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Lord Borrie: My Lords, my name is associated with this amendment, and I am pleased to be able to follow the remarks of the noble Lord, Lord Bradshaw, who has made a clear case based most essentially on one fact—namely, that the behaviour of customers has changed over the past 10 years. Their behaviour 10 years ago was largely to use package holidays when going on a holiday abroad. The ATOL licence ensured that if the holiday did not take place and the customer lost money, compensation was available. More importantly, if one was stranded abroad on a package holiday, the scheme, through the licence, would enable one to get back home. The change described by the noble Lord, Lord Bradshaw, means that now there is no such protection.

There are trade associations who are not interested in consumer protection. However, one for which I have plenty of praise is the Association of British Travel Agents. For decades it has had arbitration schemes which use independent arbitrators when there are difficulties between tour companies, airlines and the passenger. It is fully in support of this change. The Government are always entitled to reject advice, but on this occasion they have had advice not only from what the noble Lord, Lord Bradshaw, described as their own regulator, the Civil Aviation Authority; they have had advice from Ernst & Young, which has done the figures, from the Consumers' Association, from Virgin Atlantic and from the Association of British Travel Agents. What more can you do?

The noble Lord has described what more there has been—there has been this latest Select Committee report from the House of Commons. I wonder what the Minister has got to put against it. I would hate to describe the Minister as arrogant. I know he is not. I have had experience of discussions with him on a number of recent Bills in which he has been involved, and he is the very furthest remove from any touch of arrogance. But I cannot actually find a suitable word for what he seems to have been guilty of up to this point in the discussion on the Bill, but it is not one which I think is easy for him to defend.

I want to mention one small aspect of his argument in Committee. He rightly said that there were many areas where insurance was perhaps desirable, but we—
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the Government, Parliament—do not make it compulsory. That is true even in road traffic matters, where we have had some kind of insurance since 1930, I believe. We make it compulsory only in relation to liability to third parties. But this is a very different situation. In this case there has in practice been protection for years and years, the result of which has been partly explained by the noble Lord, Lord Bradshaw. Many of those who now make their own travel arrangements, as is the custom nowadays, think they are covered by ordinary travel insurance, when they are not. If they happen to use a credit card, then Section 75 of the Consumer Credit Act gives them protection. I am glad to say that our Law Lord friends in the House of Lords, in their judicial decision earlier this month, said that that applied when the consumer bought things from foreign suppliers. So, the alternative supplier—namely the supplier of the credit card—is liable for any purchase, whether airline tickets or shopping purchases between £100 and £5,000, I think. But of course many people do not think about the subtlety of using a credit card instead of a charge card such as American Express or a debit card. There are other methods of payment, too, but they do not have that peculiar advantage of using a credit card which I have just described.

In practice we have had protection, but as the noble Lord, Lord Bradshaw, explained, it is a diminishing protection as ever fewer people go on package holidays as distinct from making their own arrangements. I think that that is a sufficient argument for this amendment, which is so modest in its implications and yet so significant if you think of people stranded abroad on their holiday.

Baroness Hanham: My Lords, I want to make it clear that we are fully in support of the amendment. We understand the concerns being expressed about the lack of financial protection for air travellers, particularly those who are not booking, as has already been said, all-in travel arrangements from travel agencies but, as is now much more common, making their own arrangements on the internet for flights and hotels.

Mercifully, low-cost airlines do not go bust regularly, but when they do it is a catastrophe for travellers who often find it very difficult and expensive to make alternative arrangements. It is also very inconvenient, as the noble Lord, Lord Bradshaw, pointed out, as changes often have to be made at extremely short notice, sometimes when people are trying to get back from their holidays.

It is clear that travel insurance is not a sufficient answer as the arrangements needed to rescue stranded people require either empty seats to be found on other flights or charter arrangements to be put in hand by an organisation geared to do so, such as the Civil Aviation Authority. Reimbursement of ticket costs may be available if people have used a credit card but, as the noble Lord, Lord Borrie, pointed out, that is not true if they use a debit card.
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If this amendment is agreed to, its prime purpose is not, or should not be, to alleviate the travel companies' responsibility under the bonding system but to ensure that all travellers are covered in a way that will bring the quickest and most efficient response to the emergency failure of an airline. It is estimated that 20 million passengers a year are not protected by the ATOL scheme. As we have heard, the £1 levy will be temporary until a fund has built up that is adequate to support what is proposed. The purpose of that is to provide the necessary assurance to all air passengers that they are covered for repatriation in the event of an airline failure.

The proposals require far more consideration by the Government than was given in the letter of the noble Lord, Lord Davies, to the noble Lord, Lord Faulkner, following the Committee stage. The noble Lord, Lord Borrie, struggled for a word to describe the Minister's attitude. I would never describe the noble Lord, Lord Davies, as arrogant, but on this issue and on that letter I would describe him as being somewhat complacent about the situation.

The advantages of a levy have been well rehearsed by the previous two speakers. It is obvious that it would be extremely easy to collect and is probably not something that people would notice very much. The variation in the cost of air tickets is now so enormous that you do not know whether you are paying for the seat, for the sandwich or for the fuel. You are pretty clear that the person sitting next to you has paid four times more than you have, and you hope that it is not the other way around. The sum of £1 seems a very small amount to pay in order to provide the reassurance that is now required in view of the way the travel industry has developed. This is an important proposal. It may look like only a small sum of money, but sometimes the smallest sums reap the richest and greatest rewards.

6 pm

Lord Faulkner of Worcester: My Lords, I too am delighted to add my voice in support of this amendment, which is an improvement on the one I moved in Committee. Indeed, our debate at this stage is a little like an action replay of the Committee stage where everyone who spoke, with the exception of my noble friend on the Front Bench, was strongly in support of the principle of the levy. The amendment of the noble Lord, Lord Bradshaw, is an improvement on mine because it is more flexible. It makes it clear that if the fund builds up and is not drawn on, there is no need to go on collecting the levy indefinitely, so allowing the fund to reach absurd proportions.

This is the right thing to do because it would restore to some extent a measure of fair competition between the reputable travel trade, which is required to operate its own bonding and licensing regime, and the airline operators which offer their customers no such comparable protection. Like the noble Lord, Lord Bradshaw, my noble friend and the noble Baroness, Lady Hanham, I have struggled to understand the logic behind the Government's decision to oppose the CAA's proposal.
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I checked to see how this issue was covered when the Civil Aviation Bill was debated in the other place. But this matter was not properly debated. Indeed, as the noble Lord, Lord Bradshaw, said, the most thoughtful contribution on the subject of a levy from the Commons came from the Select Committee, which produced a very powerful and unanimous report.

You cannot argue that this would place a regulatory burden on the travel business. The travel industry itself would save between £80 million and £100 million a year through switching from the existing bond to a levy. It would also add a financial dynamic to the marketplace as the cost of ATOL bonding places a huge burden on new travel companies that are trying to set up. Also, as the noble Baroness, Lady Hanham, pointed out, it would add almost nothing to the cost of air travel. Already the airlines are piling on to their passengers surcharge after surcharge.

At the weekend I did a little test purchasing on the internet. I investigated the cost of flights to and from Malaga with easyJet from Luton. The air fares for flights out and back next week came to £192.48 per person. On top of that "taxes and charges" were added, amounting to £9.50. The company then said, very kindly I thought:

I think that this is called inertia selling. You have to remove the offer from your booking. How much was it? Was it £1? No, it was £10, which is £1 more than it was when I last looked at the site on 8 March. Then, when you come to pay, the great credit card scam slips in. I looked in vain for the suggested message which my noble friend Lord Davies said in his letter to me of 10 January, for which I thank him, the Government were encouraging UK airlines to incorporate in their booking process, making the point that payment by credit card would provide some financial protection. Not a word did I see on the easyJet booking page. Instead, it stated:

Even a debit card transaction carries a surcharge of £1 on the easyJet site.

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