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Exemption From Contributions

Volume 890: debated on Monday 14 April 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

The Secretary of State may, at any time, arrange for the introduction of a scheme under which contributions shall not be payable to the Fund in respect of customers insured against any losses or liabilities by the air travel organiser with an insurer approved by the Department of Trade and no payments shall be made from the Fund in respect of any losses or liabilities so insured; and the terms and conditions of such a scheme shall be such as the Secretary of State may by order prescribe, and any such order shall be contained in a statutory instrument and not be made unless a draft thereof has been approved by a resolution of each House of Parliament.—[ Mr. Higgins.]

Brought up, and read the First time.

10.1 p.m.

I beg to move, That the clause be read a Second time.

With this new clause we may discuss also Amendment No. 31, in Clause 4, page 6, line 11, after 'to' insert:

'section (Exemption from contributions) of this Act and'.

Amendment No. 31 is consequential on the new clause.

The Bill raises two main political issues. The first arises from the misleading statement by the Secretary of State for Industry as a result of which a large number of our constituents felt that they lost money following the Court Line collapse. That is a matter to which we can return at later stages of the Bill. It is well known that the view of this side was that the Secretary of State should have resigned and that compensation should have been paid rapidly rather than after a delay out of public funds. Instead, the Government have introduced the Bill and suggested the extraordinary solution that for the moment at any rate, pending the report of the Ombudsman, compensation should be paid out of a levy raised on people taking their holiday this year and next—a situation which I have described as bizarre.

The second main political issue concerns the protection of tourists from loss in future. We well understand and sympathise with the views expressed on this subject, though we cannot help noticing a clear trend which appears to be developing, namely, that the Government should intervene on all occasions and set up a fund financed from a levy which will be used to compensate any who might suffer loss as a result of entering into commercial contracts, whether it be tourists or, as with the latest legislation, insurance policy holders. A number of my hon. Friends have said that they are not sure where the policy will stop and whether in future there will not be a levy on those who buy secondhand motor cars, for instance.

At all events, the essence of the Government's policy appears to be that the protection must be provided under a Government scheme, even though it may be possible to provide equally effective protection by means of insurance or by some other arrangement made by the private sector.

The clause seeks to distil many of the points raised in Committee. If a levy scheme is to be introduced, it should at least be open to travel organisers to undertake insurance arrangements to provide an alternative form of consumer protection instead of paying the levy.

We have advanced this alternative with such determination because we believe that the levy scheme intrinsically fails to differentiate between companies which are efficient and soundly-based and the inefficient operator with inadequate financial resources who may have over-traded. The general feeling we have expressed throughout the proceedings on the Bill has been that if a firm is able to provide cover by insurance rather than by means of the levy, it should, at the very least, have the option to do so.

In Committee we discussed at length the likely cost. On Second Reading my hon. Friend the Member for Tonbridge and Malling (Mr. Stanley) suggested that the cost per passenger for the average holiday might be 45p as against the sum which we refined in Committee, which could be as low as 35p. In contrast, the Minister has so far been unable to produce a figure of comparable cost under the levy scheme. We remain convinced, and have not yet been persuaded otherwise, that in many cases the Government scheme would result in the cost to holiday makers being significantly higher than it would be under the insurance scheme.

In Committee a number of cases were cited, one of which was the case of Panorama Holidays. The Minister sought to argue that this arrangement would in some way favour the large operator rather than the small one. We do not accept that. It is clear that sheer size is not a necessary consideration. It may well be possible for the small but efficient operator—one who has prudent management and reasonable financial resources—to obtain insurance on a reasonable basis even though the scale of his operation is not as large as that of some operators. I shall not weary the House with the details, but we went in some depth into the question whether this was so. We stressed time and again that we believe that travellers should be given the option of travelling under one system or under an alternative system, if that could be provided by the travel agent, on an insurance basis and on a basis which was likely to be cheaper than the Government scheme.

This would present some difficulties for the Government because it would mean that certain companies would be operating and not contributing to the Government levy. However, it is clear that part of the levy will not go towards protecting future holiday makers or those who take their holidays this year or next year. It will go towards financing the compensation for those who suffered last year. Unlike the insurance case which has recently been covered by a Bill introduced in another place, in this case the Government propose to make the claim retrospective.

If some people are allowed to opt out of the scheme, it will present difficulties for the Government. Furthermore, some who take holidays would not be contributing to the levy and would not, therefore, be contributing towards compensation for those who lost their money in the collapse of Court Line and other companies last year.

That is the essence of the case we wish to make on new Clause 1. It is an important matter. To some extent it strikes at the basis on which the Government seem to be engaging in various forms of consumer protection. But of course, the important point to bear in mind is which particular group of consumers they happen to be protecting. As in other cases, in this case the Government scheme seems to be cross-subsidisation from one group of consumers to another, in a wholly arbitrary and inequitable manner.

I hope that having had time to reflect on the matter in the intervening period, the Minister will have considered carefully the clause I now propose and will be prepared to say—which would be the sensible thing to do—that he thinks it is quite reasonable that operators should have the option of covering the matter by insurance rather than the levy if they wish to do so. Similarly I hope that he will agree that those who are travelling should have the option of choosing between an operator who is carrying out his arrangements under the Government's scheme or is making alternative arrangements which, as I have said, may be significantly cheaper than those which the Government propose in the Bill.

At the beginning of his observations the hon. Member for Worthing (Mr. Higgins) threatened that he would play that oft-repeated and now somewhat broken record about the Secretary of State for Industry. That, I gather, is a pleasure yet to come, although the hon. Gentleman bruited the idea in his opening remarks. I hope that he will not be tempted into that course because we had innumerable discussions about that in Committee. The fact remains, as we had to tell the hon. Gentleman, who seems simply not to have learned, that the Parliamentary Commissioner for Administration is investigating these matters, wholly appropriately. The hon. Gentleman seems to misunderstand the totality of that situation.

Regarding the hon. Gentleman's doubts about the wisdom of providing protection in certain instances, he played the thing both ways. What he was saying was "Of course we do not oppose this form of protection, but we do not know where it will end." He wants the best of both worlds. But the Opposition have not voted against the principle in this matter. They will not vote against it. Therefore it would be as well for the hon. Gentleman to come absolutely clean on this point.

I come to the new clause. The hon. Gentleman tried very hard—I give him credit for this—to meet the pertinent objections which were raised in Committee. What he is seeking to do is to enable the terms and conditions of an insurance scheme to be vetted by Parliament. That would avoid, according to him—I suppose that he may be right in some respects here—some shortcomings in the existing insurance schemes. What he has not done is to deal with those shortcomings or to suggest that there is, excepting one or two isolated instances which he mentioned, any effective form of insurance available here.

The new clause could mean two quite distinct things. Taken in conjunction with Clause 6, the new clause would empower the Secretary of State to wind up the reserve fund and replace it with an approved insurance scheme. I do not believe that to be the hon. Gentleman's aim. In any case, such a procedure would be questionable, and it would be much more appropriate, if that were his intention, for a major change of that character to be introduced by legislation. What I assume is the objective here is to enable a scheme to run concurrently and in conjunction with the reserve fund. Perhaps the hon. Gentleman will clarify that. I would assume that that is the essential purpose of the new clause.

Clearly, it could be interpreted either way, and one would need to see how the matter developed, as we made clear in Committee. But presumably it would operate perfectly well in conjunction with it. Either alternative is one on which we would be prepared to see a concession from the hon. Gentleman.

It is clear that the hon. Gentleman has not really made up his mind about that. The fact is that I reject the first possible understanding of the amendment because I say that any major change of the character that that envisages should be made by legislation.

I come to the second concept, and I submit that there are still very serious difficulties which face the hon. Gentleman in presenting his case. He mentioned the possible adverse effect on the reserve fund itself. But I do not think that he comprehended how injurious that would be to the operation of the reserve fund.

If such a scheme were introduced and adopted by the major operators, the viability of the reserve fund would be seriously prejudiced and greatly reduced. Inevitably, it would be geared to the income from and claims in respect of firms which insurance companies were unwilling to cover—whatever the reason.

The hon. Gentleman said, as he did on Second Reading and in Committee, that the Government had failed to differentiate between the sound and inefficient firms. He was assuming that the insurance companies would necessarily be able to determine which was efficient and which was not. I do not think that that is right. I believe that the insurance premium which the insurance companies would charge would be much more influenced by the financial backing available to individual air travel organisers than by their efficiency, which they could find very difficult to evaluate.

Surely the whole basis of insurance is to try to assess financial efficiency. It is financial efficiency which makes an insurance company decide on a high premium for one company and a low one for another.

Perhaps it is because the insurance companies find it so difficult to evaluate that question that there has been no comprehensive insurance scheme coming from private insurance companies to cover the very contingencies that we are discussing.

That is the real answer to the case which the hon. Member for Worthing has presented. He has not been able to produce a tittle of evidence beyond that produced in Committee to show that there is any available insurance to cover anything but the firms which have substantial financing backing. That is what the cases to which he referred really involved. The burden of proof rests heavily upon him. If he cannot discharge that burden of proof and cannot produce the evidence required, his case falls to the ground.

There is no evidence that the insurance market would be prepared to make general offers of insurance of the type that the hon. Gentleman and his supporters envisage. Therefore, I do not think that the Secretary of State would find himself in a position to give approval to an insurance scheme, and it is clearly undesirable that he should take powers which are unlikely to be used.

For those reasons and because the Opposition have failed singularly to make a case which can possibly stand up, I urge the House to reject the clause.

Before the hon. Gentleman sits down, will he address his mind to the question of cost? Contrary to what he said, the Opposition quoted a number of specific cases in Committee giving figures on the basis of which companies were able to insure specific passengers for specific amounts and specific fares. The hon. Gentleman has not attempted to estimate what the cost would be in comparison with the Government's levy scheme.

I was not a member of the Standing Committee.

The hon. Member had every opportunity before the debate to read what went on in Committee. Anybody who participates in these debates without having taken the precaution of reading the Hansard for the Committee stage does not do himself justice.

I recognise that the hon. Gentleman cited Panorama Holidays and one or two other examples, but in each they were firms that had substantial financial backing. That is the crux of the matter. Insurers are not able to evaluate the criteria of efficiency, and inevitably smaller firms would find themselves in an almost impossible situation however efficient they were.

The hon. Member for Worthing asked me to comment on the cost. I shall do so briefly, although I refer him to what I have said previously. In the very isolated aspects of cover that insurance would provide, it would be immediately cheaper. I recognise that and I have said so before, so I do not know why the hon. Gentleman is so astounded. The hon. Gentleman suggests that the cost would be 35p or 40p. I see the hon. Member for Uxbridge (Mr. Shersby) refers the hon. Member for Worthing to certain passages in Hansard that no doubt contain my observations.

I accept that in the immediate future payments under the Government scheme would be considerably larger, but our fund would be variable from time to time. It is to be flexible and we shall have to see what develops during the operation of the fund. Therefore, at some stage there may well be no payment due, which could never operate under the hon. Gentleman's scheme, because insurance premiums would be continuing and would have to be met by the firms involved.

But that is not germane to the main points that I have already made. It does not matter whether it is 35p or £1 or £2 at this stage. What is important is that we should cover the generality of passengers, the travelling public. That is what this is about, and the hon. Member wants to wreck the scheme.

It is bizarre and absurd of the hon. Gentleman to say that we are trying to wreck the scheme. What we are trying to do is to improve it. He said that he had answered my question about the comparative figures in Committee. Perhaps he would like to give us the Hansard reference for when he produced the figures in Committee. At a rapid glance, I cannot see it.

At a rapid glance, I cannot. However, I caught the hon. Gentleman out in Committee when he asserted that I had failed to deal with an argument and he subsequently had to apologise. On referring to Hansard he will find that I dealt with the subject of cost and, if I recall aright, I referred to the figure of £2 as being a possibility. However, the hon. Gentleman will have to use his hon. Friend the Member for Uxbridge to look up the reference carefully and he will see that I dealt with this argument.

It comes a little odd from the Under-Secretary to suggest that it is an essential pre-requisite to taking part in a debate to have read all the documentation. It is not very long ago that in Committee he was suggesting in the circumstances of a strike by the printers, against the Government's social contract, that we did not need any of the documentation, did not need to study it, that nobody needed to worry about these things. It is a different story tonight. But those were the days when the Government were in difficulties because of that strike. Now the Under-Secretary sings a different tune. He should behave with a little more humility and he may get along a little more quickly.

The Under-Secretary knows why we did not vote against the principle of the Bill. We certainly do not approve of this odious way of compensating those who lost their money in Court Line disaster, but we think it long overdue that the Government should implement their election promises. We believe that those who lost their money on the Secretary of State's say-so should at long last be paid.

I would not dispute that I was extremely nice in Committee—so was the Under-Secretary of State. He was then trying to find excuses to give to those who had not been able to read the documentation. Tonight he is being abusive to those who have not had time to do so. That is why I am being a little hard on him.

What we find so odious about this legislation is the fact that it seeks to perpetuate another of the Government's dogmas. It seeks to lay down the law that bad money should drive out good money and that bad business should drive out good business.

I should like the Minister to say what was the view of British Airways on the Bill. Was British Airways consulted and did it welcome the principle by which an airline, which could be insured against these risks for a very low premium, will be compelled to pay the same premium as everybody else? Do I understand by the Minister's silence that British Airways was not consulted about this matter? I shall gladly give way to the Minister if he wants to tell the House.

When we hear stories about the greater liaison which would occur under an enterprise board, or through the nationalised industries by their immediate and quick responses to Ministers, we can assume that perhaps now and again there will be some failure of communication. Was British Airways consulted and did that body give its views? Are we to be given that information by the Minister in the interests of open government? It is very quiet in here tonight. I have found it easier on other occasions to get Ministers to their feet, but tonight things are a little sticky for them. I do not blame them. After all, one of their colleagues moved only a few yards and he got fired for it.

The Under-Secretary of State said that it would not be proper for the fund to be wound up by order—at least I think that is what he said. Am I correct in that? My goodness, it is getting more and more difficult to get a response from tthe Minister.

I am always loth to intervene when the hon. Gentleman is on his feet, because it tempts him to go off into even more irrelevant matters. However, as he is on the point of going into something which is wholly erroneous, I should inform him that he will find that I did not say what he ascribes to me. What I said was that if the amendment were taken in conjunction with Clause 6, it would empower the Secretary of State to wind up the reserve fund and replace it with an improved insurance scheme. But I did not assume that to be the Opposition's aim in moving the amendment. I said I thought that a major change of that character would require legislation rather than the course thought to be appropriate by the Opposition.

I am grateful to the Minister, but I am still as puzzled as I was before. Clause 6 stipulates that:

"The Secretary of State may at any time, after consulting with the Authority, the Agency, and persons appearing to him to be representative of the interests of persons … by order provide for the dissolution of the Agency, the winding up of the Fund and the disposal of any assets then standing to the credit of the Fund."
In other words, he has power to do this by order, but will not accept our amendment which would make sense of the whole matter.

What the hon. Gentleman is thinking of is the replacement of the scheme by something different. Of course, the winding up of the scheme is appropriately done by order.

10.30 p.m.

Why it should be wholly appropriate to wind up the whole scheme and replace it with nothing by order, but wholly inappropriate to wind it up so that it may be replaced with the provisions of another part of the Bill by order, must be beyond the wit of anyone other than the hon. Gentleman to explain. I cannot understand it.

But we are sliding away from the point of the amendment. It is a simple, straightforward and permissive clause—I am not usually on the side of permissiveness—which allows the Secretary of State to allow the financially secure, responsible, well-run firms, the firms of good repute, to get the benefit of a well-managed business, and to allow their customers to have the benefits that should go to a customer who thinks before he purchases and who make sure that he goes to a reputable firm.

In essence, what will the Bill unamended do? It will merely allow every lame duck and every black sheep in the business to feed in the hon. Gentleman's agency, and feed off the money provided by those who run their businesses well and those customers who think before they buy.

The Bill already allows exemptions in the categories of holiday maker included in its provisions. The Under-Secretary's contention that we must have regard to the generality of the travelling public must be seen in the perspective that by no means all travelling holiday makers are to be covered. There are substantial exceptions, including those travelling other than on licensed air transport, which could embrace whole classes of holiday makers travelling abroad. The Bill also does not include those who holiday in this country.

What distinction do the Government see? They appear to regard the most vulnerable element as being the aid flight abroad and back. But that is not the only consideration they have given to preparing the Bill. The same air company might well fly people to the North of England for a holiday in the Lake District and back. Those holiday makers will not be covered by the Bill. Those who fly abroad and back, but spend their holiday abroad a British cruise ship, which could be regarded as part of the United Kingdom in terms of operation and financial resources are included in the Bill. There are anomalies in its coverage.

It is clear that the Government are trying to ensure that the risks to those most vulnerable, those engaged in inclusive air holidays abroad, are covered by the Bill. Therefore, although there are no exemptions from contributions to be made by those whom the Bill encompasses, there are large exemptions among those who qualify.

The Government have said that the Bill is necessary because of the failure of the bonding system, which is the first line of defence for travelling holiday makers abroad. We have the Bill because the bond was insufficient at the level at which it was established last year to cover the risk of collapse at the height of the season.

Another reason is that, closing the stable door after the horse has bolted, we are to compensate those who lost money last summer—not only in Court Line and its subsidiary companies but in a number of smaller companies. That is why, in the first instance, future travelling holiday makers will be required to pay over the odds for their insurance. It is there that the differential lies between the cost of a premium for a self-insurance scheme and the amount of 1 per cent., eventually 2 per cent., of the levy which the Government propose. It is asking future holiday makers to compensate those who have lost money in the past. That is highly questionable. It is proposed in the amendment that companies that are able to arrange it to the satisfaction of the Department of Trade should be allowed to operate self-insurance schemes.

The hon. Gentleman puts his case moderately, unlike the hon. Member for Chingford (Mr. Tebbit.) I do not know whether he speaks for the Opposition, but is he saying that the Opposition do not favour providing com pensation for all the people unconnected Court Line matter who suffered in the mishaps of last year?

No, I am not saying anything of the kind, and I am sure the Minister understands that very well. We are discussing the method whereby the compensation is provided. It is questionable whether the clients of any company which goes bankrupt should be compensated by the Government or, indeed, by future customers of the industry. That is the principle that is fudged in this misshapen and misconceived Bill, but that is not the subject of the amendment.

The Government propose a compulsory scheme of insurance on which all travelling holiday makers within these categories will be obliged to pay the levy. The Minister has acknowledged that the reason for that is that unless all companies are obliged to pay the levy the scheme will not be viable. Let us examine the implications of that. The Minister is saying that clients of good companies with ample and adequate financial resources shall be obliged to prop up a scheme for companies which do not have adequate financial resources. Can he defend that principle to the last in the light of day, or is the principle highly questionable, as we believe it to be?

It is not for the Government to concern themselves whether there are any such insurance schemes available as an alternative to safeguard the travelling holiday maker. If no such insurance schemes come forward the Government will know that the holiday makers will be covered by their measures. What we seek is that companies that are able to arrange insurance should be allowed to do so.

The Minister said that apart from the evidence brought forward in Committee there had been no evidence of companies being willing to make available such arrangements. There were certainly statements in the Press to the effect that a Dutch group of insurance brokers would be prepared to offer such a scheme. There has also been a report of Lloyd's being prepared to consider such a scheme. But so long as the Government stick to a compulsory scheme it is unlikely that any company will take the initiative and come forward with an alternative scheme. The Minister has not proved to our satisfaction that efficient companies with the adequate resources would not be able to in the obtain insurance—

Does not my hon. Friend agree that one way of discovering whether insurers are available is for the Minister to accept the amendment? We would then see what happened. If no one came forward no harm would be done. If insurers came forward the Secretary of State could refuse to give permission. At least we should find out the truth of the matter.

It is clear that the Minister has a rooted objection in principle to making any exception whatever. His attitude throughout the passage of the Bill has been totally inflexible. Why cannot he support a reasonable proposal that is in the interests of the holiday maker? In case he should feel that his ministerial career depends upon making no exception, may I draw his attention to the fact that the bonding scheme is now established with an exception—namely, that approval has been given by the Civil Aviation Authority to the "Jetsave" for an escrow scheme which allows a guarantee trust fund to be substituted for a 15 per cent. bond.

The Minister need have no fear that by accepting the amendment he is establishing a precedent for an exception. If he is prepared to be sufficiently generous to ensure, if necessary, that the Government line that he is advancing will provide cash resources to compensate holiday makers, he may be right to allow exceptions where they can be secured. There is no doubt that the holiday industry would be prepared to come forward with such a scheme.

I agree with my hon. Friend the Member for Chingford (Mr. Tebbit) that the Minister has not begun to reply to the amendment. I found it disappointing that so little work had been done inside the Department between Second Reading and Report in considering this important alternative. The Minister has developed only three arguments of a sort against the amendment and none of them provides any sort of examination.

The first argument is of a purely technical nature and it has been well demolished by my hon. Friend the Member for Chingford—namely, the question of a combination of new Clause 1 with Clause 6. To suggest that it should require legislation to replace the operation of the reserve fund by an insurance scheme when it does not require any legislation to wind up the reserve scheme and to replace it with nothing will not command very much understanding or comprehension by my right hon. and hon. Friends.

The other two objections that the Minister put forward are of some interest although I did not find either the last bit compelling. He suggested that if the House agreed this amendment it might in some way upset or destroy the viability of the reserve fund as its viability would be prejudiced by the contracting out of the reserve fund of the major operators. I thought that that was an interesting possibility for the Minister to contemplate. He is clearly admitting that the success of the reserve fund is dependent upon the participation of the tour operators that will not collapse and upon the holiday makers who fly with them—in other words, prudent holiday makers are being obliged legislatively to subsidise those for whom there is a real risk of collapse. That is the clear deduction that can be drawn from the Minister's argument that there might be a danger to the viability of the fund if the major operators contract out.

If the main operators contract out all that he would seem to be saying is that those operators have come to the conclusion that they can provide a better form of consumer protection for their passengers through the insurance market. If we are in favour of consumer choice and the best possibility of consumer protection in the most economic and efficient way, it would seem reasonable to allow holiday passengers to seek protection in the most effective and economic market.

The final argument that the Minister advanced was that there is a lack of evidence that the necessary insurance cover is available. He will be aware that there is a perfectly satisfactory scheme already in existence to which I referred on Second Reading—namely, the scheme arranged between the Norwich Union In- surance Group and Panorama Holidays. The Minister referred to it in his earlier remarks.

I now return to the intervention of my hon. Friend the Member for Chingford. Even if not one tittle of evidence existed that insurance cover was obtainable—and that is not the case, as I have already stated—that in itself would not be justification for rejecting the amendment. There is nothing in the amendment, if it were accepted, which would oblige tour operators to seek the necessary insurance cover for their holiday passengers. It is provided clearly in the amendment that if they can come forward with an insurance scheme it will be first necessary for them to obtain the approval of the Secretary of State before it can come into being. There can be no line of argument for rejecting the amendment on the basis that there is no substantial evidence that this type of insurance is regularly used.

Evidence however already exists that this form of insurance cover is available. This is a further reason why the Minister should consider this new clause. If he does not accept it he is saying that those who travel with the soundest and most responsible firms will pay a significant increase as a direct result of this legislation when it would be possible to obtain the relevant protection at a cheaper price through the private market.

10.45 p.m.

The House will have gathered that the Minister was not very forthcoming in his earlier remarks. Those of us who served on the Committee know that the Minister was not very forthcoming in the early morning. But he improved and became more benign as time went on. It is early yet and no doubt he will become more benign as we get nearer to midnight.

The important part of the clause is the first sentence which says:
"The Secretary of State may, at any time,".
This does not suggest that the Secretary of State should wrap this fund up tomorrow and introduce an insurance scheme to which all the trade would conform. If my hon. Friends were to suggest that I would say that it was not practical. This fund has been introduced because the Government had to introduce it, partly because of their misdemeanours or miscalculations. I hesitate to say that they misled, although some would say so. They certainly miscalculated.

Those who lost on Court Line expect their money back and a lot of others are in a similar situation. I should be the last to suggest that there should be any delay in such people getting what they expect from the fund because they were given a promise by the Minister. But this is not the best way in the long term to raise this kind of money. We are to have a Budget tomorrow. I do not know what the Chancellor will say but I imagine that he will indicate very clearly that there is a limit to the financial obligations that the Government can take on. He will be making public expenditure cuts, telling the nationalised industries that they have to make a profit and can no longer have subsidies. This is a new form of intervention which may be justified in the short term. It is not justified in the long term.

If it is possible to bring this activity back into the realms of free enterprise it should be done. I would not expect Labour Members to rush into doing this but a Conservative Government, when returned, ought to do it. Who knows, given good sense, we may find that the Government decide to phase it out in a year or so and hand the operation over to free enterprise.

Why would it be easier for this to be handled by the private sector in a year or so than it would be now or a year ago? It is because there has been a sea change in the whole of the business. Bonding has been introduced. We know that, because of bonding, companies that are financially viable will be seen to be so. In addition, there will be improved capital structures imposed upon all companies seeking a bond. We will not have companies offering tours to customers on the basis of a weak capital structure.

Those who provide the bonds will look at the capital set up. As a result, it will be seen which companies are weak and which are strong. They will be able to provide a form of indemnity on the basis of a premium related to the strength of a company. There will be no weak companies. From now on it will be much easier for the insurance business to back a scheme to take the place of the Government scheme. A scheme covered by insurance and bonding provides a yardstick by which we can determine weak and strong companies.

The proposed scheme provides a form of feather bedding. Weak companies will not need to worry since they will know that a charge of £2 per head will be imposed by the Government. They will rest on that and say "it does not matter whether we are financially prudent or not." Therefore the Government should take the lifeline provided by Clause 6 and bring in the private sector.

I was struck by the variation of Gresham's Law of my hon. Friend the Member for Chingford (Mr. Tebbit), that bad money drives out good. Indeed Government supporters must learn that there is a Benn's Law, that profitable companies must subsidise the unprofitable, and that the rich must shore up the inefficient. That is what this Bill is about. It will primarily have the effect of helping the incautious travel organiser and the person who flies with that firm at the expense of those who fly with responsible companies.

I received the impression that the Under-Secretary was more interested in setting up this fund as a further example of Government interference, with more place-men available for the Secretary of State to appoint, rather than in providing protection for the holiday maker at a reasonable cost.

Two points stand out. The reasonable insurance cost from private industry is likely to be about 35p or 40p as opposed to the £l per centum for the Government fund. That is a substantial difference. It represents a worth while saving for a family of five going on holiday. This proposal should therefore be investigated and not thrown out of the window in the cavalier manner suggested by the Under-Secretary.

Secondly, it has been said that the private insurance scheme has not been investigated by the Government. They give the impression of simply not having bothered to look into the alternative. The Under-Secretary gave the impression that such insurance might be available only to the large company. However, in the insurance business size is by no means the only criterion. Strong, although small, balance sheets, consistent records of profitability and good management must also be taken into consideration. Those facts might be available to the smaller air travel operator who had operated successfully for a few years. In recognition of this, when he presented his case to the insurance industry he would get a lower insurance premium for the risk that he was trying to underwrite and he would be able to pass on the benefit to the customer. The customer flying with the small and well-run operator would get the benefit of an even cheaper insurance premium.

The Under-Secretary also said that the new clause would lead to the removal of competition and that it would favour the larger firms only. I doubt whether he has read the article in the Financial Times this morning which pointed out that the present system of bonding plus the enforced Government levy which the Under-Secretary wishes to set up is causing substantial difficulty for some of the smaller companies. The article states:
"Inquirers at the Civil Aviation Authority today will be told that 30 companies of that original 116 still do not have licences. What is regarded as most worrying about the present position is that it very much favours the larger operators".
In fact, the present situation of bonding plus the levy suggested by the Government is likely to lead to a diminution of competition and to many of the smaller companies being forced out of business because they cannot afford this double protection which the Government are unnecessarily insisting upon. Protection for holiday makers is a fine political cry in these days of consumer awareness, but it is the holiday makers themselves who are the ultimate victims. It is they who will have to pay not only for the Fund but for the staff of the Civil Aviation Authority, the expenses of collecting the contributions and all the other bureaucratic expenses which will be involved. If the Under-Secretary has any doubt about this, let him through the travel operators, ask the customers which they would prefer to see—the industry making its own insurance arrangements or the blunderbuss of the State scheme.

Unfortunately, the real purpose of this Bill, as my hon. Friend the Member for Worthing said, is to bail out the Secretary of Industry. It is robbing Peter to pay off Tony. As an alternative to that, I trust the House will consider the alternative insurance scheme that my hon. Friend has put forward.

The arguments that we have heard from the Opposition have been extremely ambivalent. Opposition Members did not, in fact, vote against the principle of a Bill which the hon. Member for Romford (Mr. Neubert) describes as misshapen and misconceived. They have got to make up their minds about this. They did not wish to be seen as not wanting to compensate people who had suffered from the difficulties of last year—

The hon. Gentleman says "No, no'', but that is the ineluctable conclusion of their failure to vote on the Second Reading. They had the chance to vote on a matter of principle, and they chose not to do so. [Interruption.] If the hon. Gentleman wants to interrupt, he may do so but not from a sedentary position.

The reason why there is such anxiety about this whole problem is that the right hon. Gentleman encouraged people to believe that there was some substance behind the assurances given, and these have been proved to have been worthless.

The hon. Gentleman rarely rises above the level of the basement, and he did not do so on this occasion. I am sorry that I gave way to him. Hon. Members opposite seek at every conceivable opportunity to introduce an argument which, if it has some relevance, is being dealt with by the Parliamentary Commissioner and by an inquiry under Section 165. All that they sought to do in those summer months was to maximise capital at the expense of the anxiety and distress of holiday makers. However, I will not pursue the argument, because it is the subject of a full and independent inquiry.

11.0 p.m.

No. I want to deal with the principle of the Opposition's argument. The object, so they say, to the concept of a 1 per cent. levy this year which will go up to 2 per cent. after 1st April 1976. What they fail to take into account is that this is in many ways comparable in principle with the operation of the bonding system. If their arguments were right, why have the bonding system at all? Why not rely upon private insurance companies? The fact is that no hon. Member opposite sought to adduce that argument.

The point is irrefutable. Private insurance companies were not willing to deal with this matter. That is why we have the bonding system. There has been no evidence that, in the generality of cases, we would be in a position to have proper and effective insurance to deal with this matter.

It is all very well to adopt the fanciful belief that insurance companies somehow or other will rally round if we drop this proposal, but there is no evidence of that. Indeed, hon. Gentlemen have adduced no evidence to that effect.

I am convinced that if ABTA were able to see this as a matter which would have general application, that argument would have been not simply asserted, but backed by hard evidence from insurance companies. The Opposition have not been able to do that. In those circumstances, I feel that the evidence that they have produced falls far short of that which ought to be available.

Is the hon. Gentleman aware that prior to the Civil Aviation Act coming into force in 1971 the tour operating industry had made arrangements for a bonding system which was a first line of defence. In moving the new Clause we are seeking only to allow the industry within its scope to regulate its own affairs in the same way.

The hon. Gentleman says that the industry would have introduced its own bonding system.

Or that it had introduced its own bonding system. Evidently the Conservative Government were not satisfied with it. I do not know the intricacies of thought which went on at that time, but the bonding system was introduced by the Conservative Party. The hon. Gentleman must therefore explain that. However, I do not propose to offer him the opportunity now to engage in historical research.

May I ask the hon. Gentleman, because he is so much better at giving answers than accepting arguments, whether there is more than one rate of bonding for different kinds of companies or whether the bond is applied universally as his levy would be?

The hon. Gentleman knows perfectly well that it relates to both ABTA and non-ABTA members. The Opposition cannot escape from the argument that if insurance were the key to this matter—

The hon. Gentleman always likes to think that he shoots everybody down. The House will be aware that he is mostly shot down by his own bullets.

The argument that the hon. Gentleman adduced about insurance should cover bonding as well. It does not. It is not capable of doing so. That is an argument to which hon. Gentlemen opposite have not given any thought at all.

It is no use dealing in vague possibilities of insurance companies coming to the rescue. They have not done so. For that reason, I ask the House to reject the clause.

The purpose of the clause is to provide for contracting out in the case of insurance-covered tours and travel. We seek to secure that

"The Secretary of State may … arrange for the introduction of a scheme under which contributions shall not be payable to the Fund in respect of customers insured against any losses or liabilities by the air travel organiser".
In other words, we are trying to introduce an insurance option under approved conditions—conditions, in other words, approved by the Secretary of State.

We believe that such arrangements would enable the travel operator to insure his customer in accordance with terms and conditions which not only had parliamentary approval but were also subject to scrutiny by the Minister and his Department. In other words, the operator would do so as an alternative to using the fund.

There is no reason why the Government should not accept the clause. It would mean that any customer arranging his travel through a firm which was insured would not have to contribute to levy through the cost of his holiday. The Under-Secretary gave no convincing reasons against this. Surely it is fair to say that most reputable firms would wish to insure rather than to pay the levy. Their customers would get the benefit of insurance, probably on the London market, rather than having to contribute to a Government levy. Would any hon. Member suggest seriously that, for example, Lloyd's is less reliable than the fund? This is one of the crucial arguments on the clause.

We have heard that the insurance option could cost less—probably only about 35p instead of £1 in every £100 if the levy is at the rate of 1 per cent. Private insurance would certainly be just as reliable as the fund.

Division No. 167.]AYES[11.8 p.m.
Aitken, JonathanKnight, Mrs JillRoberts, Michael (Cardiff NW)
Atkins, Rt Hon H. (Spelthorne)Knox, DavidRost, Peter (SE Derbyshire)
Berry, Hon AnthonyLawrence, IvanSainsbury, Tim
Biffen, JohnLawson, NigelShaw, Michael (Scarborough)
Brittan, LeonLe Marchant, SpencerShelton, William (Streatham)
Brotherton, MichaelLester, Jim (Beeston)Shepherd, Colin
Bryan, Sir PaulLewis, Kenneth (Rutland)Shersby, Michael
Buchanan-Smith, AlickMacfarlane, NeilSilvester, Fred
Bulmer, EsmondMcNair-Wilson, M. (Newbury)Skeet, T. H. H.
Chalker, Mrs LyndaMarshall, Michael (Arundel)Speed, Keith
Clark, Alan (Plymouth, Sutton)Maxwell-Hyslop, RobinSpicer, Michael (S Worcester)
Clarke, Kenneth (Rushcliffe)Mayhew, PatrickStanley, John
Cooke, Robert (Bristol W)Meyer, Sir AnthonySteel, David (Roxburgh)
Cope, JohnMolyneaux, JamesSteen, Anthony (Wavertree)
Costain, A. P.Morgan, GeraintStradling Thomas, J.
Durant, TonyMorgan-Giles, Rear-AdmiralTebbit, Norman
Fisher, Sir NigelMorrison, Charles (Devizes)Thomas, Rt Hon P. (Hendon S)
Fletcher-Cooke, CharlesNeave, AireyThorpe, Rt Hon Jeremy (N Devon)
Fowler, Norman (Sutton C'f'd)Nelson, AnthonyTownsend, Cyril D.
Fox, MarcusNeubert, MichaelVaughan, Dr Gerard
Gilmour, Sir John (East Fife)Newton, TonyViggers, Peter
Glyn, Dr AlanParkinson, CecilWainwright, Richard (Colne V)
Goodhew, VictorPenhaligon, DavidWalder, David (Clitheroe)
Grist, IanPercival, IanWeatherill, Bernard
Grylls, MichaelPowell, Rt Hon J. EnochWinterton, Nicholas
Higgins, Terence L.Rathbone, TimYoung, Sir G. (Ealing, Acton)
Hooson, EmlynRees-Davies, W. R.
Hunt, JohnRenton, Tim (Mid-Sussex)TELLERS FOR THE AYES:
Hutchison, Michael ClarkRhys Williams, Sir BrandonMr. Russell Fairgrieve and
Jessel, TobyRidley, Hon NicholasMr. Adam Butler.
King, Evelyn (South Dorset)Ridsdale, Julian


Anderson, DonaldBagier, Gordon A. T.Buchanan, Richard
Archer, PeterBates, AlfCallaghan, Jim (Middleton & P)
Armstrong, ErnestBennett, Andrew (Stockport N)Campbell, Ian
Ashton, JoeBlenkinsop, ArthurCarmichael, Neil
Atkins, Ronald (Preston N)Boardman, H.Carter-Jones, Lewis
Atkins' n, NormanBottomley, Rt Hon ArthurCartwright, John

The Minister said that my hon. Friend the Member for Worthing (Mr. Higgins) did not deal with the shortcomings of an insurance scheme. Nor did the Minister deal with any alleged shortcomings. I suggest that an insurance scheme would be simple for members of the travelling public to know whether they were properly insured. After all, the travelling public do not need to be spoon-fed I believe that in the longer term insurance will be desirable, anyway. So why do not the Government get down to doing something about it now by accepting the clause?

Perhaps it would be a good thing in the not too distant future if ABTA and the tour operators got together with the insurance companies and evolved their own scheme. I suggest that an insurance option should be there. I therefore advise my right hon. and hon. Friends to vote for the clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes, 88, Noes 122.

Clemitson, IvorHatton, FrankPrescott, John
Cocks, Michael (Bristol S)Hoyle, Doug (Nelson)Radice, Giles
Cohen, StanleyHughes, Robert (Aberdeen N)Roberts, Albert (Normanton)
Colquhoun, Mrs MaureenHunter, AdamRodgers, George (Chorley)
Cox, Thomas (Tooting)Jackson, Miss Margaret (Lincoln)Rooker, J. W.
Craigen, J. M. (Maryhill)Janner, GrevilleRowlands, Ted
Cryer, BobJenkins, Hugh (Putney)Ryman, John
Dalyell, TamJones, Dan (Burnley)Shore, Rt Hon Peter
Davidson, ArthurJudd, FrankSkinner, Dennis
Davis, Clinton (Hackney C)Kerr, RussellSmall, William
Deakins, EricKilroy-Silk, RobertSmith, John (N Lanarkshire)
Dean, Joseph (Leeds West)Lambie, DavidSnape, Peter
Dempsey, JamesLeadbitter, TedSpearing, Nigel
Dormand, .J. D.Lestor, Miss Joan (Eton & Slough)Spriggs, Leslie
Douglas-Mann, BruceLoyden, EddieStallard, A. W.
Duffy, A. E. P.McElhone, FrankStoddart, David
Dunn, James A.MacFarquhar, RoderickStott, Roger
Dunwoody, Mrs GwynethMackenzie, GregorThomas, Ron (Bristol NW)
Eadie, AlexMackintosh, John P.Thorne, Stan (Preston South)
Ellis, John (Brigg & Scun)Maclennan, RobertTinn, James
Ellis, Tom (Wrexham)McNamara, KevinTomlinson, John
Evans, John (Newton)Madden, MaxWainwright, Edwin (Dearne V)
Ewing, Harry (Stirling)Magee, BryanWalker, Terry (Kingswood)
Fernyhough, Rt Hon E.Marks, KennethWard, Michael
Flannery, MartinMarquand, DavidWhite, Frank R. (Bury)
Fletcher, Ted (Darlington)Marshall, Dr Edmund (Goole)White, James (Pollok)
Ford, BenMillan, BruceWilliams, W. T. (Warrington)
Fowler, Gerald (The Wrekin)Morris, Charles R. (Openshaw)Wise, Mrs Audrey
Fraser, John (Lambeth, N'w'd)Murray, Rt Hon Ronald KingWoodall, Alec
George, BruceNoble, MikeWoof, Robert
Golding, JohnO'Halloran, MichaelWrigglesworth, Ian
Gourlay, HarryOvenden, JohnYoung, David (Bolton E)
Grocott, BrucePalmer, Arthur
Hamilton, James (Bothwell)Park, GeorgeTELLERS FOR THE NOES:
Harper, JosephParry, RobertMr. Laurie Pavitt and
Harrison, Walter (Wakefield)Pendry, TomMr. Donald Coleman.

Question accordingly negatived.