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Lord Berkeley: My Lords, does my noble friend agree that the cost of booking by phone, where you have to hang on for two hours, is probably about equal to those charges?

Lord Faulkner of Worcester: Or even more, my Lords. Indeed, other airline booking sites such as Ryanair have introduced the novelty of a charge of £5 for a bag weighing 20 kilograms on its flights, and again not a word about financial protection if you use a credit card to pay.

There is a huge problem of perception here, as other speakers have said. People book their cheap airline tickets in the belief that they are protected by some sort
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of fund which will bring them home if the airline collapses, as EUjet did last year. Back in 1997, the ATOL scheme protected almost every traveller—some 98 per cent. By the end of last year the proportion had fallen to a little over half. Only last week the travel trade press reported that some tour operators, those with their own airlines, are looking at ways of pulling out of the ATOL scheme following the judicial review decision in January. That is more bad news for consumer protection.

By continuing to resist the CAA proposal for the £1 levy, I am afraid that the Government are storing up huge problems for themselves. We have not had the last airline collapse, and I really do not want my noble friend to have to come before the House and explain why tens of thousands of British holiday-makers are stranded abroad because no fund was in place to bring them home when their airline went bust. It cannot make sense for the airlines to continue to exploit their passengers who fall for their insurance schemes and credit card rip-offs while at the same time deny reasonable protection to everyone who flies from a British airport with a simple £1 levy. I am very pleased indeed to support the amendment.

Lord Howe of Aberavon: My Lords, I wonder quite why I find myself taking part in this debate because it is not a topic into which I normally venture. It may be because I smell the scent of aviation fuel after having had the privilege of representing for 22 years the eastern frontier of Gatwick airport. The other reason is that I declare an interest as honorary president of the Consumers' Association—Which?, as it now is. I cannot add any substance to the arguments already advanced, except to sum them up in a way that seems to me should be overwhelming to the Minister as he sits in his place.

Never have I previously encountered a proposition of this kind, one which has the support of almost every organisation in sight: almost every organisation in the travel industry, the Parliamentary Select Committee in the other place, along with every consumer representative association. However, the Minister stands alone, unable to summon any witness or supporter to his aid. The argument has been advanced that the proposal is in some way unacceptable because it would be a compulsory scheme, but that was a characteristic of the ATOL scheme before it. A further argument has been advanced that it is in some way a stealth tax. First, it is not a stealth tax; secondly, the sum involved is so minute as to be invisible; and thirdly, it is a charge which it has been proclaimed in advance will be reduced as soon as the fund reaches a point of sufficiency. Having read the Minister's speeches at previous stages of the debate, I find it impossible to work out quite why so Horatio-like he stands upon such a fragile bridge.

I will try to express the nature of the proposal in a different way. Far from being a tax, it is an immensely attractive one-way bet. A pound a throw and the reward, if you ever have to claim it, could be a substantial sum. In every conceivable way it is beneficial, save only for the Minister, who is
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proclaiming himself—sadly, alas, and uncharacteristically—to be a ministerial masochist. I wish him well, but do not believe that he will convince the House in any way.

Lord Clinton-Davis: My Lords, I am delighted to follow the noble and learned Lord, Lord Howe of Aberavon, whether or not he was brought to the debate by the smell of aviation fuel. He may have other reasons—there are better ones.

My noble friend, for whom I have a tremendous regard, was for many years a colleague of mine in the Commons. I am delighted that he is here, but I am profoundly unimpressed by the arguments that he has adduced. When we debated the subject in Grand Committee on 8 December, he said that this decision was arrived at in full recognition that there were as many arguments on one side as on the other. I have heard arguments only on one side—except from him. Apart from the airlines, I do not think that anybody supports the idea that he now propounds.

I say that with some reluctance, because I am totally baffled by the stance that the Government have taken on this issue. The position has been recommended by the Civil Aviation Authority, among many others, as was said by my noble friend Lord Borrie. What arguments are to be adduced here?

As far as I know, the organisations representing passengers are totally in favour of doing away with the present position. As far as I know, most consumer organisations are also in favour of this. I am totally bewildered by the stance that my noble friend has taken in this regard, but I am prepared to absolve him. He is not the Aviation Minister. He is determined by policy made by other people. I have a very high regard for him. I hope he will not let us down, but I fear that he will. On this occasion, I cannot think of a single issue that defies the logic of this amendment, which I wholly support.

Lord Davies of Oldham: My Lords, we move from arrogant to complacent. As I recall—the noble and learned Lord, Lord Howe, will perhaps confirm it—Horatio had an attribute of courage. Lonely I may stand, but I also recall that Horatio had considerable success in his lone stance with two colleagues. On this argument, I have more than two colleagues on my side.

I intend to address the issue in principle, because I am certainly upset by the statement of my noble friend Lord Clinton-Davis—I was grateful for his kind words, until he delivered the killer blow—that he could find no one who agreed with me. I emphasise that there are arguments on the other side, which I will deploy as best as I can in a moment. Those arguments convinced the Government to take their stance, fully aware of the representations received from other quarters and mindful that, as the noble Lord indicated and other noble Lords have emphasised, the Select Committee in another place took a different view from the Government.

Let me deal with a less than courageous response, the low blow that I could deliver at the end of this debate. That would be a little demeaning, but ought to
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be effective, if noble Lords recognise that at this very late stage of the Bill we can deal only with amendments that deliver what they say that they want to deliver. The problem with this amendment is that it does not.

6.15 pm

The amendment will not give extra protection to airline passengers. While it widens the contributors to the Air Travel Trust by charging all airline passengers on all UK flights, it does not likewise widen the beneficiaries of the fund. The Air Travel Trust can pay out only to customers of package operators. It cannot pay out to flight-only customers unless the deed governing the trust is varied to extend the beneficiaries under it. Varying the deed is a matter for my right honourable friend the Secretary of State. The new clause does not give him the specific power to do this. Airline passengers, therefore, could be left paying for a benefit that they could not access. The proposed levy would simply add a financial burden to more than 20 million airline passengers per year, yet those passengers might not benefit from the Air Travel Trust if their airline became insolvent, because of the deficiency in the amendment. That is why I hope that it will not be pressed to a vote—it will not put in the Bill that which noble Lords intend.

It would be a weak response if I relied solely on that matter. I have been challenged to identify whether there are any arguments that substantiate the Government's position. We accept that there is considerable weight of opinion on the other side. It was voiced in this House both today and in previous debates on the Bill. As I mentioned, the Select Committee in the other place took a different view. Originally this was a proposal from the Civil Aviation Authority, a body that we also take seriously on these matters.

We oppose the levy in principle. We considered the Civil Aviation Authority's proposal carefully, but we were not convinced that it would be fair, fully effective or proportionate. Our arguments are these—first, it is not fair because the bulk of the £250 million fund, which the CAA intended to build up, would have been spent on refunds, not on repatriation. It would have benefited in particular those who take expensive trips with financially insecure companies. Moreover, as a matter of principle, the state does not generally organise refunds for products where the supplier goes bankrupt before delivery. That is a Pandora's box for the House to recognise if ever there was one.

Secondly, it is not fully effective, because independent travellers would be covered only for their flights—not for their hotel, campsite or car-hire company—solely for the flight.

Thirdly, it would not be proportionate, because UK airlines have committed themselves already to helping stranded passengers return home at moderate cost. The European Low Fares Airline Association has
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certainly reviewed the experience last summer with EUjet and agreed to improve arrangements; for example, better communication, keeping offers open for at least two weeks and making seats bookable. These days, when there are so many options for travel, people are far less likely to be stranded overseas, with no alternatives to getting home, than would have been the case in previous decades.

As regards refunds, travellers have other ways of protecting themselves. They can buy insurance, which covers scheduled airline failure. They can pay by credit card, to which my noble friend Lord Faulkner referred. I recognise, of course, that that carries a surcharge but it gives protection under the Consumer Credit Act for transactions over £100. We do not believe that those who have protected themselves should have to do so twice over, as they would under a levy. Instead we shall continue to encourage airlines to include information to passengers booking online that flight-only bookings are not ATOL-protected. Both British Airways and Flybe have posted such a message and amended the travel insurance they sell to include cover for scheduled airline failure. British Airway's insurance extends to all the oneworld alliance partners. Flybe issued a press release on 1 March to draw attention to its new insurance product, offered in conjunction with AIG Insurance. Ryanair has a scheduled airline failure insurance policy available for customers to purchase from 27 March, yesterday, in conjunction with primary insurance. Some other airlines are working on this, and those already committed account for 30 to 40 per cent of the CAA's target group. In addition, the Government understand that more general travel insurance providers are working on including scheduled airline failure.

So events have moved on from the CAA's study, which led it to make its recommendation. The CAA's study reported that only about 10 per cent of travel insurance offered scheduled airline failure cover. The situation is being transformed. Increasingly, media travel pages are drawing the need for personal financial protection to passengers' attention. In addition, there is information for passengers on the CAA, FCO and Air Transport Users Council websites. The Foreign and Commonwealth Office website has been updated to alert passengers that paying by credit card can bring financial protection—a point to bear in mind when deciding whether to pay by credit card.

We have asked the CAA to review the existing ATOL bonding arrangements to make them less burdensome for tour operators. It has already consulted the industry informally and will go out to further consultation on its proposals very shortly. That may result in tour operators paying a single payment per customer instead of financing both a
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bond and a contribution to the Air Travel Trust Fund. Rather than extending compulsory cover beyond those caught by the package travel directive, we are looking to make the existing ATOL system less onerous. The directive is, however, under review by the European Commission.

There are many areas where insurance is wise but the Government do not make it compulsory. The Government do not make it compulsory for medical insurance to be taken out for travel abroad, though people get ill or become injured on holiday. The Government do not make compulsory personal possessions insurance for travel abroad, though people lose valuables or have them stolen. The Government do not make compulsory car breakdown insurance, though people are often inconvenienced by breakdowns far from home.

One could say that any of these eventualities is just as likely and just as distressing as being caught up in an airline insolvency. My right honourable friend the Foreign Secretary launched only last week on 21 March a new guide to consular services, Support for British Nationals Abroad. Over the past year consular staff dealt with many traumatic cases, including 4,000 British nationals hospitalised overseas, 4,000 deaths and almost 6,000 British detainees. In his Statement in another place my right honourable friend said:

The Chancellor announced in the Budget that the Government would support with an initial endowment of £1 million the creation of a new terrorism relief fund to provide rapid relief to victims of terrorism at home and abroad. However, that is a unique and particular risk, an extreme case which we consider merits government intervention.

Travel has changed substantially from when ATOL bonding was introduced in the 1970s. In those days air travel was for the few. Now it is for the many. The network of destinations and carriers has given people a choice unimaginable 30 years ago. The Government believe that encouraging personal insurance is much more in keeping with these trends. It is not for the state to step in and compulsorily enforce consumers' responsibility to themselves for the protection they need on their holidays.

To summarise: in view of the CAA review of ATOL bonding and the improved availability of consumer information and scheduled airline failure insurance, the Government do not intend to alter their decision against a mandatory financial protection levy on international flights.

Of course, I recognise the point that my noble friend Lord Faulkner made on the cost of EUjet travel insurance. However, travel insurance covers much
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more than just the flight home. I am talking about full travel insurance. That is the message we must get across to the increasing multitude of travellers. One is at far greater risk from incidents other than airline failure. We therefore have strong arguments on our side. I hope noble Lords will recognise that at least I have met my noble friend's charge that there are no arguments on the other side. We said all along that we recognised that the CAA had some good arguments to put before us, and we considered them very carefully.

I hope that today I have deployed a convincing case against the argument, but I also hope that noble Lords will forgive me if I reiterate the point which I made right at the beginning—this amendment does not deliver what it sets out to achieve. It ought not, therefore, to be in the Bill.

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