble Lord. Of course, I was speaking of the financial side and not at all of the air safety side.
§ 3.3 p.m.
§ Lord BELSTEAD
My Lords, I should like to thank the noble Lord for his clear explanation of the terms of this Bill, which establishes a statutory fund to be financed by compulsory levies on air travel organisers in order to guarantee any losses or liabilities incurred by customers in the future, and to repay those who suffered losses last year. Of course it is a fact, as the noble Lord explained, that last year some five air travel organisers besides the Court Line Group failed, and I believe I am right in saying that more than 170,000 people lost all or part of their holidays in circumstances which caused disappointment and, in some cases, considerable distress.
Particularly because, as the noble Lord explained, there has been such a rapid increase in package holidays, every effort clearly has to be made to ensure that a situation of this sort does not recur. But at a time when this House stands only just over a week away from the Second Reading of the Government's forthcoming Policyholders' Protection Bill—a Bill under which the Government will specifically exclude any idea of retrospective help to policyholders in Nation Life—I am surprised that the House is being asked 1161 in this Bill to approve retrospective payments to last year's holidaymakers, without any explanation of this apparent contradiction.
It may be fair to claim that the reason is not very hard to find. On 26th June last year, the Secretary of State for Industry made a Statement in another place about the Government's readiness to acquire Court Line's shipbuilding interests, and in that Statement he volunteered the information:that this should stabilise the situation in respect of Court Line's interests, including the holidays booked for this summer."—[Official Report, Commons, 26/6/74; col. 1557.]He went on to amplify and confirm that assurance. Without a shadow of doubt, on this assurance from the right honourable gentleman many thousands of people went ahead with their holiday plans, and many completely lost their holidays. In the circumstances, I can well understand— and I do not in any way quarrel with this—that the Government have an obligation to those who lost their holidays last year, but I think it is an obligation which should be discharged by the Government and not by future travellers. I think this is a reason for a fundamental criticism of this Bill.
The safeguarding of customers in the future is quite another matter. This is something which members of the Tour Operators' Study Group have tried to ensure since they started the idea of voluntary bonding in 1970. It is really the reason for the issue of air travel organisers' licences by the Civil Aviation Authority, and there need be no difference of opinion between either side of the House on this issue, provided the arrangements to give the necessary guarantees are as fair and economical as possible.
Regrettably, I do not think this is achieved by this Bill, which I find on reading to be both inflexible and burden-some. It is inflexible because the Bill disregards any alternative arrangements which the tour operators might want to make; for example, through insurance. It is burdensome because it provides for travel organisers to pay the levy in the first instance. This, in turn, will have to be passed on to the customer and all this will apparently be supported by a Government loan which we are assured will be up to £15 million, interest free. The Bill will, therefore, be a burden on the 1162 firm's customers and on public expenditure; and in our present economic climate I do not think this is warranted.
Now that the Bill has passed through another place, I hope the Government appreciate what an appreciable burden the levies will impose on the travel trade. It is this three-pronged burden to which I particularly want to draw attention. The Government have made it clear that the regulations to be made under Clause 4 of this Bill will provide for contributions to the Fund twice-yearly in advance. I believe the noble Lord said that, first of all, it would be 1 per cent. of the expected turnover, increasing to 2 per cent. from April next year. These payments will be on top of the cost of the licence and of the bonding arrangements.
As an air travel organiser's bond has now been increased from 5 per cent. to 10 per cent. of turnover, the cumulative effect of these cash payments will really be very heavy indeed. For example, for some firms the commitment to this new Fund will add tens of thousands, and even hundreds of thousands, of pounds to their immediate necessary cash payments. As the levies are to be paid in advance of any hope of being able to recover the money, these payments will amount to a very substantial tax on our travel organisers which they will not be able to avoid passing on to their customers. Perhaps when the noble Lord comes to reply, he could tell the House by how much the price of holidays will increase because of this Bill. Doubtless the amount will not be insignificant.
Despite repeated warnings, I do not believe that the Government have appreciated the danger of piling increasing burdens upon the cash flow of companies, and I am certainly not satisfied that they have explored the possibility of encouraging firms which might want to do so to guarantee their services through another method—perhaps through insurance. In another place figures were given which showed that to insure travellers against failure of the company to provide the services paid for would amount to about one-third of the cost of this year's levy; that is, before the rate of the levy is doubled next April. Most desirably, insurance would be for a specific holiday, as distinct from the levy, which will be a general tax paid in advance, as I have said.
1163 Insurance, I think, would also overcome what I find a most undesirable feature of this Bill; namely, the requirement for prudent management to pay subsidies to guarantee the operations of other people. Alternatively, it is perhaps just conceivable that the bonding arrangements might now be sufficient guarantee. The noble Lord spoke about this matter at some length and I listened with interest. But the point I want to put to the Government is that, when the Bill was introduced earlier this year, I certainly would not have suggested this, but now not only has the cost of the bond been doubled as from a year ago but I see from The Times of April 2 that, on that date, over 100 air travel organisers' licences had not been renewed by the CAA; and although I understand that subsequently this number has been considerably reduced, and all members of the Association of British Travel Agents are now licensed, I note The Times also reported that it was understood that there were now tougher bonding requirements being applied by the CAA. This presumably would lead one to the conclusion that the bonding requirements, both financial and mechanical, are much more satisfactory or at least much more stringent than they have been in the past. Those are just two possible alternatives: relying on the bonding or at least allowing an option of insurance.
When the noble Lord comes to reply, perhaps he can give us some figures in support of the case for the Bill. For instance, has an estimate been made of the shortfall of a bond in the event of a company failing at the height of the holiday season? I suppose the answer is that it is estimated that the 1 per cent. or 2 per cent. levy would take care of this, supported initially by the Government's £15 million loan. But are the Government sure that the levy needs to be stepped up in this way? On the face of it, I should have assumed that the levy could taper as the Fund accumulates. What is to be the division of the Government loan of £15 million as between last year's holidaymakers and an amount to be kept in reserve against any future emergency? Again, I realise that this is not easy to assess because, as the noble Lord has said, the liquidators have not yet finished their work. But on Second 1164 Reading in another place the Secretary of State for Trade said that much careful thought—those were his words—had been given to fixing the amount of the Government loan. So presumably there must have been some assessment of the likely level of retrospective claims from last year.
I ask these questions because the House needs to be satisfied that the Bill is necessary and that the level of expense is justified. It is a sad reflection of present-day inflation that this Fund is really nothing more than a duplication of the financial arrangements of the bonding system. I cannot honestly call that a very imaginative approach to meeting the risks of charter travel, but if it is to be done in this way then let us ensure that it will be done as fairly and as economically as possible.
In another place—I did not hear the noble Lord say it this afternoon—the Government gave the view that this Bill provides a measure of consumer protection: they actually used those words. When the noble Lord is replying perhaps he could explain to the House the Governmenfs policy on reserve funds of this kind. By tomorrow week this House is to have had two such funds proposed to it, this one and the proposed Insurance Fund. Is this line of policy to be extended indefinitely? If it is, it will encourage irresponsibility in some cases. It is absolutely bound to raise costs. What I find most worrying is that, far from protecting consumers, as a policy it will remove from consumers any choice of how best to protect their interests, not only most effectively but also most economically. When the noble Lord referred to Clause 6—the winding-up clause—of this Bill, he said that it might be needed if some new or wider scheme were to be introduced. I rather quailed when I heard those words. I hope that this Fund will be at least buoyant within the next few years, and it will be for that reason that the Fund can eventually be wound up or alternative arrangements thought of.
In conclusion, my Lords, if the Government feel they have an obligation to those who booked holidays last year— and on the evidence I think there is such obligation—then the Government should make a grant and explain to Parliament the reason for this. But as to the future, 1165 this Fund is a very expensive way of providing the necessary guarantee. From this side of the House I certainly agree that there must be a guarantee that what happened last year never occurs again. In providing this guarantee, there are ways in which the commitment to the Fund could be alleviated, and the House will wish to explore some of those ways when we reach the next stage of the Bill.
§ 3.16 p.m.
§ Earl AMHERST
My Lords, I should like to join the noble Lord, Lord Belstead, in thanking the noble Lord, Lord Beswick, for taking us through this Bill, and I further thank him for his exposition of the history of this inclusive tour business, both its ups and its downs. He has explained that the Bill provides for an agency to be called the Travel Reserve Fund Agency to be set up under the ægis of the Civil Aviation Authority. It is to be a statutory body empowered to collect and administer funds to reimburse travellers who incur liabilities and losses through the default of an inclusive tour organiser with whom they have booked, if such liabilities and losses are more than can be met by the existing bonding arrangements required by the Civil Aviation Authority when they grant the licences. In the first instance, this Fund is to come from a levy to be made on the tour organisers commensurate with the volume of their turnover. This will at once be passed on to the customer when he pays for his ticket. I am told that it is likely to work out at an additional cost to the traveller of possibly 1 per cent. up until April 1976, and there-after 2 per cent. Should this Fund be insufficient to meet the full liabilities the Agency is to be able to borrow from the Government amounts up to an aggregate of £15 million sterling free of interest.
We on these Benches welcome any effective measures that will give to the travelling public as much protection as possible against losses and miseries as so many of those people suffered with the Court Line failure. So at first sight we will give a cautious welcome to the Bill as it now stands. But there are some aspects both of detail and possibly of policy attaching to the Bill in its present form with which we are not at all happy. 1166 We note that Government loan is to be obtainable only up to 30th September 1977, when indeed the Agency itself can be wound up. If by that time it is found that the Agency is in credit, what happens to the balance? Is it to be funded to the Treasury, the tour organisers, or the customers? If the Agency is to be continued, will it be on the same terms with the possibility of an interest-free Government loan, and for how long? If it is to be wound up, do the Government contemplate that the travel business will by that time have reached such a Utopian state that further protection of the customer is no longer necessary? If that is Government thinking, what kind of crystal ball are they using?
As I read it, those unfortunate people who suffered heavy losses and liabilities in the Court Line disaster, and who are still without compensation, are to be taken care of out of this special Fund, but, if that is insufficient, from the Government loan. This point was stressed very much by the noble Lord, Lord Belstead. Does this not mean in effect a retrospective tax to be levied on this year's passengers and possibly next year's passengers as well, and if there is not enough, on the taxpayer? I understand there is some urgency to get this Bill on the Statute Book in time for this summer's holiday traffic. Even so, I believe that two Government inquiries are being held one of which is expected to pronounce whether or not the victims of the Court Line affair were misled by any Government statements. If the answer is "Yes, they were", should not the Government be responsible for their own mistakes and cover the position by possibly a grant-in-aid or something of the kind, rather than seek to do so by imposing retrospective taxes on future passengers? Should there not be some provision in the Bill to meet such contingencies as may arise from the findings of these inquiries?
In some tour arrangements there is an element to cover the cost of hotels and accommodation abroad. In providing cover for the kind of liabilities we are now talking about, should there not be provision in the Bill to ensure that no part of public funds is used to compensate foreign hoteliers? Surely it is not our responsibility or our business to cover such people against commercial risks that they themselves choose to take.
1167 It would hardly be realistic to assume that all tour organisers are models of rectitude. Should there not be some provision in the Bill to deal with those unscrupulous ones who are running up a big list of liabilities, producing some rigged statements of accounts and absconding abroad with the money and possibly a couple of Rolls-Royces, leaving the customer in the lurch and the Treasury to pick up the pieces? Clause 3 provides for the Civil Aviation Authority to make rules in respect of payments from this Fund and the circumstances in which it is held that the tour organiser is unable to meet his financial commitments. Could it not rescale the bonding arrangements to a point where they could cover these liabilities?
Clause 6 enables the Secretary of State to give direction to the Agency in regard to its functions—if I may say so, just about as wide a provision as could be. It seems in this connection to give the Secretary of State full veto and direction over both the Agency and the Civil Aviation Authority. Does this indicate that if the loan and the Agency itself is to be wound up in 1977, possibly at the instance of the Secretary of State who has the power to do so, the way is then paved for the Secretary of State, if the present incumbent is still there at that time, to nationalise the lot?
While reiterating that we on these Benches are anxious to support all possible measures to give protection to the travelling public, we ask whether it is really necessary to set up this new Agency —yet another statutory body, another bureaucratic entity—if only on a temporary basis and even if only a very small staff is contemplated. Is there anything that this Agency is set up to do that cannot equally well be done by the Civil Aviation Authority? I know that I have asked a great many questions. Just how many Amendments we may be putting forward from these Benches at the Committee stage of this Bill will depend upon how the noble Lord who is to reply is able to answer my questions.
§ 3.22 p.m.
§ Lord DAVIES of LEEK
My Lords, I am grateful to my noble friend Lord Beswick for introducing the Second Reading. I ought to declare an interest 1168 because one young member of my family lost about £60 on a tour. Therefore, I have a little interest in the matter, in that I had to subsidise him in order that he could get his holiday. He got it and enjoyed it!
I ought to make one point clear. Like most noble Lords, I have hopped around the world on my own. Only once have I ever gone on a package tour. My wife and I went on this tour and I want to pay tribute to the fact that it was one of the best organised tours I have ever been on in my life. It was to Jugoslavia. For the money which I spent, the hotel food was marvellous. Had I travelled on my own, the cost of my air fare would have been nearly twice the cost of my stay in Jugoslavia. Therefore, when we are discussing this point, do not let us think that there has been an organised racket to milk the new millions who have started touring the world. The truth is that but for these organised, conducted tours in foreign lands, where there is lack of knowledge of the language of those countries, millions of people would not have enjoyed an expansion of their knowledge and a better understanding of foreign countries.
Having said that, I will now deal with a few biting points. I have read with care the minutes of the Committee stage, and I am tired to death by it all. In his dulcet tones, the noble Lord, Lord Belstead, reminds me sometimes of Spenser's Faery Queene—beautifully enunciated but with a waspish sting underneath. He has asked whether the Government could not do anything better. This is a bit of propaganda. In Committee upstairs, 11 columns of Hansard were taken up with a discussion about on which day they should sit, and how many days a week—Tuesdays and Thursdays. Believe you me, my Lords, if you want to enjoy yourselves read the load of rubbish in those 11 columns. It was nothing but propaganda denouncing some Minister who allegedly had let the world understand that Court Line was absolutely sound financially. Nothing could be further from the truth. Of course, most noble Lords do not bother to distinguish between supposition, fact and truth, the three legs to the stool of society which should be kept firm.
I wish that the noble and learned Lord, Lord Hailsham of Saint Marylebone, was 1169 here. On Saturday I listened on my car radio to a philosophical dissertation of his on reality and knowledge. I wish that when he is dealing with this side of the House the noble and learned Lord would sometimes apply his succinct mind to the elimination of some of the propaganda. Therefore, I take very little notice of the noble Lord who spoke from the other side and popped in his little bit of propaganda, because one of the great sayings of the week, bless him, if he is now looking over the ramparts of Heaven, is culled from the late honourable Member of another place, Sir Gerald Nabarro. After he had frightened the whole of the British population, just as some people are trying to frighten it now, about travel tours and taxes on cars going up, at the end of the day he said, "I am a propagandist, and when one is propagating views and ideas one does not determine too closely what is fact and what is supposition". Of course, we get plenty of this.
The noble Earl who has just sat down made many constructive points and I hope sincerely that some of these will be dealt with at Committee stage. This Bill aims at giving greater security to holiday-makers. Also, it aims at helping holidaymakers who lost money. The advancement of the air tours industry is shown by the figures which have been given by the noble Lord. I will not repeat them, but the number of tour operators has vastly increased above the 57,000 who were licensed in 1957. In 1974, and in the world in which we are now living, conditions have changed. Often it seems to me that the keen knife edge of competition in this aspect of tourism placed many companies in jeopardy, in their endeavour to give a fair deal to people who had never before travelled overseas. In some cases, they cut their profit per tour to the bone in the hope that the numbers would make up the profit. I pay tribute to some of those firms who struggled to do that. The Edwards Report on Civil Air Transport recognised the ultra-competitiveness of this kind of tourism.
I think that in this connection a caveat or warning from the Government was necessary. It is no good twitting this side of the House for not having done anything earlier and for lack of imagination. During their period of power when tourism was at its peak, what did the 1170 Conservative Government do in this direction? The answer is nothing. I am not clear about one important point which was made by the noble Earl who spoke from the Liberal Benches. The point appears in the introduction to Clause 1. I am not clear about how consumer representation is to be included. I know that this was promised upstairs in Committee. Will there be consumer representation on the Travel Reserve Fund Agency? What powers, if any, through a representative or representatives, will the man in the street have?
There is no need to cover ground that has already been covered, and I do not know whether this comes within the purview of the Bill; but, finally, in these days of highfalutin' advertising propaganda I think there is need to protect the unsuspecting public from the kinds of paradise that are sometimes printed or shown on television. For instance, while I have not been in Honolulu for 20 or more years, if you offered me a free holiday in Honolulu I would probably take it. A noble Lord may want to do that; but I think I would prefer a fort-night on the mountains of Wales to a fortnight in Honolulu.
§ Several Noble Lords: Hear, hear!
§ Lord DAVIES of LEEK
Thank you for that, my Lords! Due to the fact that the technological cacophonous age in which we are living is filling the whole earth with noise and with crowds of people who seem to lack that grace, neighbourliness and courtesy which is necessary to live in a civilised manner, I hope that while the taxpayer and the Government are willing to risk this money there will be some limit on the type of propaganda or advertising that goes out from these organisations to encourage people to make these trips.
If I said any more I should merely be reiterating what people have already said in Committee in another place and what others are going to say. Also I notice that I have spoken for nine minutes, and that is quite long enough.
§ 3.32 p.m.
My Lords, it is always difficult for a simple Sassenach to follow after the inspiring and musical Welsh hwyl of the noble Lord, Lord Davies of Leek, but I will do my best.
1171 When any of these tragic circumstances have occurred, either that people have paid for their holidays and then there are no holidays, or perhaps, worse still, they find themselves stranded in a foreign country with no means of getting out and the hotel bills going up and up, I have always said to myself one of two things: either "There but for the grace of Cod go I", or alternatively, "I really think they could have investigated the position more carefully before booking". Particularly as public money will be concerned—we see that under Clause 5 it may be lent, but I expect it goes a little further than that—I was anxious to find out in this Bill what protection there will be for those who want to be sure of being safe when they are making a booking.
I find in Clause 2(4) and (5) that no compensation will be paid unless the air travel organiser holds an air travel organiser's licence. So far so good. But what has one to do to get an air travel organiser's licence? By courtesy of the Civil Aviation Authority, I have here, as your Lordships will see, a fair wad of paper which is the application that a firm has to make in order to obtain this licence. In this section 5 was what really made me happier: that the firm or the applicant should send with this application a copy of his last three Annual Reports and Statutory Accounts. With that I felt considerably happier, because it infers that somebody will need to have a bit of background.
There is one aspect of this form with which I do not agree. In Section 1 of the application, paragraph 6 on the front page is headed "Personal contact". I make this observation in the hope that my noble friend who is chairman of the Authority and who is not only a noble friend but a very long-standing friend, will not sever that friendship because I am criticising one of his documents. It says there:As the Authority may wish to ask you further questions or to discuss matters arising from your application, please state here the names and telephone and extension numbers of suitable contacts within your organisation.My Lords, 43 years in business have taught me to shun the telephone like a mad dog for anything that has to do with an agreement. It must be in writing and 1172 I hope very much that the Civil Aviation Authority will slightly tone down that Section 1(6).
I do not like retrospective legislation. Here I agree with my noble friend Lord Belstead. On the other hand, at the risk of his being cross with me—and I think any anger that I may arouse in him can easily be dispelled within ten minutes at the Bishops' bar—I am going to commend this Bill to your Lordships because I think it is right and proper to do so. However, I want to ask the noble Lord, Lord Beswick, a question. Today, a great deal of information comes out and so many new laws and rules are made which it is very difficult to get across to the general public. I ask that every possible effort should be made to bring home to the general public, if and when this Bill becomes an Act, that on no account should they book on any tour or voyage without making absolutely certain that the firm or the individual with whom they are booking holds an air travel organiser's licence.
§ 3.37 p.m.
§ Lord BESWICK
My Lords, I should very much like to thank the noble Viscount, Lord Monck, and say that I agree with him absolutely that the general public should themselves feel a responsibility, but they should be given every assistance to discharge that responsibility to deal with and travel with a reputable concern. The trade and the Civil Aviation Authority are already doing a good deal to make it possible to do just this. I understand that the Civil Aviation Authority already issues lists of licensed air travel organisers through the Association to all its retail members, and we are doing all we can to persuade the non-licensed travel agents to get themselves on the Civil Aviation Authority's circulation lists. These lists will be available at all local trading standards offices and through the Citizens' Advice Bureaux, and of course a telephone call to the Civil Aviation Authority will provide the answer on the spot. That is being done to enable the potential traveller to see where he can most confidently go with his business, and he should be encouraged to take precautions.
However, having said that let us recognise the fact that we are here dealing with a business which went through what was in many ways an unhealthy period of growth, and it really is not 1173 good enough, as my noble friend Lord Davies of Leek said, for the noble Lord, Lord Belstead, to be quite so superior about this and to criticise the present Government. These troubles developed in an era of the printing press as operated by the previous Administration. It was in that atmosphere of false affluence, when everybody thought everything was all right and then found it was not, that troubles followed one after the other. Let us not forget that we are trying to mop up a situation which was rather the result of over-expansion.
The noble Lord, Lord Belstead, said that he was proposing to table some Amendments and the noble Earl, Lord Amherst, also said that he may have some Amendments to offer. Maybe some of the points raised would better be dealt with on the narrower subjects when the Amendments have been put down on the Order Paper. I will do my best to answer the Questions raised.
My Lords, first of all let me tell the noble Lord, Lord Belslead, that we are in fact dealing here with the Air Travel Reserve Fund Bill, and not another piece of legislation which is coming up next week and which the noble Lord was disposed to criticise. No doubt he will repeat his criticism then. I will certainly reserve my answers until then. The noble Lord asked me about the need for the loan and what was the shortfall of the bonding. My information is that the possible liability outstanding is between £7 million and £8 million, and there is about £2,500,000 in the kitty left over from the bonding arrangement. So, as of now, there is need for an initial support.
The noble Lord, Lord Belstead, advanced two contradictory lines of argument. On the one hand he was saying that the proposed levy would be a burden upon the industry, while on the other hand he was criticising us for making available this £15 million loan. The idea is that there would be a period of time when unforeseen liabilities would be backed up by this Governmental loan. But at the same time we recognise that there is a financial difficulty facing some of the companies, and therefore the levy was fixed initially at 1 per cent. The levy then goes up to 2 per cent. when the companies have had a greater opportunity of making the necessary financial 1174 arrangements. The noble Lord said that he expected it to taper off rather than build up. I should expect it to be increased initially whilst the industry is making its financial arrangements and that subsequently, provided that we have no more trouble, it should then be expected to taper off. I absolutely agree with the noble Lord that it should, and I hope that this is what will happen.
My Lords, part of the argument of the noble Lord, Lord Belstead, has been that in any case the Government should not come into this matter; it should be left to the industry. I agree with the noble Lord that it ought not to be necessary for the Government to come into it. I have no knowledge of any of my colleagues who wanted to come into it, but we are faced with a situation where the industry itself did not make the necessary provision. The industry made some provision with this bonding arrangement, but it was not adequate in the special circumstances. As I see the arrangements, they give us time to get the industry properly, soundly, and healthily organised. The bonding system is the first bulwark of defence. However, in my personal view, best of all is the expertise which the Civil Aviation Authority will acquire, build up and gradually apply to the licensing arrangements. I hope that in the future we shall have an industry in which there are only reliable and reputable operators, in whom we can all have trust. When that time arives, when it is seen to be arriving, when the reserve fund is tapering off, then the situation will arise to which the noble Lord, Lord Belstead, looks forward. I share his expectations.
I was asked what would be the effect on the cost of holidays. Of course there will be a cost; there is bound to be. The cost is expected to be of the order of 2 per cent., but I am rather inclined to the view that it would be better to have an extra 2 per cent. on cost at this point rather than have the miserable start we have seen in the last year or two. If we can give the necessary security for 2 per cent. it will not be too bad.
I was asked by the noble Earl, Lord Amherst, whether the foreign hotelier will be compensated. The answer is that he will not. This will be made clear in the rules that will be published. I was asked what would happen to the Fund 1175 when and if it eventually has to be distributed. My information does not reach quite so far ahead, but I agree that it is something to which we shall give a little more thought. I think I can say a little more on this point in the other stages of the Bill, and I shall be very happy to do that.
A question was raised about the responsibility of my right honourable friend in the case of the Court Line business. If I may say so in all friendliness to the noble Lord, Lord Belstead, I thought he made rather heavy weather of this. If it be said that some people took out a holiday because they thought there was the imprint of a guarantee from my right honourable friend, it is not beyond the bounds of possibility, but I do not think it can be shown to be the case. If his words are studied I should not have thought there would be any question at all of his accepting responsibility for the losses of these foreign travellers. My right honourable friend was talking, and was known to be talking, about a completely different sphere of activity of that particular company. In any case, an inquiry under Section 165 of the Companies Act is now being carried out. There is also an inquiry by the Parliamentary Commissioner. I should have thought we could safely leave that particular matter to those inquirers. I think that answers the questions, but if it does not I promise I will faithfully return to them when we come to the Committee stage. In the meantime, I hope it will be found possible, in accordance with what has been said, to give this Bill a Second Reading.
My Lords, could the noble Lord, Lord Beswick, answer a point that is worrying me and which I think was not raised at all? What discipline will there be on those air travel organisers who do not organise their business in a prudent manner? One knows that the ambitions of young men sometimes overrun their discretion. What discipline will there be?
§ Lord BESWICK
My Lords, with great respect I tried to answer that point when speaking about the development of expertise on the part of the Civil Aviation Authority, who will not issue a licence to an operator unless they are satisfied that 1176 that operator has prudence, to use the fine old Victorian word used by the noble Lord, Lord Hawke. The operator will have to provide a bond. He will now have to provide this levy. I should have thought that they would be financial sanctions. They will have to provide a financial guarantee in advance—and here i am dealing with a point made by the noble Lord, Lord Belstead, who said, in tones of great criticism, that the operators had to provide this money in advance —as it would not be any use going to them when they were broke and asking them to provide a levy. They will have to give the money in advance. I should think that would be the sort of discipline that the noble Lord, Lord Hawke, and myself would wish to see.
§ Lord DAVIES of LEEK
My Lords, before the noble Lord sits down, I think I may have missed something. I asked a question on Clause 1 about the interests of the travelling public. If the noble Lord, Lord Beswick, is too busy to answer now, we can come to it in Committee, but it is important.
§ Lord BESWICK
My Lords, I made a note of that and intended to answer the noble Lord, Lord Davies of Leek. I am sorry I did not. In the first place, I look upon this Bill as being in the interests of the consumer. The whole purpose of the Bill is to protect the consumer. It is consumer-orientated. On the Agency there will be a representative of consumer views.
§ On Question. Bill read 2a, and committed to a Committee of the Whole House.