Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 2 NOVEMBER 2005
MS KAREN
BUCK MP, MS
SANDRA WEBBER,
SIR ROY
MCNULTY
AND MR
RICHARD JACKSON
Q40 Clive Efford: It would cover
the costs if you, say, arrived at Manchester and wanted to get
to Gatwick?
Sir Roy McNulty: Absolutely. That
is the similar to what the ATOL currently does for tour operator
packages.
Q41 Clive Efford: What assessment,
if any, have you made of the willingness of the travelling public
to take out insurance when they are made aware that they are not
covered?
Sir Roy McNulty: Are you talking
about insurance as in the corporate insurance market or the £1
levy kind of insurance?
Q42 Clive Efford: To cover them for
the failure of their carrier.
Sir Roy McNulty: In a 2004 ABTA
survey, four in five people agreed that a levy of up to £2
to help people in the event of an airline collapse would be acceptable.
Q43 Clive Efford: Some large airlines
do offer an insurance package. Presumably, because they are a
big airline, they are at an advantage over smaller airlines that,
perhaps, cannot offer such a package. Is there, in your opinion,
a concern from government in general (not just the Department
for Transport) that the levy is intervening in a marketplace for
travel insurers?
Sir Roy McNulty: I think, if I
might suggest, that is perhaps a question for the Minister.
Q44 Clive Efford: I just wondered
what assessment the CAA had made in their response to your recommendation.
Sir Roy McNulty: We followed a
line of thought which started with the logic that lay behind the
ATOL, that there is something about air travel; firstly you pay
a lot of money well in advance of taking advantage of it, quite
often, and, secondly, there is the risk of being stranded overseas.
We think that that logic still stands. We felt that there was
a good reason to extend it into the airline market. The Government,
for the reasons the Minister has explained, thinks otherwise,
and that is where we are.
Q45 Clive Efford: If there were more
publicity for the Schedule Airline Failure Insurance generating
increased demand, has there been any assessment made of whether
underwriters would be prepared to continue to underwrite insurance
policies in that market?
Sir Roy McNulty: Not to my knowledge,
but the Minister may know.
Q46 Clive Efford: Perhaps I can put
those last two questions to the Minister. First, on the issue
about whether there is concern within government about the levy
intervening in the air travel insurance market.
Ms Buck: That is certainly not
a consideration that I was aware of.
Q47 Clive Efford: In terms of making
an assessment of whether underwriters would be prepared to continue
to underwrite the SAFI insurance scheme if there were increased
demand?
Ms Buck: I am not aware of that
being a problem. That has not been flagged up as being a cause
for concern.
Q48 Mr Scott: Sir Roy, you mentioned
earlier there had been rumours about EUjet being in trouble. Is
it not fair to say they were more than rumours because there had
been lots of articles in the press about the parent company difficulties
for quite some time. I do not know if you would agree with me
but (even though it was an Irish registered company the parent
company, if I am not mistaken, was British registered) would it
not have been wise to perhaps warn the paying public in some way?
Would you agree with me that something should be set up to take
that into account?
Sir Roy McNulty: I do not think
we have ever seen it as our duty in relation to an Irish registered
airline to warn the British public on the basis of rumours, which
is what you are saying should be the case. There have been lots
of rumours, I can remember, about various airlines which ultimately
proved to be totally false. I think it is a very difficult area
for us to think of getting into.
Q49 Mr Wilshire: Minister, you referred
to this statement saying that you had had meetings with airlines.
The Committee has got a letter from Virgin Atlantic here dated
1 November. In a paragraph at the end of the first page it says:
"After the meeting on Monday 24 October a Ministerial statement
was circulated to the attendees for their approval." Is that
this?
Ms Buck: After the meeting we
had on the 24th, we discussed with the airlines a form of words.
Q50 Mr Wilshire: That was this statement?
Ms Buck: Yes.
Q51 Mr Wilshire: Virgin Atlantic
then go on to say: "We have since been told that if we do
not agree to the voluntary measures contained in the Minister's
draft statement we run the risk of being `named and shamed' in
front of the House of Commons Transport Committee Inquiry on Wednesday."
Is that true?
Ms Buck: No. Certainly not to
my knowledge.
Q52 Mr Wilshire: So Virgin Atlantic
are lying?
Ms Buck: Certainly I know absolutely
nothing about that. I am not calling anybody a liar; I can say
that I do not know anything about it. I have no intention of doing
any such thing.
Q53 Mr Wilshire: Could some inquiries
be made in your department? Could somebody write to this Committee
saying whether or not this is a true statement in this letter?
Ms Buck: Certainly, but as I say
I have absolutely no knowledge of it. No such thing was authorised
and, therefore, I find it hard to believe, to be honest.
Q54 Mr Wilshire: But you will make
some inquiries?
Ms Buck: Of course I will.
Q55 Mr Leech: Just on that point,
and then I will go back to what my original question was going
to be, are you suggesting that all these airlines are quite happy
to sign up to it, as far as you are concerned?
Ms Buck: Yes, we had a positive
meeting on the 24th (and we have said we would meet again), and
a form of words, as I say, open to variation but a form of words
on the basis of our discussion, was circulated and people expressed
they are content with it.
Q56 Mr Leech: Going back to the question
on the insurance side of things (and I do not know if anybody
will be able to answer this), has any work been done to work out
what the difference in cost would be to ensure that everybody
was covered for returns to the UK under their insurance policy?
What is the difference in costs between that and this proposed
£1 levy?
Ms Buck: Not that I am aware of,
but I am quite willing to say that I am not arguing that a levy
probably would not work out the cheaper system, but then that
is also true of a number of other areas of insurance. It would,
for example, be no doubt cheaper for housing associations to provide
contents insurance for all their tenants, but we do not do it.
Q57 Mr Leech: If the £1 levy
is actually going to be cheaper for consumers (and you have accepted
that ideally you want everyone to be covered by insurance), surely
this is a far better option than encouraging people to take out
the better insurance that covers return to the UK?
Ms Buck: No. I think what I said
was, clearly, I encourage people, not just in this area but in
other areas, to take out insurance or to take a decision on the
balance of the costs that they are making that they are prepared
to carry the risk. That is completely up to them. The thrust of
the approach, and why the decision was taken, was to say that
it is really, as a reflection of this changing world and the changing
arrangements that people make, for them to take their own decisions.
In the end, as I said in the opening statement, the alternative
approach is one of compulsion—no choice—and in a significant
minority of cases requiring people to carry two or even three
times the cost for the same level of protection.
Q58 Mr Clelland: Can I ask Sir Roy
where this £1 levy came from? What research or guesstimates
is it based on?
Sir Roy McNulty: The £1 came
from, first of all, establishing how big a fund would you need.
We have estimated that at around £250 million, which would
cover the cost of the collapse of a major tour operator in the
low season. If you have set your objective of building a fund
up like that and you aim to build it up over three to five years,
then a £1 per passenger levy does the trick.
Q59 Mr Clelland: Would the CAA administer
this fund?
Sir Roy McNulty: That, I think,
ultimately, would be for government, but it would seem logical
in the sense that we administer the existing scheme and we have
the capability to handle repatriation and exercises like that.
| 
