Air Travel Reserve Fund (Hansard, 24 July 1985)

§ Mr. Michael Spicer

I am grateful to all those who commented on the proposals for strengthening the present arrangements for protecting air package holiday makers. There was virtually unanimous support for the proposal that the Air Travel Reserve Fund Agency should be wound up, including from the agency itself, and the fund transferred to the Civil Aviation Authority to administer on a trustee basis. Some of those consulted were, however, concerned about questions of accountability under the new arrangements and, in particular, that the advisory committee which is to be set up under the new arrangements should be able to play a strong and independent role.

In the light of the consultations, I can confirm that the agency is to be wound up. But we are amending the new arrangements in some respects to meet the concerns which have been expressed.

The trustees of the fund will be members and officers of the CAA. My Department will draw up a trust deed. Amongst other matters, the deed will define what payments can be made from the fund. I would expect that in deciding what payments to make, the trustees' discretion would be no narrower than the discretion which bond administrators have in administering payments from tour operators' bonds. The trustees will have power to obtain banking, accountancy and other services; to delegate the settlement of eligible claims to bond 541W administrators; and to decide on whether an on what terms top-up insurance should be arranged. The trust deed will be drawn up in a way which ensures flexible and speedy settlement of claims from holiday makers. The deed will also require the trustees to publish and submit to my right hon. Friend an annual report and accounts.

I received several suggestions that the trustees of the fund and the proposed advisory committee should be merged into a single body. I have not been able to accept this. The committee will include commercial interests and I have concluded that it would not be right for any trustee of the fund to be a person representative of a commercial interest in the travel trade.

But I am persuaded that the committee should enjoy greater stature and independence than was envisaged in my original proposals. To this end, it will be appointed by my right hon. Friend, and not by the CAA, for at least the first two or three years of its existence. It will have an independent chairman and its members will be drawn from the travel trade, the air transport users' committee, the trustees of the fund and independent representatives. I am pleased to say that Sir Peter Lane has agreed to serve as its first chairman, and we would expect to appoint members of the Air Travel Reserve Fund Agency to the committee.

The committee will exercise an important role in relation to the new arrangements for protecting holiday makers. Its terms of reference, which my right hon. Friend will draw up, will require it to advise on the operation of the fund and bonding arrangements; to guide the trustees of the fund on the use of their discretion when making payments, including the mechanisms for handling claims; and to seek a uniform approach from bond administrators when making payments from bonds. One of its early tasks will be to consider with the trustees the question of top-up insurance. My Department will also consult the committee on the principles of the trust deed to be drawn up.

The committee will be required to report annually to my right hon. Friend on its activities, at the same time as the annual report which the trustees must make. I would expect the committee, either in its report or at any other time, to draw attention to any problem areas where action is required. My right hon. Friend will ensure that copies of the annual reports from the trustees and the committee are available to Parliament when published.

An order to wind up the Air Travel Reserve Fund Agency and transfer the fund to the CAA will be laid early in the next Session. I would expect the committee to be appointed in good time to advise on the transition to the new arrangements, including the principles of a trust deed. Subject to the committee's views on the transitional arrangements, the agency will probably be wound up at the end of February next year. Sir Kenneth Selby will remain chairman of the agency until then.

Subject of investigation	Chairman	Date established	Date of report
Channel Tunnel and Alternative Cross Channel Services	Sir Alec Caimcross	April 1974	1975
Trunk Road Assessment	Sir George Leitch	December 1976	1977
Motorway Service Areas	Peter J. Prior	November 1977	1978
Road Haulage Operators' Licensing	Christopher D. Foster	December 1977	1978

542W

My right hon. Friend and wish to place on record our gratitude for, and appreciation of, the vital role played by the agency over the last 10 years in bringing peace of mind to holiday makers. Sir Kenneth Selby, as chairman, and members of the agency past and present have devoted many hours of unpaid service to ensuring that holiday makers do not suffer financially from the collapse of a tour operator.

I believe that the new arrangements will build on the agency's pioneering work and will give air package holiday makers an even better and more flexible system of financial protection. The Government will in due course seek powers whereby the CAA can replenish the fund, once it has taken it over, by means of a levy on ATOL holders. With the improvements which are being made to the system, however, I can see no reason at present why the CAA should need to impose a fresh levy for the foreseeable future.