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Civil Aviation (Air Travel Organisers' Licensing) (Reserve Fund) Regula- Tions 1975

Volume 895: debated on Wednesday 18 June 1975

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4.27 p.m.

I beg to move,

That the Civil Aviation (Air Travel Organisers' Licensing) (Reserve Fund) Regulations 1975, a draft of which was laid before this House on 30th June, be approved.
These regulations are made under Section 4 of the Air Travel Reserve Fund Act, which requires the regulations to be subject to affirmative resolution of both Houses of Parliament. The Act provides the enabling power for the Civil Aviation Authority to require air travel organisers to make contributions to the reserve fund which will be held and managed by the Air Travel Reserve Fund Agency. The regulations impose on air travel organisers the requirement to pay contributions as a condition for obtaining an air travel organiser's licence.

When the House considered the Lords amendment to the Air Travel Reserve Fund Bill, Members opposite were concerned about two aspects in particular—the starting date for payments and the period for which payments should be made. The reason sent to the Lords for not agreeing with the amendment was that in the interests of flexibility, the times at which and the manner in which the contributions are paid should be determined by the regulations. During the debate I undertook that the first contribution would not be required before 1st September and the regulations provide for this. The travel trade will, therefore, have had ample notice of the timing of the introduction of the levy.

I also said that the Government would have further discussions with the travel trade about the period for paying contributions. Following these discussions the Association of British Travel Agents has changed its articles of Association so that a member failing to pay his contribution by the due date will be subject to penalties and ultimately to expulsion from the Association. The ABC Operators Council has also amended its rules. In view of these undertakings, the Government are prepared to agree that, for an experimental period, payment of the levy should be on a quarterly basis, and the position will be reviewed after the experiment has been in operation for a year. The regulations state that the period for contributions shall not exceed six months, but the CAA will specify in the licences which it issues that contribution periods will be three months, after the initial contribution period of one month. However, the payment period can be altered to six months if circumstances make this necessary.

Quarterly payment periods will start on 1st October, January, April and July so as to coincide with the renewal dates of air travel organisers' licences which run from 1st October or 1st April. The regulations prescribe that contributions will be 1 per cent. of turnover in respect of licensable business from 1st September this year and 2 per cent. from 1st April 1976. Provisional payments will be based on an estimate of the contributions due in respect of the period to which the payment relates. The CAA will require licence holders to put forward estimates of their overseas licensable turnover and will base the provisional payments on them. The final say on estimated turnover rests with the CAA because some licence holders may pitch their forecasts of turnover unrealistically low in order to avoid making a large provisional payment. Contributions, as opposed to provisional payments, will be based on the turnover actually achieved by the licence holder during each contribution period.

No provisional payment will be required in respect of the first contribution period, which will be the month of September this year. If the CAA were to collect a separate payment in advance for this period, it would have been necessary for the regulations to come into operation at an earlier date to enable the authority to do the necessary work before 1st September. The first payment, which will be the provisional payment in respect of the second contribution period, will not therefore be required before mid-September. This will give the travel trade a reasonable period in which to make arrangements for their initial payments.

Audited turnover statements will be required for each contribution period by the end of the month following, so that adjustments can be made as necessary to the provisional payments to take account of the turnover actually achieved. To make adjustments at longer periods than at the end of each contribution period would seriously complicate the administration of the arrangements for collecting contributions. Neither the air travel organiser nor the agency would know precisely where they stood until the end of the year or whatever period was taken. I am convinced that the benefits to all concerned of settling the contributions for each period shortly after the end of that period considerably outweigh the burden of having to produce auditors' certificates at quarterly intervals.

The CAA has a great deal of work to do before 1st September, in order to vary the existing licences to provide for contributions to be made and to prescribe the periods of the contributions. It is therefore important that the regulations should come into operation as soon as possible, and I ask the House to give their approval to them.

4.33 p.m.

As the Under-Secretary said, these regulations set up the mechanism whereby the holders of air travel licences make contributions to the Air Travel Reserve Fund. Until April 1976, each licence holder will contribute at the rate of 1 per cent. of turnover and after that at the rate of 2 per cent.

We discussed these matters fully during the various stages of the Air Travel Reserve Fund Bill as it was going through the House. The licence holder has to pay his contribution to the fund not more than six weeks after the contribution period. The way in which licence holders are to be required to pay is based on turnover throughout the contribution period, and the figures have to be verified by auditors approved by the Civil Aviation Authority at the end of each contribution period.

I wish to ask the hon. Gentleman whether he will look again at the frequency with which audits are required, and whether he is willing to consider the possibility that, after the scheme has had an opportunity to settle down, audits at greater intervals will be satisfactory, rather than saddling the operators with the need for and the expense involved in such frequent audits.

As I understand the provisions of paragraph 4, the CAA may refuse to issue an air travel organisers' licence
"unless the applicant has made a provisional payment of such amount as the Authority may require in respect of contributions which may thereafter become due."
However, it appears that where the amount of any such provisional payment exceeds the amount due from the licence holder, the CAA shall pay him not more than six weeks after the end of the contribution period or two weeks after the holder has complied with the requirement to furnish details of turnover.

Generally speaking, my colleagues and I welcome the degree of flexibility that is now contained in the regulations and particularly the provision for quarterly payments. We hope that it will be of great assistance to firms in the travel trade.

Another aspect of the regulations which rather surprised me when I first read them was that Regulation 4(6) deals with contraventions of the regulations. As I understand it, paragraph (6) provides for fines and two years' imprisonment for conviction on indictment for contravention of the regulations. I do not recall at any time during the passage of the Air Travel Reserve Fund Bill, either in the House or in Committee, any discussion about fines for contraventions of these regulations. Nor, so far as I recall, was there any discussion of the possibility that those who contravene the regulations might be sent to prison for a period not exceeding two years on conviction on indictment. Are we really being asked to approve, in these regulations, provisions that would in the ultimate send a tour operator in contravention of these regulations to prison for a period of up to two years? Are we saying that these people who are today providing holidays for many thousands of people under most difficult circumstances—

Order. I seem to be very difficult this afternoon, but I must interpret the rules. I am advised that it is beyond the scope of the regulations to debate the desirability of setting up the Air Travel Reserve Fund. We may discuss the size of the contribution required or, indeed, the recent failure of companies operating in this area.

I am grateful for your guidance Mr. Deputy Speaker. However, I understood that we are discussing whether this statutory instrument should be approved. Paragraph (6) provides that

"Any person who contravenes the provision of this Regulation or any term included in a licence pursuant to paragraph (4) of this Regulation shall be guilty of an offence and shall be liable … to a fine … or imprisonment". Is it not in order to debate that?

I listened very carefully and I thought that earlier the hon. Gentleman was arguing whether the Civil Aviation (Air Travel Organisers' Licensing) (Reserve Fund) should be set up. If I have misunderstood the hon. Member, I apologise for being wrong.

I am grateful to you, Mr. Deputy Speaker. I was not attempting to argue that matter, but simply dealing with the appearance in the regulations of this particular paragraph which I find very surprising and which certainly we did not, as far as I can recall, debate at any stage during the passage of the Bill.

I should like to proceed to develop my argument on that point if I am in order. Will the Under-Secretary tell me whether he has received any representations on this point and whether it was the Government's original intention to provide such Draconian penalties for those who are seeking to arrange holidays for the British public? It is rather curious that this paragraph should have slipped into the regulations. I see that it comes from Section 26 of the Civil Aviation Act 1971 which deals with the provision of accommodation in aircraft.

Subsection (2)(e) deals with the imposition of penalties for contraventions of the regulations relating to the provision of accommodation in aircraft. I accept that we are discussing the provision of accommodation in aircraft but we are discussing a slightly different point from the one included in Section 26 of the Civil Aviation Act 1971. I have studied that statute, and I see that Section 5, which deals with special provision in relation to special functions, provides for a much lower fine —on summary conviction, for example, of an amount not exceeding £100 for any contravention. I should have thought that a fine of £100 would be a sufficiently high penalty on a tour operator without resorting to the much greater fine of £400 and the possibility of imprisonment following conviction on indictment.

I should be grateful if the Minister could assure me on that point and say why the Government feel that it is necessary to include the penalty of imprisonment in regulations. It would have been much more desirable to specify such penalties in the Act, so that the matter could have been debated when the Bill was before Parliament, instead of the poor tour operator suddenly discovering that he can be sent to prison for contravention under a paragraph slipped into regulations and debated late on a Friday afternoon.

4.42 p.m.

It is with some relief at the fag-end of this extended Friday afternoon that at last we reach this business. I do not know whether the Government intended to provide an extra matinee performance for the tourist season or whether they thought to slip through some of what they regard as their less controversial business. If the latter is the case, they will have been sadly disillusioned. After an hour debating a motion to allow the Editor of Hansard to appear in court to verify a report and a half-hour debate on the Salmon and Freshwater Fisheries Bill, I am relieved to reach the business which interests me.

I declare an interest in these matters, as a travel consultant. First, I join my hon. Friend the Member for Uxbridge (Mr. Shersby) in paying tribute to the Government's generosity in allowing more flexibility in the frequency of payments —something which was forcefully sought when we last discussed these matters. The quarterly payments will be a considerable easement of the otherwise burdensome temporary tax on tour operators. They will also not fail to appreciate the month's grace that they will be given this September before they have to make an advance payment.

That having been said, at the risk of adding insult to injury, I should like to reinforce the plea for less stringent conditions in regard to turnover. May I suggest an alternative way of easing this requirement—that the certificate exacted by the CAA should be such as would not normally be acceptable by the standards of the auditing profession but would nevertheless be sufficient for the purpose of the CAA, at least at quarterly intervals? A more thorough-going audit might be required for a longer period, but turnover is relatively easy to assess, without perhaps the in-depth checks that auditors would normally make to be satisfied for their own professional good that all was well.

This is a matter of degree. The Minister will appreciate that, in the mass of consumer protection, the consumer often ends up having to pay more, in small matters as in large. This is perhaps not the best year in which to exact too great an expenditure on administration—an issue that we discussed on the original Bill.

May I take this opportunity of asking the Under-Secretary to comment on the fact that these regulations leave gaps in the protection of holiday makers? It is public knowledge that these regulations cover only holidays that are operated abroad by means of aircraft. Can the Under-Secretary give any indication when similar cover will be provided for those travelling abroad by other means—for example, by land and sea? Naturally this will be a matter of greater complexity because there is not the simplified administrative system available to hand as there is in the ATOL system. Undoubtedly exemptions and exceptions will have to be made.

These regulations indicate no exemptions whatever. I should like to make a last plea that, perhaps, some further consideration might be given to those shipping companies that operate fly-cruises. An exception has been made in the case of British shipping companies in the past in different ways. For example, when there was a restriction on the amount of currency that could be taken abroad, ships of British companies were regarded for this purpose as floating parts of the United Kingdom and sterling was negotiable on board. There was not the same limitation that others travelling abroad and staying on land abroad had to suffer. I ask that some further consideration be given to that point.

In the forthcoming discussions on extending these protective measures to other areas of holiday making abroad, I hope that the Minister will remember that ABTA—a very powerful voice—does not speak for the shipping industry and that shipping interests should be consulted well in advance of any conclusions to which he or the CAA, which at present has some jurisdiction over these matters, may come.

I thank the Government once again for showing some recognition of the genuine points made during the passage of the Bill. Together with my hon. Friends, I welcome these regulations.

4.47 p.m.

The hon. Member for Uxbridge (Mr. Shersby) and his hon. Friend the Member for Romford (Mr. Neubert) both raised the subject of auditing. As this is obviously a matter of concern—and I can understand that— I hope that they will forgive me if I go into more detail on it.

We require turnover to be certified by an auditor four times a year. This is a consequence of a decision to meet the desire of the travel trade to pay contributions four times rather than twice a year. The contributions will be payable on turnover.

In order to ensure that the correct contributions are paid it is essential that there should be an independent and qualified person to certify the turnover which the air travel organiser has achieved. The procedure will be as follows: shortly before the beginning of each contribution period the air travel organiser will be required to make a provisional payment based on his estimated turnover for that period. At this stage no auditor's certificate will be required. At the end of each period adjustments will have to be made in the light of the turnover achieved by the air travel organiser during the period.

If turnover has not come up to expectations so that the air travel organiser's provisional payment has exceeded the amount due from him, he will either receive a rebate or that money will be credited to the next payment due from him. If his turnover has exceeded expectations he will have to top up the provisional payment he has made.

In order that adjustments can be made it is necessary that the air travel organiser should furnish to the CAA proof of the turnover achieved by him. It is considered that an auditor's certificate is the simplest way of providing proof. However, it is suggested and implied that there could be an auditor's certificate or a full-scale audit at a longer period—perhaps annually.

If we were to make adjustments at a much longer period this would, first of all, seriously complicate the administration of the scheme for collecting contributions, because neither the organiser nor the Reserve Fund Agency would know precisely where they stood until the end of the year, assuming auditing is on an annual basis. Moreover—this is the significant point—in an unexpectedly bad period where estimated turnover is not achieved, the air travel organiser would be out of pocket for a longer period than was necessary. Similarly, in an unexpectedly good period the Air Travel Reserve Fund would be out of pocket.

I am convinced that the benefits to all concerned of settling the contribution in respect of each period shortly after the end of the period considerably outweigh the burden of having to produce an auditor's certificate at quarterly intervals. However, we have said that we shall review the regulations, the payments period, and so on, at the end of the first year. I can assure the hon. Gentleman and his hon. Friends that if, in the light of a year's experience, the trade feels strongly that it is an insupportable burden or that they require us to look at it again, I shall certainly undertake to do so, because we shall certainly have to review the regulations as a whole in the light of one year's experience, as we have had nothing like this previously in the travel industry.

I come to the second point raised by the hon. Member for Uxbridge—the fine or imprisonment provision. First, we have had no representations on this subparagraph. Regulation 4(6) is really essential to ensure enforcement. There is an enabling power, as the hon. Gentleman rightly said, in Section 26(2)(e) of the Civil Aviation Act 1971, from which he quoted. It is true that this was not discussed in relation to the Air Travel Reserve Fund Act, but express power is given to use Section 26(2) of the 1971 Act in Section 4(1) of the Air Travel Reserve Fund Act itself.

Of course, as regards the fine—these are maximums, of course, and the hon. Gentleman quoted the other maximum of £100—there may be room for argument there, but certainly our references to Section 26(2) of the Civil Aviation Act 1971 should, I think, have been sufficient for anyone who is interested in the particular point about penalties. There is a direct reference to it in Section 4(1) of the Air Travel Reserve Fund Act. It always was envisaged, throughout the Committee stage that the obligation to pay contributions would have to be enforceable, which is why the words:
"including in particular any such provision as is mentioned in subsection (2) of that section"—
that is, Section 26 of the 1971 Act, were in Section 4(1) of the Air Travel Reserve Fund Act. We drew attention to it there. The hon. Gentleman may feel that we should have made a particular point about this. If he does, I am sorry that we did not do so, but there was this indirect reference via Section 4(1) of that Act.

The hon. Member for Romford (Mr. Neubert) asked about fly-cruise holidays. This matter was raised on Second Reading and in Committee. It is a fact that organisers of fly-cruise holidays which use British aircraft and join a British ship have to pay contributions. For example, fly-cruise operators such as P and 0 hold an air travel organiser's licence and they provide a bond. They are therefore required to contribute to the reserve fund as a second line of defence to the bonding arrangements. Moreover, passengers with such companies who buy a package which includes both their flight and their cruise will be covered by the reserve fund in respect of the whole package. It would therefore be inequitable to exempt such operators from the obligation to contribute to the fund.

Having said that, I hope that I have answered the points which have been raised.

4.53 p.m.

I am not content with the reply that the Under-Secretary has given in regard to the penalties referred to in Regulation 6. The hon. Gentleman has pointed out—it would be more accurate to say that he has admitted it—that there was no debate on this point during the passage of the Bill, which went on for a considerable time—Second Reading, Committee stage, Report and, I think, Third Reading. Not once did the Government see fit to bring to the attention of the House the fact that penalties involving two years' imprisonment were likely to be imposed on those who did not comply with what they had in mind. That is a remarkable omission.

The hon. Gentleman went on to say that he had received no representations on the matter. That is not surprising, because the matter simply had not been brought to public attention. Indeed, it was only on examining this aspect of the question today that my hon. Friend the Member for Uxbridge (Mr. Shersby) and I came across it.

The Under-Secretary suggested that the provision in the regulations is made under an enabling power in Section 26 of the Civil Aviation Act 1971. He will know that that section relates to the provision of accommodation in aircraft. Section 26(2)(e) states:
"Regulations made for the purposes of the preceding subsection may…include provision—(e) for imposing penalties for contraventions".

Section 26(2)(e) is the provision which lays down the penalties. Is that the one you mean? It is the same as regulation 4(6) of these regulations.

Order. This is the first time I have known a conversation with two hon. Members standing up to be continued after the Minister has sat down.

I beg your pardon. Mr. Deputy Speaker. I was addressing my remarks to you and when 1 said "you" I meant you. The point is a little complex. Section 26(2)(e) of the 1971 Act provides:

"Regulations … may … include provision—(e) for imposing penalties for contraventions of the regulations not exceeding in the case of each contravention a fine. of £400 on summary conviction and a fine and imprisonment for a term not exceeding two years on conviction on indictment".
The Government seek to impose the maximum penalty including one of two years imprisonment, although no mention had been made of it and if we had not raised the point no mention would ever have been made of it. Why do the Government think that the maximum penalty needs to be imposed? Two years imprisonment is a heavy penalty by any standards in this context. Why is imprisonment necessary?

The regulations refer to Section 5(1) and 5(2) as well as to section 26 of the principal Act. The penalty under Section 5(1) and 5(2) is substantially less. It is a fine of £100 for contravention. There is no mention of imprisonment.

The Under-Secretary relies on Section 26 the rubric of which is:
"Regulation of provision of accommodation in aircraft."
The Air Travel Reserve Fund Act 1975 includes provisions which may not involve accommodation in aircraft. They may involve provision of a holiday and travel by sea. Are we to understand that if someone carrying out such an operation contravenes the Act no penalty is imposed on him because travel by sea is not covered by the 1971 Act?

In short, I think that the matter we had at the beginning of our proceedings today, when the Government seemed to be pushing through something which had not been fully explained to the House and of which notice had not been given, could perhaps be regarded as an unfortunate lapse. However, when such an occurrence is repeated in the course of the same sitting an unfortunate lapse becomes a nasty habit. I hope that the Under-Secretary will clarify the position.

The hon. Member for Worthing (Mr. Higgins) seems almost to have taken leave of his senses in saying that the Government are trying to push through, in regulations which have already been published, penalties unknown to the outside world before today. That was the implication of what he said. That is absolute nonsense. That is certainly not worthy of the hon. Member, even at this hour of the day.

That is not what I said. I said that the matter had in no way been brought to the attention of the House or the Committee during the proceedings on the main Bill, and that until these regulations had been brought to our attention no one else had noticed it either.

The hon. Member still has it wrong. The regulations have been published and they were available before today. They contained the provisions, and any hon. Member who wanted to raise a question on them would have been able to read the regulations and to have pointed out aspects of them with which they did not agree.

The hon. Gentleman says that we are seeking to impose maximum penalties. We are not. I hope that there will be no need to impose any penalties whatever. One of the reasons for our talking so long with the Association of British Travel Agents was to ensure that if possible they could act as a sort of policing mechanism with their own members. They have altered their articles of association. The erring tour operator is likely first to fall foul of his own association before falling foul of the Civil Aviation Authority. We must, however, have in reserve the power of enforcement. It would be impossible to come before the House with regulations which laid on people duties, including the power to require levies, without some means of enforcing them.

If the argument is merely whether the maximum fine should be £100 or £400, or whether there should be provision for two years' imprisonment, that is a legitimate subject for debate. I rest my case on the fact that these regulations are made under Section 4(1) of the parent Act, which in turn relates back to Section 26 of the major Civil Aviation Act 1971, which was passed by the Conservatives, although I seem to remember that it had all-party support. I do not think, therefore, that there is any dispute on that point.

We are keeping the maximum penalties, which we hope will never be used, in line with maximum penalties in the parent Act for the same type of offence against licence conditions. After all, if someone defaults on his contribution, he will be defaulting on a condition of the air travel organisers' licence. There is no difference between defaulting in this respect and defaulting in respect of any obligation imposed upon him by virtue of the licence conditions to which he has agreed as a means of getting a licence.

Sections 5(1) and (2) are irrelevant. They relate only to procedures of the authority and govern only Regulation 5. As for the question of sea travel, if there is no air travel there is no need to pay contributions.

Does the Minister agree that, whatever the penalty, it is imperative that it be enforced and that it be a real deterrent to such a lapse on the part of a tour operator? I remind him of the case last year of Western Jet when the company went into liquidation with debts running to £250,000, when the managing director went off scot-free and drew social security with no fine whatever.

The hon. Member has made the point very well and I fully agree with him. I hope that we shall not find more examples such as Western Jet or, for that matter, Court Line. We must have this power of enforcement, Draconian as it may seem to some hon. Members, but we shall keep it in reserve.

Question put and agreed to.


That the Civil Aviation (Air Travel Organisers' Licensing) (Reserve Fund) Regulations 1975, a draft of which was laid before this House on 30th June, be approved.