HL Deb 28 July 1977 vol 386 cc1197-201

6.11 p.m.

Lord ORAM rose to move, That the draft Civil Aviation (Air Travel Organisers' Licensing) (Reserve Fund) (Amendment) Regulations 1977, laid before the House on 14th July, be approved.

The noble Lord said: My Lords, these Regulations are made under Section 4 of the Air Travel Reserve Fund Act 1975 which requires the draft of the Regulations to be subject to Affirmative Resolution of both Houses of Parliament.

The Act provides for licensed air travel organisers to make contributions to the Civil Aviation Authority for the purpose of the Fund, which is held and managed by the Air Travel Reserve Fund Agency to serve as additional protection for certain payments made for bookings with such organisers in the event of their businesses failing. When the Air Travel Reserve Fund Act was before your Lordships questions were raised about the build-up of the Fund if contributions steadily exceeded claims. It was made clear at the time that if the Fund appeared to be outgrowing its usefulness it would be the intention to reduce the levy and that it might not be necessary to collect it at all.

The first payments to the Fund were made in September 1975 at 1 per cent. of turnover and the rate was increased to 2 per cent. on 1st April, 1976. In total a little under £15 million has been collected by the Civil Aviation Authority in this way and passed to the Agency, after the deduction of expenses incurred in the collection. Further payments will be made during the period up to 1st October. The Agency has repaid the Government loan which was made to enable payments to be made from the Fund before the initial contributions from air travel organisers had been received. I am advised that the total amount of the Reserve Fund will be about £12½ million.

In presenting the new regulations account has been taken of the present level of the Fund and the protection still afforded by the bonds which each air travel organiser has to provide before receiving a licence from the Civil Aviation Authority. These bonds continue to be the customer's first source of protection. The Fund is, as the name implies, a reserve mechanism. Consideration has also been given to the possible extent of future calls on the Fund. There have been very few calls on the Fund since it was set up as a result of the failure of licensed air travel organisers. The Civil Aviation Authority has been consulted, as required by the Act, and in all the circumstances it has been decided that it would be right for the present to reduce the levy to nil. That is the purpose of the regulations before your Lordships.

Contributions to the Fund are made on a quarterly basis. The next convenient point in time to introduce a change in the rate of the levy is 1st October. Accordingly, the regulations provide that licensed air travel organisers will not be required to make payments to the Fund from that date. The conditions in the travel trade and the level of calls on the Fund will be kept under review, and I must emphasise that if either circumstance requires the resumption of payments your Lordships will be asked to approve the reintroduction of the levy at the appropriate level. For this reason it has been desirable to preserve the basic regulations intact.

My Lords, the suspension of the levy will relieve the trade of one element in their calculation of their charges to the travelling public, and, as holidaymakers can be assured that the present protection provided by the Fund will continue, I believe that the proposed change will be generally welcomed. I therefore commend the draft of the regulations to your Lordships. I beg to move.

Moved, That the draft Civil Aviation (Air Travel Organisers' Licensing) (Reserve Fund) (Amendment) Regulations 1977, laid before the House on 14th July, be approved.—(Lord Oram.)

6.15 p.m.


My Lords, I should like to welcome these regulations which the noble Lord, Lord Oram, has explained to us. At a time of severe inflation undoubtedly it will assist air travel firms not to be required to pay into the Fund, and that of course is good. Yet the Fund is there in case of a crisis, which was the intention of the Act that was passed some two years ago. The only note of reservation I would strike is that it seems a pity that the contributions will not be reduced to nil until October, which will presumably help to reduce the cost of holidays. It would have been nice if that could happen just before your Lordships were all going off on your holidays so that we could have benefited in that way.

I should like to ask the Government two questions because, although the noble Lord spoke about the possible reintroduction of contributions to the Fund—and I do not quarrel with that because it may, indeed, be necessary—he did not seem to mention the problem that I can foresee building up if the Fund continues to be untouched. First, what is actually happening to the Fund at the moment? Presumably it is invested—is that the case? If it is the case, perhaps I might ask the noble Lord, Lord Oram, about the Government's intention as the size of the Fund continues to grow. After all, as the noble Lord explained to us, all air travel organisers have to put up a bond and that is the first line of defence if there is any crisis with an air travel firm—and this is a reserve fund. This money which has been put up and which totals some £15 million—although the Fund stands only at £12½ million because the balance was a Government loan which has now been repaid—is money which belongs to air travel firms. Presumably consideration is being given to the desirability of some repayments to those firms who have contributed if the Fund were to remain untouched for any length of time in the future. I hope that the Government are giving this point some consideration.

For instance, if the Fund continues to rise and arrives at £15 million, £18 million or £20 million, it would be a pity if a Government spokesman was forced to come to the Dispatch Box and say that no consideration had been given as to what on earth to do with that money, which, after all, belongs to someone else. I do not say this in any partisan way. This is a sensible question to be considered. With those two questions I, of course, welcome the passage of the regulations.


My Lords, I should like to thank the noble Lord, Lord Belstead, for his welcome to the draft Regulations and briefly to reply to his two questions. The Fund is invested and, on the one hand, it therefore has interest accruing to it, but, on the other hand, it is subject to corporation tax. Estimates vary as to whether that means it will slightly increase or slightly decrease. However, that is the situation. As to the future, there is power under the Air Travel Reserve Fund Act for the Secretary of State after consulting interested parties, to make an order dissolving the Agency, winding up the Fund and disposing of the assets, if that is considered to be desirable. Thought was given to the problem at the time of the passing of the Act, and that is the situation which could be invoked.


My Lords, before the noble Lord sits down, may I ask him what happens to the bonds? Are they paid to the Civil Aviation Authority, and how are they held and invested?


Yes, my Lords; I understand that they are lodged with the Civil Aviation Authority when the application for the licence is made.

On Question, Motion agreed to.