§ 12.8 p.m.
§ Baroness Denton of Wakefield rose to move, That the draft regulations laid before the House on 1st December be approved [13th Report from the Joint Commit tee.]
§ The noble Baroness said: My Lords, the regulations are intended to implement in UK law the EC directive of the same name. This is a consumer protection measure, and the regulations will mark an important step forward in the development of consumer rights in this field.
§ The directive and the regulations have three main objectives: first, to ensure that organisers and retailers of packages maintain proper professional standards in their dealings with their customers; secondly, to require organisers and retailers to take full responsibility for the proper performance of their contract; and, thirdly, 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 the insolvency of the organiser or retailer. Those objectives are reflected in the draft regulations now before your Lordships.
§ Although the directive is relatively short, the matters it deals with are complex and I hope that your Lordships will bear with me if I take a little time to explain how the requirements of the directive are reflected in the proposed implementing regulations.
§ Regulations 1 to 3 deal with definitions and application. Basically, the regulations would only apply to packages sold or offered for sale after 31st December 1992. However, the provisions regarding protection against insolvency affect all contracts in place on 31st December 1992 which remain to be performed in whole or in part. That means that organisers (and retailers if they are party to the contract) must on that date have security for all pre-payments that they hold. It would clearly be unacceptable if a tour operator became insolvent at the end of January, and those customers who had entered into contracts subsequent to 31st December were protected while those who 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 but must contain—in so far as it is relevant to the package—at least the information contained in Schedule 1, and will, subject to certain qualifications, be binding on the organiser.
§ Regulations 7 and 8 deal with information to be provided before the contract is concluded. This includes, among other matters, passport and visa requirements and details of travel arrangements.
§ 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 663 given a copy of the contract in writing. There is nothing in this regulation to prohibit the conclusion of telephone contracts or contracts which are concluded only at the last minute. In appropriate circumstances it could, for example, be as late as the moment when the customer arrives at the airport that he obtains his copy of the written contract.
§ Regulation 10 gives the consumer certain rights to transfer a booking.
§ Regulation 11 deals with the important question of surcharges. We have given a lot of thought to this, and have concluded that it would be unreasonable and probably not in the long-term interests of the consumer to attempt to ban surcharges altogether. But our regulations do not in any way "legalise" surcharges. The imposition of surcharges has always been perfectly lawful so long as it is provided for in the contract. What our regulations will do is for the first time place strict limits on the circumstances in which surcharges may be imposed. In doing so we have, exceptionally, gone beyond the strict requirements of the directive. Surcharges will be permitted only to deal with variations in the price of fuel, fluctuations in exchange rates or increases in certain dues and taxes. In addition the organiser must absorb the first 2 per cent. of any increase and may not impose any increase within 30 days of the date of departure. This mirrors the current requirements of the code of practice of the Association of British Travel Agents. We believe that this strikes the right balance between protecting the interests of the consumer and recognising what can be a genuine problem for organisers.
§ 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; Regulation 13 spells out the consumer's rights in this situation and also in the event of cancellation by the organiser. This is another area where we have had to strike a balance between the interests of the consumer and that of the organiser, since provision is included for cancellation by the latter if a tour fails to attract the minimum number necessary to make it viable. This reflects the directive, and we have thought it right to allow it, provided the fact that a minimum number is required is made clear to the consumer from the outset.
§ Regulations 14 and 15 deal with the rights of the consumer whilst 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 makes the organiser, or possibly in certain circumstances the retailer, strictly liable for the performance of the contract. This means 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, 664 have foreseen or forestalled, and liability other than for death or injury may be limited so long as that limitation is reasonable.
§ That brings me to Regulations 16 to 22 which deal with security for pre-payments and against the possible need for repatriation in the event of insolvency. I would like to explain our approach to this important provision in the directive.
§ The first point 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 an educated guess. But we believe the total number may be up to 20,000 and could be more, 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, farms and similar establishments which offer a tourist service—for example pony trekking, golf, or fishing—in addition to accommodation. Among tour operators proper, the range varies from the giants of the package travel trade to one-person companies exploiting some niche in the market.
§ Faced with this diversity, the philosophy we adopted was to offer the widest possible range of choice for meeting the requirements of the directive. Those who have urged on us a more prescriptive approach in implementing the directive have in my view totally failed to appreciate the breadth of its coverage and the variety of companies, organisations and even individuals that fall within its scope. To try to force all these within a single framework of control would have been impossibly bureaucratic and restrictive. It would have put people out of business, and therefore would restrict competition and would restrict consumer choice. None of these would have been in the consumer's interests.
§ The options that organisers may choose 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 be affected by the regulations, or by arrangements in force in another member state.
§ There are two particular points about this regulation. 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. That is because the interval between approval of these regulations and their date of entry into force is likely to be very short and we needed to give the very large number of operators who currently have no protection time to make appropriate arrangements. The provision regarding other member states does not give operators a free hand to move offshore and avoid the requirements of the regulations. That is because the provision applies only 665 if the rules of the other member state extend to packages sold in the UK and that member state has implemented the directive.
§ In addition to meeting the general requirement 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 an organiser who wishes 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 approved bodies.
§ Regulation 19 offers an alternative to bonding in the form of insurance. It 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. That 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. And, 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 only ensure that any payments he receives are kept separate from his personal bank account so that they cannot be seized by his creditors in the event of his insolvency. The remaining regulations consist of consequential and general provisions.
§ The regulations have presented some difficult problems. To those who have urged us to go further and impose a central licensing and enforcement system I would say, "Have you really considered the cost and bureaucracy of what you are suggesting?". To those who have argued that we should provide this or that additional right for consumers I would say, similarly, "Have you considered what the cost would be to the industry and what price, therefore, the consumer would pay for his additional protection?". As in all things, there is a balance to be struck.
§ That does not mean neglecting the consumer interest. On the contrary, this is a consumer protection measure and in drawing up our implementing regulations we have been concerned to ensure that the consumer is indeed properly protected. But all protection has a price and it is the consumer himself who must ultimately pay that price. It is for that reason that we have followed, generally, the principle that the implementing regulations should offer sound protection for the consumer while placing the least possible additional burden on the industry consistent with proper implementation of the directive. We know that we shall not satisfy everybody but we believe that this way we have got the balance about right. I commend the regulations to the House.666
§ Moved, That the draft regulations laid before the House on 1st December be approved [13th Report from the Joint Committee].—(Baroness Denton of Wakefield.)
§ 12.24 p.m.
§ Lord Graham of Edmonton
My Lords, perhaps I may express the gratitude of the whole House for the care and attention to detail which the Minister gave to the regulations and to their background. No doubt she will need a moment or two to recover from what was, by any standard, a marathon speech of 14 minutes, when she did the House proud. We understand that it was her duty to deal with all the provisions, some of which are more important than others. I intend to concentrate on two or three of the issues, which will probably expand to four or five.
In 1982 the Commission first recognised that the state of the holiday industry and the jeopardy in which consumers could be put required attention. It produced some ideas and guidelines on Community tourism. In 1984, under the aegis within which it operated, the Community adopted a number of measures and principles. New proposals were published in 1988. The present proposals have been on the table, as it were, for the past two years. Your Lordships and consumers will recognise, therefore, that whatever other emergencies and imperatives may have existed—and there have been many —it has taken a long time to bring forward these regulations.
Last week I listened to the debate on the regulations in the other place and therefore experienced the atmosphere and the mood. The reaction of its Members was hostile to the case that the Minister put forward, although they were grateful to him for the care that he took. My task is made a little easier because so many questions were then asked and left unanswered that there are no questions that I can ask of which the department has not had notice from those in another place. Last night my honourable friend Nigel Griffiths asked me to invite the noble Baroness to throw some light on the department's failure to reply to his letter to her noble friend. He wrote two weeks ago inviting the Minister to name one bona fide organisation which approves of what the noble Baroness outlined today. I hope that those who assist her will be able to name more than one group, individual or organisation.
The first disturbing point that we must make is that the Government have been involved in a consultation exercise which has resulted in the charade. What is the purpose of consultation? It is not merely to circulate pieces of paper, receive them after completion and then give one's own views. The replies should be taken into account. The Consumers' Association is emphatic in saying that it does not approve of the orders. The industry and ABTA does not approve of the orders. Those involved in business travel do not approve of the orders. In the debate in another place Sir Anthony Grant declared an interest as representing business travellers and said: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".—[Official Report, Commons, 10/12/92; col. 1083.]667 He was not one of the hostile speakers on the issue. Therefore, with friends like Sir Anthony Grant speaking on the matter the noble Baroness does not need any enemies.
The trading standards officers must enforce the regulations. They too have stated emphatically that they do not believe that the regulations are enforceable or will work. What organisations' views are so paramount that the Government have chosen to believe them rather than the consumers, the industry, business traveller or the enforcers?
The Consumers' Association said:The Government's proposals for implementing the Directive are fundamentally flawed. Tragically they represent a missed opportunity to ensure that all consumers get a fair deal when booking their holidays".The Minister is quite right to say that she has sought to achieve a balance. However, I believe that the balance in these provisions means that the Government have done as little as possible. The Minister described this as a consumer protection measure, but I see no sign of that.
The Minister in another place, Mr. Leigh, said: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".—[Official Report, Commons, 10/12/92; col. 1077.]I wonder which element of industry is supposed to agree with that statement. ABTA certainly does not agree with it. ABTA's members represent 90 per cent. of package holiday makers. ABTA has been prepared voluntarily to add to its burdens in order to protect consumers.
The Minister told the House that this is a consumer protection measure, and mentioned surcharges. I should like the Minister to be rather more specific as regards her assertion that this order does not legalise surcharges. My interpretation of the directive is that there is nothing wrong with companies increasing surcharges above the ABTA recommended limit of 2 per cent. A consumer may look at a holiday brochure in the autumn and see the price of the holiday which he wishes to take the following year. He then finds subsequently that surcharge after surcharge has been imposed. That is unfair. The Minister failed to state, and the industry has not been prepared to recognise, that currencies may fluctuate in both directions—up as well as down. A properly organised business should be able to set its prices fairly in advance.
We know what the directive says about liability as regards providing holidays. However, what happened about the implementation and enforcement of that liability? For example, the regulations state that an organiser shall be responsible for the services he has sold. That is laudable. However, the organiser is not obliged to take out insurance. Therefore, many consumers will suffer loss and will thus have a right to sue. They will find that although they have rights, the holiday company cannot satisfy those rights.
I am sure your Lordships will remember the company, Land Travel. Last year 40,000 consumers failed to get either their holiday or their money back. 668 Does the Minister realise that to lay an obligation on such a company is laughable? The Government need to see proof of enforcement.
The Minister did not mention the licensing scheme. Originally, the Government favoured a licensing regime, but subsequently they have dropped that. On the basis of whose evidence have they decided they no longer wish to have a licensing scheme? It is not on the basis of evidence from consumers, the industry or ABTA. Why have the Government dropped that scheme and why are they making such heavy weather of bureaucracy? They do not mind the bureaucracy involved in the ATOL scheme.
I strongly recommend the ATOL scheme to the Minister as being beneficial to consumers. What does that scheme do? We have had great difficulty in finding out about costing. In that regard the evidence which the Civil Aviation Authority gave to the Government about the ATOL scheme was:The quantifiable cost to the passenger of the present ATOL system is the total of licence charges plus the amount levied and put in the back-up fund plus the cost to individual licence holders of the work in securing a licence and the sums payable in respect of getting bonds. All the figures which follow are at 1990 prices. The levy raised £51 millions: the Reserve Fund still contains £26 millions. Over the period since the levy was introduced 117 million passenger journeys under ATOLS have been authorised. The cost per passenger authorised in ATOL charges is about 16p".Is that the punitive cost upon the industry of financing a licensing scheme? It continued:With a net levy cost per passenger of 21p, the cost per passenger of levy and licence charges combined is about 37p. This is equivalent to 0.14 per cent. of the current average passenger trip price. It is difficult to estimate the true cost of bonding".Other details are then given and the comment is made that the cost of a licensing system, which would give teeth to the regulations, would be between £1 and £1.80.
The Minister and her colleagues have run away from inviting consumers—never mind the industry —to add the cost of £2 to the price of package holidays, whereas in fact consumers would welcome it. When there is a tragedy, as there will be next year and the year after, the Minister and her colleagues will know that they are responsible. These regulations are not the responsibility of Europe or of anywhere else; they are the responsibility of the Minister and her colleagues. When I come back to the House next year or the year after with the details of a tragedy I shall say to the Minister, "Minister, you declined to add a marginal cost onto either the industry, which is willing to bear it, or onto consumers, who are willing to pay it". What a terrible price consumers will have to pay for that mistake on the part of the Minister.
The Minister should recognise that she has failed to convince anyone that what she has done is in response to the needs of the industry or consumers. This would have been a golden opportunity but it is now a missed opportunity.
I forgot to mention the trading standard officers. They have said that they will be called in, but that will be when it is too late, after the stable door has been closed. From her wide experience the Minister knows 669 that there is now a shortage of trading standard officers. They are overworked now and yet they are to be asked to police these matters.
Everyone who goes on a holiday knows that certain risks are taken. This directive could have put their minds at rest. People could have gone on holiday knowing that the Government had set in place either an extended ATOL scheme or an additional scheme which mirrored it to protect the consumer. I fear that because of doctrinal stubbornness the Minister is saying to consumers, "Hard luck. We have given you what appears to be a good package". This package is flawed. When I come to the House with details of tragedies I hope that the Minister will have a good explanation, not only for me but for the country as a whole. If I can persuade the Government to recognise that these regulations are not what consumers, the industry, business travellers or local government want, then I believe that I shall have done the House a service.
§ 12.38 p.m.
§ Lord Finsberg
My Lords, several years ago I was a director of one of the major tour operators in this country, but for the past three or four years I have had absolutely no connection with the industry. I should like to ask my noble friend some questions and make one or two comments about these regulations.
First, I am certain that no scheme, however gold plated, would satisfy the noble Lord, Lord Graham. I have known him for many years and he will never be satisfied. Frankly, I do not believe that any better compromise could have been put forward than that proposed by my noble friend. It is a compromise, as she rightly said. One must not assume that the Consumers' Association speaks for consumers. It is a professional body. The overwhelming bulk of people who travel on package holidays are satisfied. But we do not hear from them. I accept that we hear all too frequently from those who have suffered. It is of course possible for individuals to take out their own insurance. Why should everybody have to pay the additional costs that would be incurred if the industry were to gold-plate all the safeguards and all the guarantees?
On the issue of surcharges, of course none of us likes to pay a surcharge. The brochures and the costings are worked out many months ahead. So it is impossible ever to guarantee that there will be no surcharges unless we are prepared to say to the tour operators, "You build in whatever you like to cover yourself for this", and then there will be no surcharge; but most of us would be paying much too much to have that already covered. I put it as gently as I can: let us have no more of this nonsense about surcharges. What is in this proposed set of regulations may be the lowest common denominator, but it is an advance on what we have at present.
I should like to ask my noble friend two specific questions. Can she assure the House that nothing in this set of regulations has been added by the Ministry? We have heard in the past three or four weeks from my right honourable friend the Prime Minister that some 670 of the regulations and bureaucracy that bear down on this country are not the result of Brussels but are the result of our civil servants saying, "Minister, this is a rather nice little thing. Let us just slip it into this particular set of regulations." I know from my own ministerial experience how easy it is to fall for this syrupy language, but if one is firm it can be stopped. Can my noble friend assure us that there is nothing in here that satisfies a whim of the third assistant secretary in one of the ministries?
Secondly, my noble friend spoke of a significant change in Regulation 12 that would enable certain things to happen. Can she explain what is meant in this instance by "significant"? Does it mean, for example, that the plane is going to depart from Gatwick instead of Heathrow? Does it mean that the plane is going to depart at 5 p.m. instead of 7 a.m.? These are matters of real importance to those who are going on package holidays. I have suffered from that sort of change. I would regard it as significant, but I should like to know what advice my noble friend can give to the House to explain what exactly the safeguard is.
I agree with the noble Lord, Lord Graham, that of course something is going to go wrong; it always will. That is human nature. My noble friend need have nothing on her conscience when the noble Lord comes back, if he does come back, on a future occasion, because one has to work the art of the possible. It is not possible to produce Utopia, which I think was what the noble Lord opposite was trying to get. If my noble friend can satisfy me about Regulation 12 and can assure me that the regulations contain no excess baggage that is the whim of a civil servant in the United Kingdom, I should be most grateful.
§ Lord Graham of Edmonton
My Lords, before the noble Lord sits down would he care to consider one of the central points that he made, that the organisations that I quoted do not necessarily speak for the consumer. These are the bodies that have been created by the Consumers' Association. I have been a member, but not a professional. The noble Lord said that there was a professional organisation. It is an organisation, but the members are certainly not professionals. Does the noble Lord think that if the total cost of ensuring the kind of provisions that a consumer wants amounts to £2 that the ordinary consumer would jib at that?
§ Lord Finsberg
My Lords, what I would say, having 98.5 per cent. sat down, but not 100 per cent., is that I am not sure that I necessarily accept the figure that the noble Lord quoted of as little as £2. To achieve what he wanted would have cost substantially more. I do not necessarily believe that consumers would want that.
I have just recalled another point I wanted to make. There is always a problem about consultation. Those of us who have had to indulge in consultation know full well that one will be given totally conflicting views, depending on which side of the fence one is sitting. A consumer has one set of requirements; a provider has another. It is not government's job to listen to consultation, advice and then accept it all. It is the job 671 of the government to listen, to see what is sensible and practical, and then to achieve a balance. That is what my noble friend has done.
§ 12.45 p.m.
§ Lord Monson
My Lords, like the noble Lord, Lord Graham, I too should like to thank the noble Baroness, Lady Denton, for explaining the regulations with such clarity and patience. Having said that, I must oppose the regulations, not because I am against increased safeguards for travellers in principle but because both the EC directive and the enhanced obligations added later by the Government go too far.
I agree with the honourable Member for Cambridgeshire South-West, Sir Anthony Grant, cited by the noble Lord, Lord Graham, who suggested in another place a week ago that the directive was bad for the travel industry, bad for business travel, bad for exports and hence bad for Britain. In my view the regulations are excessively paternalistic, even maternalistic. Secondly, they impose excessive burdens upon businesses, especially upon innovative entrepreneurs who lack massive capital backing. That will eventually rebound upon consumers whose choice will be restricted and who will have to pay more, possibly much more, for their package holidays. At the moment package holidays in Britain are among the cheapest, if not the cheapest, in Europe by a wide margin.
Thirdly, the regulations breach the principle of subsidiarity in so far as they have been extended to embrace holidays sold almost exclusively in one country and not seeking to attract people across frontiers from other EC countries. Finally, although some of the principles that motivate the obligations now to be imposed upon business are admirable, they are inconsistently and illogically applied.
May I deal with this last point first? When we originally debated the matter a great many months ago, I think well over a year ago, the emphasis then was on protecting people who had flown out to another country and risked being stranded hundreds of miles from home should anything go wrong. Illogically and inconsistently the protection was not extended to people who travel other than on a package basis, whether by air, sea or long-distance coach: I do not think that railways go bust very often. There are many students, for example, who travel as far as Athens by coach in order to catch cheap flights to the Far East, and many of those coach companies are not companies of great financial substance. I suppose that the EC Commission reckons that people capable of booking their own accommodation have the nous to get themselves out of a tight spot, whereas package travellers are thought to be too simple and unsophisticated to be able to do so.
Subsequently, it would appear that the draft directive, which I have not been following, was altered to embrace all sorts of holidays, including those that do not involve flights overseas and which are not generally thought of by the public as package holidays. The emphasis shifted from the repatriation of stranded travellers, for which there is a great deal to 672 be said, to protecting deposits. That is much more ambitious, admirable though it may be. Here the inconsistencies and illogicalities multiply.
There are a number of transactions in this country where people often have to pay substantial deposits in advance—those involving hotels, holiday cottages, caravans, boats on canals or on the Norfolk Broads, central heating systems, double glazing, furniture (a three-piece suite nowadays costs more than many a package holiday) and of course builders, who often require substantial staged payments during the course of a large conversion and who can go broke later, leaving the householder with an uncompleted extension, and so on.
In all these cases the seller or provider is just as likely to go bust as is the provider of a package holiday, yet the public simply have to accept the risk. Moreover, the proposal throws up some extraordinary anomalies. As I understand it, trans-Atlantic crossings by the QE2 are not covered by the directive but cruises by the QE2 are covered, even though the amenities and services provided are precisely identical. Again, if a hotel simply provides bed, breakfast and dinner it is not caught by the directive but if it offers a "special weekend", where a series of special wine-tastings are thrown in, or tickets to an opera, concert or theatre, then it is caught.
This brings me to the extra burden imposed upon businesses. A small but hitherto successful Scottish company, in which I must declare a very modest interest as a BES shareholder, runs cruises along the west coast of Scotland, giving employment to 50 people and bringing many benefits to what is an economically depressed area of Scotland. It is demonstrating Scottish enterprise at its very best; but it believes that it may collapse as a result of the implementation of the directive. Instead of being able to receive and utilise payments made eight weeks before the cruise, as is normal with shipping companies, it cannot now touch a penny until the last passenger has disembarked down the gangplank. In the present economic climate, additional bank borrowings to make up for the lost working capital are almost, if not wholly, impossible to obtain. The company is not old-established enough to be able to obtain insurance readily. This seems a crazy way to encourage initiative and the revival of business confidence which this Government rightly seek.
The question of subsidiarity also comes in here, inasmuch as 95 per cent. of this company's clients come from the United Kingdom, approximately 34½ per cent. come from North America, Australia, New Zealand and South Africa, just over half a per cent. come from non-EC countries and less than 1 per cent. come from other EC countries. If only 1 per cent. of the clientele comes from other EC countries, why should the EC interfere, since the whole purpose of the directive, as I understand it, is to protect people who cross frontiers in search of better value package holidays?
In order not to run the risk of being accused of elitism, I will restrain myself from saying all that I had intended about the excessive paternalism of the directive. But this much must be said. The directive 673 apparently covers fly-drive holidays—the sort where one travels to, say, Lyon, Marseilles, Lisbon, Malaga, Rome or Izmir, usually by scheduled flight, with a week's car-hire thrown in for virtually nothing. Yet as this technically constitutes a package holiday a representative evidently must be provided at the other end. Are we really to believe that people on this sort of holiday need a representative to take them by the hand as they descend the aircraft steps and guide them to the desks of Messrs Hertz, Avis, Budget or Eurocar?
I have two final questions for the noble Baroness. The first more or less repeats what the noble Lord, Lord Graham, asked: why do the regulations extend to business travel? Business travellers are surely more than capable of looking after themselves. Secondly, I should like to ask whether it is indeed the case, as I have been told, that of the 12 EC countries only the United Kingdom and the Republic of Ireland are on the point of implementing the directive? If so, is it not a pity that once again Britain and British business are paying the penalty for being virtually the only people to obey EC rules?
§ Baroness Denton of Wakefield
My Lords, I should like first to thank your Lordships for your patience in listening to my explanation of the regulations. As you will recognise, they are important regulations. May I say also that it is an unexpected pleasure for us all to hear the noble Lord, Lord Graham, at the Dispatch Box. But I am sorry that on this occasion I cannot agree with him.
First, I do not think he would hold me responsible for the speed at which the European Commission works. I hear his point about how long the matter has been discussed, but it is obviously a matter of European concern and it would not be helpful to go ahead of European legislation when it was coming towards us and when we have supported this legislation from the moment of its introduction.
I also apologise as the noble Lord said that his friend had not received a reply to the question of who was in support of the organisation. Perhaps in answer I may quote the submission made by the Institute of Trading Standards Administration:Overall, the institute is very pleased with the changes which have been made to Article 7 with reference to the surveillance by trading standards departments of the bonding or insurance provisions. We think think that this is now a realistic approach".We acknowledge that it has been impossible to keep everyone happy. It is not, as my noble friend Lord Finsberg said, the purpose of government to keep people happy: it is the purpose of government to legally implement directives and to ensure that there is security for the consumer. We believe that we have done that. We have listened and consulted very extensively. That is why we are today discussing these regulations. We have taken on board all the facts we have heard, but a major point I would make is that we are not talking about an industry in the same way as we talk about the work of ATOL—
§ Lord Graham of Edmonton
My Lords, will the noble Baroness allow me to intervene? Is she really 674 putting forward as a defence to the argument that no one is in sympathy with what the Government are doing that one observation by the trading standards institute? Quite frankly, that is puny and tiny. I have a letter here from one officer there to another officer, ridiculing the manner of implementation. But may I come back to the main point? Could we have a long list, as I have produced a long list, of organisations and bodies that have actually said, "We not only approve of the principle but we are happy with the orders"?
§ Baroness Denton of Wakefield
My Lords, I was trying simply to cover the matter raised by the noble Lord in his point about the letter. I was explaining that it is not the purpose of government to ensure that we have a list of supporters of our activities: we take our decisions on legislation that we believe will look after the consumer, having consulted many organisations.
There is an enormous difference between ATOL and the number of companies it is responsible for—around 160—and an industry with some 20,000 or more operators. The costs on these operators, as opposed to large companies, would indeed be very high out of licensing. This is where we have moved; and I thank the noble Lord, Lord Monson, because in introducing his point, he gave us a defence of not becoming over-bureaucratic in instituting these directives but of trying to ensure that we keep in the marketplace the small and innovative company. It is quite often such companies which provide employment and family holidays. It is important that we recognise that ABTA, which has done a very good job with its members, is not a major part of the market. It has a view.
§ Lord Graham of Edmonton
My Lords, I am very grateful to the noble Baroness for giving way. I hope that this is my last intervention. What puzzles people outside the House is the question of cost, but no costing has been provided. The Government have decided that the provision is too costly. The figures produced by the CAA are ridiculed; namely, 16p, 21p and 37p and the global figures of £1 and £1.80. Can the Minister give the figure that the Government have which it is said will be far too dear? We believe that for doctrinal purposes the Government do not wish to add what they say would be another layer of bureaucracy.
§ Baroness Denton of Wakefield
My Lords, perhaps I may clear up that point. I have no knowledge of the strength of the CAA figures. However, I am not ridiculing them. As regards the very small but large number of operators in this area, I do not believe that the figures are relevant. It is not a doctrinal matter. There are only two sources of money: one is the taxpayer and the other is the customer. It is wrong to ask the customer for a small family holiday to carry the burden which, as my noble friend said, is unnecessary for the majority of holidaymakers. We should recognise that the industry comprises mainly companies supplying customers with a very satisfactory product. That is the Government's view.
675 I now turn to the question raised by two noble Lords about the inclusion of business travel. We have no alternative but to implement the directive as presented. I believe that if business travel had been exempted, the whole industry would have suddenly consisted of business travel, and those who are specialists in that sector would have found themselves with a large number of new competitors. In that area we have no choice. In another place we removed the surcharge limits from that market sector on the basis that it deals with customers who understand the market.
I am grateful to my noble friend Lord Finsberg for the practicality, realism, past knowledge and experience which he brought to the debate. He rightly said that if one is not to allow a surcharge, then the obvious reaction of the marketplace would be to include belt and braces on some things. The cost could then be much greater. I also support his point—which was raised by the noble Lord, Lord Graham—as to whether insurance should be taken out as a matter of personal choice. Many people now have comprehensive insurance cover. That is not part of this directive. Whether there should be an upper limit on the surcharges is related to the meaning of the words "occasionally" or "significant" in the regulations. The regulations have closely followed the wording of the directive. Any interpretation that we might place on such words would have no authority. It would be for the courts (ultimately the European Court of Justice) to interpret the directive, and any regulation which the court determined was not in accord with the directive could also be overturned.
I have every sympathy with those who have called on the department to define the words "significant", "occasionally", and other such words. In some areas, such as the definition of "pre-arranged", we have felt bound to offer an opinion. That will be set out in a guidance note. It is important to remind your Lordships that our view carries no particular validity.
§ Lord Finsberg
My Lords, I wonder whether my noble friend is accurate on that. As I understand it, on 26th November the Law Lords gave a ruling that it is now possible for courts to take into account what Ministers have said as reported in Hansard. If that is so, is my noble friend prepared to say what view she takes on the one or two points that I raised as regards significance?
§ Baroness Denton of Wakefield
My Lords, this is obviously an area in which I would not claim to have expert knowledge. I suggest that the ruling of the Law Lords was not about an EC directive. I shall take advice and write to my noble friend on that matter. He also suggested that officials approached one with syrupy words which resulted in excess baggage. In many ways it would have given me great pleasure to assure him that there was no excess baggage. There is a minimum of excess baggage. We have aimed to keep additional burdens to a minimum, consistent with proper implementation of the directive. The main area is the regulation dealing with surcharges which we brought into line with the current practice operated by 676 ABTA; namely, no surcharges in the 30-day period before departure and a requirement on the operator to absorb the first 2 per cent. increase.
If we had not done that, the protection which the United Kingdom consumer currently enjoys could be lost. We have also stipulated that brochures should contain a description of arrangements if the consumer is delayed at the outward or homeward point of departure. In addition, we have made it a requirement that the brochure should include a statement of the arrangements in place to protect the consumer in the event of insolvency and that that information should be given to the consumer before the contract is concluded. I hope that my noble friend will not think that I was too subject to syrupy words.
The noble Lord, Lord Monson, identified in the company operating in Scotland exactly the kind of operator to which we felt it was important to give alternative ways of meeting the directive requirements. We wanted to establish very clearly that, although there are many strong and effective high street giants in the industry, there are also individual companies running holidays which offer great attractions to people. That was one of our reasons for trying to walk the tightrope of balance which these regulations have done.
They are important regulations and it is an important market. It is one which represents for many people an important part of their quality of life which very often involves families with young children. We are extremely aware of that. We have endeavoured to ensure that they have not only protection under the directive, but also choice. It would not be my wish that we should bring regulations before your Lordships' House that ask the consumer to pay more for less.
§ Lord Monson
My Lords, before the noble Baroness sits down, can she say whether any EC countries, other than the United Kingdom and the Republic of Ireland, are implementing this directive as from 1st January 1993?
§ Baroness Denton of Wakefield
My Lords, the noble Lord will appreciate that it is important that the United Kingdom Government observe the legal requirements. So our decision is made irrespective of what other countries are doing. As we have the presidency, we should lead from in front. We understand that France and the Netherlands have implemented the directive.
On Question, Motion agreed to.