§ Order for Second Reading read.
§ 4.21 p.m.
§ The Secretary of State for Trade and President of the Board of Trade (Mr. Peter Shore)
I beg to move, That the Bill be now read a Second time.
We are debating today a modest but important measure designed to put into force the harsh lessons learned by the package tour industry last year. In particular, we do not wish to witness again the sudden crisis of last summer, with tens of thousands of angry and disappointed holidaymakers in the United Kingdom with little or no hope of getting their money back, all the worries and uncertainties, and the threat of harassment in foreign lands to which thousands of our fellow citizens were subjected—a situation for which last summer there was no adequate remedy.
There will be some who will attempt to turn this occasion into an inquest on the immediate events which preceded the collapse of Court Line. For myself, I shall resist that temptation—[An HON. MEMBER: "Surprise, surprise."]—first, because that matter is now under thorough and independent examination, both by the Parliamentary Commissioner and by the company inspectors whom I appointed last autumn; and second, because even the most splenetic critic of the Government will hardly dispute that whatever the Government did or did not do between the end of June and mid-August last year, the collapse of Court Line could not have been avoided. Let me say, however, that I look forward with some relish to the later occasion when, on the basis of independent reports, we can discuss all these matters.
§ Mr. Eldon Griffiths (Bury St. Edmunds)
I take the right hon. Gentleman's point, and I shall follow his advice that this is not, perhaps, the time for postmortems. But will he explain why it is that when the Parliamentary Commissioner is considering this matter in some depth—he has fairly paid recognition to that—the Government now bring forward retrospective provisions to deal with 1576 the holidaymakers in advance of the Ombudsman's conclusions? Surely the Ombudsman is entitled to reach his conclusions first, and the House should then decide what to do on the basis of those conclusions.
§ Mr. Shore
The short answer to that question is that we want to get on with the job of giving greater security to this year's holidaymakers and also to be, at the earliest possible moment, in the position of being able to help those unfortunate holidaymakers who lost their holidays and money last year. Of course, if—and this is a very hypothetical question—recommendations and reports were made as a result of the independent investigations to which I have referred which suggested lines of action which the Government needed to consider, we should consider them. We have preempted nothing at all. If any such recommendations were to suggest new lines of action I would, of course, propose them.
§ Mr. Robert Adley (Christchurch and Lymington)
The Secretary of State has said that the collapse of Court Line could not have been avoided. On what date, approximately, did he come to that conclusion?
§ Mr. Shore
No, the point I am making is that in a recollection in tranquillity about the events of last year, I should not like to say at what particular moment I came to that view. But what I am saying is that anyone looking back now with the benefit of hindsight could scarcely dispute that judgment. That is not a matter which would divide any serious people, on either side of the House.
Today, we have to address ourselves to the task of making sure that if collapses do occur in the future, holidaymakers will at least be fully protected financially. As essential background to this I shall, first, briefly review the development of the air tour industry and, second, the measures 1577 previously taken to increase the security of holidaymakers.
The past 20 years have seen an extraordinarily rapid growth of holidays abroad and the development by go-ahead travel concerns of what amounts to a new service trade. Air carriers and hoteliers abroad, particularly in Spain, were eager to invest their facilities if a steady mass market could be established. The key to successful development was recognised to be cheapness and convenience for the customer. This meant the use of long-term block bookings in hotels and in aircraft to produce the low-unit-cost package. But the crucial reduction of costs was also secured by pruning the need for the operator to raise capital, accompanied by heavy interest rates, by the device of using advance receipts from the customer as a high proportion of working capital. The recipe for success and for a great deal of happiness for a great number of people seemed assured.
In 1957 it is estimated that some 57,000 Britons went abroad on package tours by air. In 1973 this figure was more like 3¼ million, with approximately 340 licensed tour operators in business, as compared with about 40 inclusive tour operators in 1957. Over that 20-year period, 1953 to 1973, the industry maintained an overall annual growth rate of 37 per cent. It was an astonishingly rapid development. These were, I suppose, the halcyon days.
But as 1973 wore on and, more markedly, in 1974, the climate changed and the temperature dropped. Inflation and uncertainty at home were dramatically compounded by the oil crisis and the impact of the three-day working week. Domestic political crisis in popular holiday destinations—Portugal, Greece and Cyprus last year—added to the problems. There was a marked falling off in the number and timing of summer bookings. Last summer five air tour operators, besides Clarksons, Horizon and Air Fair in the Court Line group, were unable to meet commitments to the travelling public. Approaching 170,000 or 180,000 people all told lost all or part of their holidays or, having completed their holidays, had to be repatriated under special arrangements. The disappointment and distress this involved for these people is 1578 not something that can be measured, nor can the damage which this involved for our business reputations abroad. These failures occurred at the height of the season.
§ Mr. Kenneth Lewis (Rutland and Stamford)
The right hon. Gentleman has talked about our reputation abroad. What is going to happen through this Bill to help all the Spanish hoteliers who lost a lot of money? Our reputation was seriously damaged over that. Nothing that the Government propose in the Bill, and nothing that they did then, has had any effect in so far as helping to regain our reputation with those Spanish hoteliers and other hoteliers around the world.
§ Mr. Shore
I am not producing a scheme to insure Spanish hoteliers. This is a much more limited scheme to help British people going on air package holidays abroad. There will be an indirect benefit in the extent to which the bonding system will be increased. Some of the difficulties that the foreign hoteliers faced were consequences of the lack of resources available to British firms in dealing with the many problems, including repatriation and so on, of their customers. In so far as we have strengthened these arrangements there will be a subsidiary benefit for all those who do business with British firms.
The failures last year occurred at the height of the season and at the moment when the rest of the trade was least able to step in with spare capacity to offer alternative holidays and transport. The fact that everyone was brought back safely in these circumstances was an impressive and creditable achievement for the trade but that such failures should have occurred at the season of maximum cash inflow for the trade was an alarming event. It threw into relief the inadequacy of the capital structure of the trade, the inadequacy of the cost control within it and the flamboyant competitiveness which years of success and boom had engendered.
The lessons have been expensive. Already the prices of package tours have been increased and the range of holidays offered has been reduced. These have been the open consequences. Within board rooms I trust that managerial and financial controls have been drastically 1579 tightened. Unless that is the case there is a danger of further setbacks and with them an erosion of confidence in the package tour business among investors, suppliers and, most important, among the travelling public, which no system of protection can check.
The risks inherent in the organisation of the trade were recognised as long ago as 1969 in the Edwards Report on Civil Air Transport. Forward commitments, which I have already described, the expensive marketing to promote their arrangements and the keen pricing as a consequence of the intensive competition for custom placed many businesses on a knife edge. By the time we came to the circumstances of last summer some failures were inevitable.
Following the Edwards report the Conservative Government provided powers for the licensing of air travel organisers under the Civil Aviation Act 1971. The consequent regulations—the Air Travel Organisers' Regulations of 1972—required the Civil Aviation Authority to be satisfied that an applicant for a licence was a fit person and had made adequate financial arrangements for discharging his obligation.
As from May 1973, when licensing was introduced, the licence holder had to obtain a bond intended to provide protection for passengers in the event of financial failure. These bonds were fixed at 5 per cent. of turnover for members of ABTA and 10 per cent. for other firms. The differential takes account of the assistance that the association is able to provide for its members should one of them find himself in financial difficulties.
When the scheme was originally drawn up in the spring of 1973 it was not supposed that operators would find themselves in such difficulties at the height of the season and at the time of maximum cash flow. Last summer's events showed that that was wrong and that, despite the system of licensing and the substantial bonding, in the case of major operators, running into several millions of pounds, additional safeguards were needed. That is what we are discussing today.
There are a number of choices open to us to consider. Some have argued for the reintroduction of floor prices for package holidays. This is an area where cost factors and the make up of the 1580 package offered are shifting so constantly that it has already been proved that such a system cannot be enforced effectively. The alternative possibility of a simple increase in individual bonds held by tour operators has great attraction. The bonding system already exists and in the case of ABTA operators is not confined to air travel. New arrangements on these lines might therefore prove unnecessary.
However, it is now clear that to cater for last summer's situation, with failures at the height of the season, bonds would have to be set at very high levels. Complete security in such a situation would call for bonds so onerous as to be beyond the means of all but a few operators who were members of large groups with substantial resources. Such a move would discriminate against smaller operators, who might be just as efficient and prudent as their larger competitors and who fulfil a real need. I can see no justification for forcing small firms out of business if other safeguards can be devised. None the less, there is a case for increasing bonds, and I shall return to that point later.
Other possibilities, such as paying customers' money into special accounts, provide an individual insurance rating for individual firms on the ECGD model or rely on the kind of individual guarantee offered this year by some of the larger operators. But these involve the same discriminations and favour the firm with direct access to the financial backing which comes from being a member of a large group. These are the disadvantages of these alternative proposals.
The Government have therefore decided to build on the existing system under which the Civil Aviation Authority is responsible for licensing those who are entitled to offer organised air travel, including package tours, and to require of them an appropriate bond. With the Bill there will stand behind that bond a second line of defence, a reserve fund, based on the levy contributed by licence holders.
I have been determined, for the health of the industry, that the first source of protection for passengers who are victims of the financial collapse of package tour operators shall continue to be the individual bond. We want that to continue. The pressure which such a bond creates for responsible management in individual 1581 firms must be the first and most meaningful line of defence.
I have been closely in touch with the Authority about the correct level of bonds for the future. An initial increase last October is to be followed by a further increase this April. Bonds will stand then at 10 per cent. for ABTA members and 15 per cent. for others. This should mean that if a firm fails it need never be necessary for our constituents to call upon the reserve fund proposed in the Bill. Only once it is clear that there is no money left in a bond will the agency, which it is proposed to establish to run the reserve fund, be called on to step in.
The basic principles of the Bill are simple. The measure sets out to do three things. It sets up a new Air Travel Reserve Fund controlled by the new statutory body, the Air Travel Reserve Fund Agency. The Bill will empower the Civil Aviation Authority to collect contributions from air travel organisers and to pay those levies to the Agency. It will empower the Agency to manage the fund and to make benefit payments not only in respect of future losses but for those suffering from certain financial failures last year.
Clause 1, which establishes the Agency, is straightforward. I shall appoint members after consultation with the Civil Aviation Authority. The Bill does not specify how many members will constitute the Agency but I intend that there should be an equal number of persons from the industry and from bodies such as the CAA with expert knowledge of the background. The chairman will be independent. If necessary I shall have powers to give directions to the Agency on the management of the fund, and, of course, I shall keep closely in touch with its task at all times, as will the CAA.
If there are collapses involving a call upon the fund, the Agency will be faced with intensive activity and may well have to engage professional services for short periods. That is perfectly reasonable. Apart from that, I would not expect the day-to-day work to call for permanent full-time staff.
§ Mr. Norman Tebbit (Chingford)
Will my right hon. Friend say in what manner it is expected that consumer interests will 1582 be represented? Will they be represented through the industry or through the Civil Aviation Authority?
§ Mr. Shore
That is a good point. I should like to consider that. I should have thought that the CAA and the industry could both claim in various ways to have a strong consumer influence in their thinking. My mind is by no means closed to that conversation. I shall be happy to look at this in terms of the further discussions which will take place.
I very much hope that, as economic conditions improve, the health of the industry will be such that there will be very few, if any, calls upon the fund. We do not want the fund to outgrow or to outlive its necessary functions. If I may here anticipate a later clause of the Bill, this can be met by trimming contributions levied from licensed operators under Clause 4, or even by winding up the fund under Clause 6.
Under Clause 4—I shall return later to Clauses 2 and 3—the Agency's long-term reserves will come from the air travel industry itself by means of a levy contribution from air travel organisers. Here I am using the words "air travel organiser" in the sense used by the Civil Aviation Authority issuing licences under Statutory Instrument 223/1972. The authority is empowered to make conditions for the issue of such a licence.
Clause 4 will enable me to make regulations, after consultation with the Authority, to require as a fresh condition of obtaining a licence that an air travel organiser shall pay a contribution to the fund. This contribution will be based on the licensable business of the air travel organiser in question. It will be paid in advance. This means that it will be based on an estimate of the expected turnover. Provision is therefore also made for the contribution to be corrected upwards or downwards when the actual turnover is known.
Our present intentions are that the contribution will normally be made twice yearly, in April and October. I have had discussions with the Authority, which is already making the necessary preparations for the introduction of the new system, subject, of course, to the passage of the Bill. I hope that it will be possible to collect the first contributions within a few 1583 weeks of Royal Assent. These initial contributions are likely to be at a rate of 1 per cent. and to be increased to 2 per cent. from April 1976.
The figures have been given much careful thought. It can be argued that in order to build up the reserve fund as quickly as possible, the levy of 2 per cent. should be introduced from the start, but we have had to take account of the effect on the travel trade of the imposition of the higher levels of bonding required by the Civil Aviation Authority and the need to give travel organisers time to recover from the difficulties they experienced last year. I have concluded, therefore, that initially the levy should be at the lower rate of 1 per cent. to give the industry some time in which to make the necessary preparations.
However, the higher rate will become payable in respect of the first full summer season after the passing of the Bill, but it will inevitably mean more expensive holidays. However, I do not believe that anyone, or at least very few, will feel that the small sum involved is a high price to pay for the security obtained.
None the less, it will take some time for the fund to be built up. Since it must be in a position to cope with collapses from the start in cases in which the bonds are inadequate, and since there is also the need to provide for last year's victims, we have decided that the Government should help the fund off to a reasonable start.
Clause 5 permits me to lend to the Agency from public funds. Sums loaned will be interest-free. I intend that provision should be made in the form of drawing rights, available as and when verified claims on the fund exceed its assets at that time. By September 1977 independent levy contributions should have built the fund up to an adequate level and no further claims on these drawing rights will be permitted. The Bill limits total claims to £15 million, and this should be sufficient to provide for last year's victims and for collapses during the build-up period.
After an initial breathing space, when the fund will have been in operation for at least one year, we shall begin to seek repayment. I intend that from October 1976, until Government loans are paid off, the Agency shall devote half its net 1584 income to repayment, the rest being retained in the fund.
I come to what I think will be of the greatest importance to hon. Members and to their constituents. On whose behalf is protection offered? This is the point with which Clause 2 deals.
Package tours are offered in an immense variety. Probably 90 per cent. of those booking overseas package tours go by air. Sometimes holiday bookings are made with a scheduled airline either at its offices or through a travel agent. This kind of traffic has never required regulatory licensing or bonding and does not fall within the system of enhanced protection being established now. What we are talking about today is those overseas package holidays which require a Civil Aviation Authority licence and the bonding which has gone with it.
Package holidays which are confined to surface holidays—for instance coach tours and cruises—have not been subject to this protective scheme of licensing and bonding up to date and will not be included. However, it is my intention to get to grips with providing protection for those people with the aim of introducing further legislation as soon as possible. I am aware that there are many excluded categories—but it calls for much wider coverage, while involving a much smaller proportion of overseas holidays. It is not a task which can be accomplished quickly. I do not believe that the House would wish me to keep hundreds of thousands of travellers, who can be protected at once, waiting in the meantime for reassurance and help.
In general—and the House must realise that I am not attempting a careful statement of law on this point—all passengers travelling on charter aircraft overseas in a package tour will be covered. So will the bulk of package holidaymakers travelling on so-called part-charter by scheduled services.
There will be a small minority of people travelling on a package tour on scheduled services who will not be covered because the tour operator does not require a regulatory licence and the special protection which goes with it, but these are a minority.
A significant number of travellers will also benefit—I refer to those who are travelling independently, and who have 1585 made advance payments on advance booking charters—because their custom has been covered by the protective system of licence and bonding. Clause 2 of the Bill describes all those people.
How will future holidaymakers know whether they are covered by this somewhat formidable clause? The simplest way for a future passenger to find out whether he is protected is to ask the travel agent or tour operator with whom he proposes to book. If these people do not know, the passenger should deal elsewhere. The Civil Aviation Authority already issues lists of licensed organisers through ABTA to all its retail members. We are doing all we can to persuade non-ABTA travel agents to put themselves on the Civil Aviation circulation list. Arrangements are being made available at all local trading standards offices and through citizens' advice bureaux. A telephone call to the Civil Aviation Authority from the travel agent will provide the answer on the spot if there is any doubt.
§ Mrs. Gwyneth Dunwoody (Crewe)
I accept what my right hon. Friend says as to what may appear to be the best protection for those articulate and fairly well-informed customers who will make some effort to find out from an independent authority exactly whether they are covered. However, will he accept that the majority of people booking through travel agents will not know whether they are covered? It is the responsibility of the Department to work out a simple method of making it clear at the point of booking whether the intending holidaymaker is covered by the scheme.
§ Mr. Shore
I am aware of the importance of that point and I shall give it very close attention. My Department cannot reach out, as it were, to all potential travellers. We must make use of the full services of ABTA and of the trade and combine with them to give the maximum of information and publicity to the travelling public. If there are other ways in which we can reinforce such contacts we shall be only too happy to do so. I said that those arrangements were being made.
I should add that it is already an offence to take bookings for the kind of passenger we want to protect without an 1586 air travel organiser's licence and the individual bond which goes with it. The travel agent who provides travel for that kind of passenger commits an offence if he acts for an unlicensed air travel organiser.
I must emphasise the responsibility of the passenger. We cannot entirely get away from that. The passenger must check his position. The fund will not be able to look after those who needed protection and who failed to make sure for themselves whether they had it.
I have tried to describe in very broad terms who will be protected by the Bill. In any particular case the losses and liabilities they have suffered will inevitably be affected by the exact contractual arrangements which, I have indicated, the trade has varied and adapted to meet changing conditions and opportunities. It has been crucial to the trade's development that new types of contract and fares have constantly been developed.
We do not want to introduce unnecessary rigidities, but there must be some precision so that the trade and customers may know where they stand. This precision will be given in the benefit rules to be prepared under Clause 3 by the Civil Aviation Authority, subject to my approval. They will be printed and made available on request. I should expect that the benefit rules will have to be changed from time to time to keep abreast of new developments, and changed at short notice. The form of the Bill ensures that this will be possible and that precise conditions in which a claim may be made and how it shall be made are provided for.
Finally, I turn to those who were affected by the failures which occurred from 1st April last and before publication of the Bill. First, I should emphasise that a good many were in fact cared for under the bonding arrangements current at the time. That was so even in the case of Clarksons and Horizon. The bonds were called up to finance an extremely successful repatriation operation, and substantial sums still remain in those bonds.
I know that the Tour Operators' Study Group which carried out that exercise so successfully now hopes to bring to an early conclusion discussions with my Department and the liquidators to begin 1587 payments to some of the people who did not even get away. Once these bonds have been cleared and the Bill has passed through all its stages, under Clause 2 the Agency will be able to step in to provide the reinforcement required. Indeed, anticipating Assent, we are already laying down facilities to identify and verify outstanding claims with all possible speed.
I am fully aware that there has been criticism of the retrospective nature of these proposals. If I am to have regard to the hundreds of letters that I have received from hon. Members, particularly the Opposition—I have never received so many letters on any subject since becoming a Minister—I am confident that the House will rebut those criticisms.
The action taken following the Edwards Report showed that Parliament accepted the need for regulating the air travel organisers' business, including package tours. The trade itself had of its own initiative set in place a protective bonding system intended to look after its customers. That system was accepted by the Civil Aviation Authority as a proper reinforcement of the regulatory arrangements, widely advertised by the trade and the Civil Aviation Authority as a precondition of organisers' licences, thereby offering reasonable security to the travelling public. This protective system applied to the air travel organisers who failed last year, and it proved deficient on a scale which showed that the security was not reasonable in unforeseen circumstances.
We now recognise that the deficiency puts a responsibility on Parliament and on the trade to provide better protection for future holidaymakers and that we cannot discount abnormal conditions. If we do, it is not reasonable to claim that we do not all have the same responsibility to look after those who have already experienced its deficiencies. To make so sharp a distinction would be invidious and unfair.
§ Mr. Eldon Griffiths
I do not think that there will be a great deal of difference about the propriety of compensating those who, through no fault of their own, lost their holidays and money. The only question is from what source that compensation should come. Will the Secretary of State confirm, simply for clarification, that those who are to be 1588 compensated will obtain compensation in part from the liquidator, if there is anything left, in part from the new fund that is to be set up, meaning that they will obtain something from the Government's interest- free loan, and that, in addition, they will receive some part of their compensation from a levy on future holidaymakers? It is the last point which I find objectionable. I do not see why those who in future book holidays should pay for what I believe to be the egregious mistakes of both the Government and the operators in the first instance.
§ Mr. Shore
I will say more about that matter later. I understand what the hon. Gentleman is putting. We must consider carefully what is reasonable to ask of people in terms of retrospective payment. I ask him on this occasion to leave aside his view about the Government's involvement in the matter.
If there had been no Government involvement and the trade had run into serious difficulties, which I think in retrospect we could see that it was heading for, I wonder what view the House would have taken. Would it have taken the view that, on the one hand, there was nothing to be done for the failures of last year, except what was left over from the rubbish-heap of bankruptcy or, on the other hand, that, the Civil Aviation Authority having produced a scheme, there was a reasonable expectation that ordinary people who went under those auspices would have some security and, therefore, any reinforcing of that scheme, under whatever arrangements we might choose, it was not unnatural to make retrospective.
§ Mr. Shore
I have not left it. I am coming straight to it.
I think that the Bill will meet the wishes of the great bulk of the travelling public who take their holidays abroad, whatever the minority in the travel trade may say. I am sure that people will be 1589 ready to pay the levy so that they may have reasonable confidence that, if their travel organisation fails, they will get their money returned. That is not in doubt at all.
I further believe that British holidaymakers, with their sense of fair play, will not cavil at making the scheme retrospective to last year's holidaymakers and at making a small contribution to the cost involved.
It is not right that the taxpayer should pay for the failures of the air travel industry, but I accept that we must make our contribution towards launching the fund by providing a loan and, more, that we should co-operate with the industry by giving a helping hand at the start of this new scheme by making that loan interest-free.
§ 4.58 p.m.
§ Mr. Terence Higgins (Worthing)
I should like to begin with a quotation.I booked early in 1974 with Horizon Holidays for a holiday in September 1974 for four of us in Corsica. After paying a deposit and learning that Horizon were in trouble, I considered cancelling the holiday and losing the deposit of £42. When I heard, however, that Court Line were to take over Horizon, I decided to leave things as they were. When Court Line got into difficulties, I was again worried, but as Mr. Wedgwood Benn stated that Court Line Shipbuilders would be taken into Government control and that all outstanding holiday commitments would be safeguarded, I paid the balance of the cost of the holiday, and have landed myself with a loss of £536 which, as a retirement pensioner, I can ill afford. I think you will agree that this has been a disgraceful affair caused by foolish statements made by a Government Minister.That letter, perhaps shorter than some, is none the less typical of hundreds, if not thousands, of letters written by constituents to Members of Parliament. Indeed, I believe that it is at the centre of our debate today and that it is right to draw this matter to the attention of the House at the outset.
I can well understand that the Secretary of State for Trade does not feel that he could agree to an inquest on this occasion. The right hon. Gentleman said that he preferred "recollection in tranquillity". That is an interesting Freudian slip, because it is Andre Gide's definition of "melancholy". Certainly the Secretary of State has a great deal to be melancholy about. [HON. MEMBERS: 1590 "Wordsworth."] If it be Wordsworth, so be it—I may be more up to date than hon. Members—but certainly "melancholy" was being defined.
The point which we ought to bring out as clearly as possible now is the rôle which has been played in this affair by the Secretary of State for Industry. It is remarkable that the Secretary of State for Trade did not once mention his right hon. Friend during his speech. It is even more remarkable that the Secretary of State for Industry's name does not appear on the Bill, and that he has not even had the courtesy to come to the House this afternoon and face this debate.
The fact of the matter is that in this affair the Secretary of State for Industry has played a rôle which can only be described as disgraceful. In the debate, earlier this week, on the Industry Bill, we heard a great deal about the right hon. Gentleman's enthusiasm for accountability and the importance of Parliament, yet on this matter, for which he has much to account, he has not appeared to hear the debate.
§ Mr. Shore
The hon. Gentleman is being uncharacteristically ungenerous. He cannot have it both ways. If we are subjected, as we have been—with our entire consent—to two independent inquiries, we cannot at the same time have a kind of great public debate in the House of Commons, or, if we do, he is being unfair and prejudging the whole issue. The Bill is necessary for entirely different reasons, and therefore it is unfair of the hon. Gentleman to make the kind of comment that he has just made. He need not worry. When the time comes, we shall deal with this matter.
§ Mr. Higgins
I shall be quite fair and quote from the letter which the right hon. Gentleman wrote on 10th February. He said:I shall refrain from commenting upon your constituent's reference to the rôle of the Government in this matter in view of the investigation being undertaken by the Parliamentary Commissioner for Administration and the appointment of inspectors to investigate the affairs of Court Line, with which the Government have promised their full co-operation.The right hon. Gentleman, and in particular the Secretary of State for Industry, cannot shield behind those inquiries to answer points which are self-evident and which require only a moment's inquiry to 1591 establish, as I shall show in a moment. That is what the right hon. Gentleman and his right hon. Friend are trying to do. The rôle of the Secretary of State for Industry is at the centre of the matter. It is preposterous, as one of my hon. Friends said a short while ago, that the Bill should come before the House now. The Minister should wait until the results of the inquiry have become known.
§ Mrs. Dunwoody
Does the hon. Gentleman feel that there may be just a soupcon of involvement on the part of the management concerned? Cannot he bring himself to say one small word of condemnation of the management?
§ Mr. Higgins
The hon. Lady might give me a chance to proceed with my speech. It is no part of my case this afternoon to say that there is not a considerable amount of fault on various sides. That may be the case, and no doubt we shall hear more about that during the debate. I am concentrating on the crucial rôle played by the Secretary of State for Industry in this House.
There are essentially three groups which are covered by the provisions of the Bill. First, there are those who lost their money because they were misled by the Secretary of State for Industry's statement. Secondly, there are those who lost money as a result of the Court Line collapse, even if they were not misled by the Secretary of State for Industry's statement—they may be rather difficult to differentiate—and those who may have been affected by the Government's action over Court Line. Thirdly, there are the future holidaymakers, which is the aspect on which the Secretary of State for Trade concentrated many of his remarks this afternoon. I should like to deal with each of those three groups in turn.
I turn immediately to the point I was making a moment ago, which is the rôle played in this matter by the Secretary of State for Industry. The object of the Bill is to get him off the hook by pushing legislation through in advance of the inquiry being carried out by the Ombudsman. It is right that the House should be clear what it was the Secretary of State for Industry said in the House. His statement was: 1592The Government are ready to acquire the entire shipbuilding and ship repairing interests of Court Shipbuilders and consider that this should stabilise the situation in respect of Court Line's interests, including the holidays booked for this summer.The right hon. Gentleman went on to say in answer to a question by my hon. Friend the Member for Henley (Mr. Heseltine):What we are proposing to do is to bring into public ownership 16 companies that are owned by Court Shipbuilders, using legislation that the hon. Gentlemen and his right hon. Friends put on the statute book. We propose to do that in consultation with the firm and in a form that is completely agreeable to the firm, thus saving £133 million of shipbuilding orders and jobs of 9,000 workers in development areas, making possible the completion of £48 million worth of expected further orders and safeguarding the holidaymakers."—[Official Report, 26th June 1974; Vol. 875, c. 1556–7.]I do not think anyone reading that could seriously put on it any interpretation other than that the Government were safeguarding the holidaymakers. However, not all one's constituents read Hansard every day.
My hon. Friend the Member for Ealing, Acton (Sir G. Young) in an article a little while ago summarised some of the Press comment on the morning after that statement, and I do not think I can do better than use his words because he did it so briefly and cogently:'Ben's grab saves tour firm,' declared the Sun, adding that the Government was ready to rescue the ailing Court Line Group. 'Lifeline for holiday firm' said the Express. The headline in the Daily Mirror was 'Benn's big holiday rescue'.It is clear that anyone's constituents reading that and wondering whether they should proceed with their bookings were misled by the right hon. Gentleman's statement, and I do not think that that can seriously be disputed.
That being so, the question arises: what can be done about it? The extraordinary proposition which we have had this afternoon from the Secretary of State for Trade is that those who suffered in this way should be compensated by future holidaymakers. I can only use the word "bizarre" to describe what is proposed. I find it an extraordinary proposition that anyone who decides to go on holiday this year should compensate people who were misled last year by the Secretary of State for Industry. This is, and can only be 1593 described as, a bizarre and preposterous proposition.
§ Mr. Tebbit
I put it to my hon. Friend that the right phrase to describe the proposition is that it is "wholly unreasonable". That was the phrase used by the Under-Secretary of State for Trade—the hon. Member for Hackney, Central (Mr. Davis)—in describing a similar proposition concerning payment to those who lost their money in the National Life Insurance Company Ltd.
§ Mr. Higgins
I intend to come to that in a moment. I am sure that my hon. Friend is right to draw attention to that.
What should the Government and the Ministers concerned do in these circumstances? One must face the fact that if people suffer loss as a result of the actions of Ministers there is a case—moral if not legal—for compensation to be received by them. If that is so, the right course of action is for the Minister and the Government to admit the mistake to the House and ask the House to approve payment out of public funds.
Some of our constituents may argue that the money ought to come from the Minister concerned. There are well-known constitutional reasons why that would not be desirable in this case but, nevertheless, that is the right course of action, and the other essential part of the action must be that the Minister concerned should resign. That is the right course of action, but not only has the Secretary of State for Industry not resigned, he is not even here. He is dodging the issue. That is what has happened, and I believe it is right that we should bring this matter to public attention. I find it incomprehensible that the Secretary of State for Industry has not done this already. I doubt whether there has ever been a more sordid case than this of a Minister hanging on to office when he ought to go. I do not think that our constituents are laughing.
§ Mr. Shore
The hon. Gentleman insists on pursuing this matter. The whole crazy chain of logic which he is building up starts from the false premise that my right hon. Friend misled holidaymakers. He cannot sit there and prejudge the matter. Let him look seriously at all the evidence. Let him wait until we have the real facts before us.
§ Mr. Higgins
The Secretary of State has only to look at the hundreds of letters which he says he has received from hon. Members and constituents to realise that they clearly were misled. Those people are 100 per cent. sure that they were misled. I have no reason to doubt that they are right. It could be argued that in the circumstances it would be right to vote against the Bill. If we were to do so, that would effectively close the matter. The Secretary of State could then reasonably say that the matter had been put before the House and the House had reached a decision. Therefore, I go along with what the Secretary of State said.
It is right that we should wait for the results of the inquiry being carried out by the Ombudsman. If the inquiry reaches the conclusion that compensation should be paid out of public funds, how is the Minister proposing to unscramble the situation—having set up the reserve fund—assuming that the Bill receives the Royal Assent before the inquiry has been completed? I am prepared to accept what the Minister says. That is why, despite considerable provocation, I shall not encourage my hon. Friends to vote against it. It is right that we should wait for the results of the inquiry. I do not doubt that the inquiry will reach a reasonable conclusion. That being the case, I shall leave the matter as it stands.
§ Mr. Eldon Griffiths
I hope that we shall not be too lenient on this point in Committee. The Secretary of State is pre-empting any judgment that the Ombudsman may reach about the responsibilities of the Secretary of State for Industry. If the Ombudsman finds that the right hon. Gentleman has misled the holidaymakers he should come to this House to beg pardon and ask for funds to be appropriated to deal with his mistake. I hope that hon. Members who serve on the Committee will not allow this Bill to procure those funds in another fashion without the Secretary of State for Industry's being held clearly and publicly responsible.
§ Mr. Higgins
We shall pursue these various points in Committee. My hon. Friends may be assured of that. A Government interest-free loan is involved here. To the extent that it is interest-free, 1595 Government funds are being provided. This is a further way in which the issue is being fudged. However, we have not had what we ought to have had, namely, the resignation of the Secretary of State for Industry.
§ Mr. Cranley Onslow (Woking)
No doubt the right hon. Gentleman, who is anxious that the matter should not be prejudged, will help us to amend the Bill so that if the Ombudsman finds against the Secretary of State and public funds are made available to safeguard future holidaymakers, refunds could be provided. During a period of uncertainty, coupons could be attached to people's tickets so that they could subsequently receive a refund.
§ Mr. Higgins
These are points we shall need to consider carefully.
I turn to the second group of people—those who lost their money as a result of the Court Line failure. A considerable degree of doubt exists on the question whether they fall into the first or second category. There is a problem in distinguishing them. The Government may reasonably argue that if one group has to be compensated, so does the other because it is difficult to distinguish between the two.
The Government propose to compensate the second group—those who were not misled by the Secretary of State but who, none the less, lost their money in the Court Line collapse. I turn to the Government's attitude towards retrospection in relation to this group. On 17th February the Under-Secretary of State for Trade referred to the question of the Nation Life people who had lost money. He said:I cannot agree that Nation Life should be encompassed by the Government's scheme.This is the scheme for those who lost their money as a result of the Nation Life collapse. He went on:This scheme is to be financed by a statutory levy on the insurers and it would be wholly unreasonable to expect them to pay out for losses in respect of companies that fell before the announcement was made by my right hon. Friend on 29th October last year."—[Official Report, 17th February 1975; Vol. 886, c. 895.]There are differences between the two cases, but the point about retrospection is on all fours. If it is "wholly unreasonable" in the case of Nation Life, as it may well be, what is the position of the Government 1596 on this issue? Where is the consistency? They are proposing to make this retrospective, but not to apply retrospective measures in the other case. There should be a clear statement from the Government on their general policy both on the question of retrospection, on which feelings in the House always run strongly, and on the question of what the rôle of the Government should be in what The Times described on 20th September 1974, in the context of the Court Line affair, as "Wheeling in the Taxpayer". The Times pointed out in a leader that day that:Some 100,000 people have lost some money and been put out because of the collapse of that company, and that is very bad luck.That is certainly true. It went on:A lot of people have lost some money because of the collapse of equity values or farm-gate prices or because of the erosion of their savings by inflation, and that is very bad luck. … Many more people probably stand to lose a lot more money in those and similar ways before this inflation-cum-recession has blown itself out, and that will be very bad luck.We need to know the limits of the Government's policy about compensation for people when commercial operations fail. It is not at all clear at present where those limits are. It seems that with these, and other proposals, the Government are seeking to bail out one group after another. There is a serious question here, on which a statement of policy by the Government would be right and proper. I hope that in the reply the Under-Secretary, who is invariably helpful on such matters, will give us such a statement.
Another question about this second group concerns the rôle of the Secretary of State for Trade and the vexed question of timing. The right hon. Gentleman gave the impression that with only the slightest amount of hindsight the whole matter could have been anticipated. It is certainly true that the problem arose largely because of timing. It arose in the middle of the holiday season, when cash flow would normally be expected to be at its highest.
The provisions that had been made—which were meant to deal with a situation where a company failed at the beginning of the season or at the end—were not adequate to deal with it. I see no reason why the Secretary of State should not 1597 tell us the earliest date at which he had doubts about the Court Line position. The CAA is reported to have had doubts as far back as March last year. Why did the Secretary of State not take steps to correct the impression given by his right hon. Friend in the passage I have quoted? There is no reason why we should not hear his side of the story in advance of the inquiry, which no doubt will consider all aspects.
I turn to the question whether the £14 million was thought to be adequate at the time. The Secretary of State will recall the mention of £14 million in respect of the purchase of the shipbuilding interests. Will he say whether that sum has been paid, or how the position now stands? Is it true that in any case it would have been inadequate to cover the situation, since there was a deficit of around £23 million? I hope that the Under-Secretary of State, in reply, will be able to clarify the situation.
The crucial question to be considered is whether the fund set out in the Bill is necessary or desirable, so that future holidaymakers are protected. I found it quite extraordinary that the Secretary of State for Trade, in answer to an intervention, said that he would give further consideration to the question whether consumer interests should be represented adequately on the proposed Agency. Surely the Secretary of State should have given consideration to this matter a long time ago—even before the Bill was drafted. It is the consumer—in other words, the holidaymaker—whom the Bill ostensibly is supposed to protect. To say that these matters will be done through representations to the CAA and the travel trade does not amount to adequate representation of consumer interests. It is remarkable that the right hon. Gentleman should now be prepared to give consideration to the matter, having apparently been taken completely by surprise by that intervention.
I turn to deal with the important point of principle that is involved. As I understand the situation—although I have a little doubt about the matter as a result of one or two things said by the Secretary of State this afternoon—the contributions to the fund are to be compulsory. The 1598 effective levy of 1 per cent. in the coming year and 2 per cent. in following years will provide blanket cover for all tour operators, without distinction between their competence or incompetence, or prudence and imprudence. It is astonishing that the Government are to put a premium on the good firms to pay for the bad firms. Therefore, there is no incentive for clients to go to firms which are reliable. Indeed there is a most extraordinary paradox, because the more a firm cuts prices the smaller a contribution it will make to the fund. Yet much of the problem has arisen because of excessive price cutting.
§ Mr. Higgins
He never thought of it, but provision for it is in the Bill. That is a curious way of setting about the matter.
The Secretary of State referred to the bonding scheme. I want to consider carefully whether there is a better alternative to the proposals made in the Bill. The CAA bonding scheme has been in operation, and we recognise that the problem partly arose because Court Line's troubles began in mid-season. None the less, the bonding scheme helped a great many people who otherwise would have been stranded. I understand that there was a considerable amount of money available which was to be used to help those who suffered in the affair, but that it proved inadequate. On the other hand the bonding is now to be raised to 10 per cent., which presumably will be an added advantage. One would have thought that the CAA believes that to be adequate to deal with future crises. Although the Association of British Travel Agents originally felt that a scheme of the kind proposed by the Secretary of State might be adequate, I am sure the right hon. Gentleman is aware that the tour operators' study group, which covers 20 leading firms, carrying over 80 per cent. of total traffic, finds the scheme highly objectionable. It has described the Government's scheme as "unethical and unnecessary" and believes that there are better means of providing protection.
Before I turn to the alternative, which seems to me to be the best available, I should like to define three short points. First, one has the impression that the Government's scheme might establish a 1599 closed shop for those who have contributed. Will the Under-Secretary say whether this is the case and, if not, what arrangements will be made for new members to join?
Secondly, I understand that the scheme operated by Thomas Cook and others is not an insurance scheme, as such, but a self-insurance scheme, generally described as a guarantee scheme. We have had experience of guarantee schemes in the insurance industry. May we be told whether the scheme envisages an insurance scheme or a self-insurance scheme?
The third point I wish to raise relates to notices which appear in some travel agents' windows to the effect: "Book now. New Government guarantee." I gather that such notices are fairly widespread. I presume that they can only refer to this Bill. I am not sure whether they amount to contempt of Parliament, if that is the correct term, but it seems a little early to promulgate such notices, and there then may be questions of a breach of the Trade Descriptions Act. Will the Minister comment on that situation?
Is there a better alternative to the Government's proposals? I should have thought that for the CAA and others concerned in the industry the scheme will be a considerable improvement with regard to the raising of contributions. We must also consider the question whether a topping-up arrangement is necessary. If that is the case, surely it would be better to operate via a straight insurance taken out on a commercial basis. I do not see why there needs to be a Government levy, since it carries with it the serious objection of ensuring that the more creditworthy firms cross-subsidise those who are less creditworthy.
I do not agree with the Secretary of State that it would be impossible for smaller firms to operate such an insurance scheme. It is a question not of total assets, but whether they can pay the insurance. If they cannot pay the insurance because the risk is so high, surely that casts some doubt upon the firm in the first place. I do not accept the view that only large firms would be able to undertake such an arrangement. I believe that a topping-up scheme is much preferable to the Government's scheme, with all the great disadvantages which it involves. These are matters which we 1600 can consider in Committee. We shall await to see the outcome of those discussions before deciding what position we shall take up on Third Reading.
The fact is that these proposals would not now be before the House if we had not experienced the disastrous events of last year and if we had not had the irresponsibe statements made by the Secretary of State for Industry. We should call on the Government to face their responsibilities. They should admit to the House that a mistake was made. That applies particularly to the Secretary of State for Industry. The Government must ask for compensation to be paid, and the Minister should resign. There is no need to wait for the Ombudsman's report. It is increasingly difficult to envisage any issue on which the Secretary of State for Industry would resign. But there is not the slightest doubt that that is what he should do—and I believe that he should resign now.
§ 5.28 p.m.
§ Mrs. Gwyneth Dunwoody (Crewe)
I have listened with considerable attention, but with some astonishment, to the hon. Member for Worthing (Mr. Higgins), who in this debate leads for the Opposition. The hon. Gentleman is a man of intelligence and wit, and it is a little shattering to see him acting like one of the characters in "Alice in Wonderland". It was astounding that he put forward the Opposition's case without making any condemnation of the private enterprise firms involved.
I have been deeply concerned that in the debate so far we have had no plain statement of the facts. We heard from my right hon. Friend the Secretary of State for Trade how the industry got itself into this situation, but why do we not say clearly that the fact is that many travel agents reached the point at which they were undercutting each other so much that one telephone call abroad could mean the difference between a loss or a profit on a holidaymaker in a package deal.
Travel agents have a very heavy responsibility to bear in this matter. They refused to put their own house in order. Hon. Members opposite who have direct connections with the travel trade will know only too clearly that the doubts which were being expressed about Court 1601 Line were widely expressed throughout the travel trade long before the difficulties became known to this House. To talk as though the Secretary of State for Industry ought to have personally organised the whole of the Court Line holiday system for the year before it went sour seems to me extraordinarily irresponsible.
§ Mr. Eldon Griffiths
The hon. Lady appears not to understand that when a private company fails in its duty, as may well have been the case, the company pays the price with bankruptcy, the loss of its assets and, potentially—if the court so judges—by its directors going to gaol. The Secretary of State, who had some responsibility, is apparently to be whitewashed. He is apparently to have no responsibility placed upon him. That is the difference, which I wish the hon. Lady would understand.
§ Mrs. Dunwoody
The hon. Gentleman is quite wrong. There is no indication that the Secretary of State is to be either whitewashed or not whitewashed. The report of the Ombudsman, which we are awaiting, has not come to the House. Secondly, it is not the directors who pay the price if there is a bankruptcy. It is the holidaymakers who were not able to take their holidays. This stinking hypocrisy makes me sick.
§ Mr. Ivor Clemitson (Luton, East)
Does my hon. Friend agree that the people—numbering nearly 1,200—who lost their jobs because of the collapse of Court Line also paid a price?
§ Mrs. Dunwoody
My hon. Friend makes a valid point. There seem to me to have been a lot of omissions from the speeches which we have heard which are relevant to the subject in hand. For example, we have not heard any true statement of the situation concerning ABTA and this scheme. I am disturbed by the situation which exists in the travel trade, particularly in relation to this travel organisation. I find it extraordinarily worrying not just that the notices, to which the hon. Member for Worthing referred, are widely plastered all over the travel outlets, but also that it appears that ABTA itself has members who have been, on the one hand, negotiating with the Government and, on the other hand displaying so little faith in the kind of 1602 proposals being put forward that they themselves have come up with secondary schemes and are totally split in their own attitude towards the guarantee position of the ordinary tourist.
It is possible that anyone taking a holiday this summer will still find himself in considerable difficulty. It is not enough to say that intending holidaymakers can make one telephone call to the Civil Aviation Authority. If I go to Market Street, Crewe, to book a holiday I do not expect to have to ring up the Civil Aviation Authority and find out whether the tourist agent with whom I am dealing is a responsible person. What is more I do not think that many of my constituents would recognise the rôle of the Civil Aviation Authority in this matter.
As to the proposed bonding scheme, I still think it is inadequate. The 10 per cent. which is now proposed, and which is the original figure to which ABTA was asked to agree, is probably still inadequate to meet the problem if a number of firms get into difficulties. There is no doubt that package holidays will become more expensive. It that means that people will get a better standard of accommodation and will be sure of getting there and back, it seems to me that this is not only inevitable but desirable.
The industry has refused to operate a workable code of conduct. It is all very well blaming the actions of Ministers. I have no doubt that when the time comes this will be fully debated, but the fact remains that for well over three years ABTA and the firms concerned in the travel industry have gone on knowing that their arrangements were inadequate and that they were entering into such cutthroat competition that they would inevitably face considerable difficulty. Neither the trade association nor the firms took action to try to protect the holidaymakers. It is the person who booked, who needed the holiday and who in many instances lost that holiday, who seems to have been totally overlooked.
§ Mr. Kenneth Lewis
The hon. Lady knows that I have been involved with ABTA for some years. Nobody would pretend that everything was perfect, but the fact remains that the association was the first organisation to take action to give cover to holidaymakers. It is also a fact that the CAA can set the bond. 1603 They have put it up. The bond applies to each company. If the bond is too high, people will be put out of business, so a balance is required. In spite of the large-scale events of last year, a great deal of progress had been made and many people had a cover which almost guaranteed them a holiday without any question of their losing money, short of the very large catastrophe which took place. That cover was due entirely to the trade itself.
§ Mrs. Dunwoody
The hon. Gentleman must not misunderstand me. I recognise that the trade has great goodwill towards its customers. After all, they provide its bread and butter. I am convinced, however, that ABTA did not put its own house in order. In many instances, even today, the travel Press is carrying long articles showing great discontent about the operation of ABTA, on the part not only of tour operators but everybody involved in the business, and we must soon reach the point at which the Department will have a responsibility to move in and try to get an agreed set of rules for the operation of travel tours which will protect the customers before things go wrong. The hon. Gentleman used a phrase to the effect that "it almost guaranteed them a holiday". It seems to me that that is precisely the attitude of the travel trade, and it is the reason why we have the muddle which we have today.
I do not wish to go back over past events. I, too, have slight reservations about the fact that present and future holidaymakers will be paying some of this levy. Once the undertaking to replace the money lost was given in public, one is in some difficulty if one seeks to levy on people who are not involved in any way in order to pay back sums of money which the Government will have to underwrite. That is not to say that I believe there is any defence of the Court Line management or the people who got into this situation, but I think we are on to a slightly dicey moral argument if we say that we shall underwrite it, but that on the other hand we expect to take the money back from people who were not involved in the original incident.
Given that slight caveat, I say this. The travel industry had an enormous growth period and looked as if it was 1604 going through the classic boom and bust. This is an industry which cannot only provide a good service but should also be a considerable earner for us. It was never taken seriously by this House until it got itself into a frightful muddle. I do not think that that either is defensible.
I conclude by saying what I hope will not be interpreted as a few unkind words. I have absolutely no involvement in this matter beyond that of protecting the interests of my constituents and beyond wishing to see this industry putting its own house in order. It would be best if it could be done voluntarily. I have no doubt that the travel trade, in the management that it allows to take charge, in the way that it behaved over Court Line and in the way in which it is negotiating with the Government about this scheme, is not beginning to assume the degree of responsibility that it should. I have considerable reservations about the future of the industry if it is allowed to continue as at present.
§ 5.42 p.m.
§ Mr. Norman Tebbit (Chingford)
The debate was opened with all the charm and courtesy that we expect from the Secretary of State for Trade. Well he needed it, because he had very little to rely on except charm and courtesy when introducing the Bill. I am sure that the debate will be closed in a similar style by my constituency neighbour the hon. Member for Waltham Forest (Mr. Deakins). The Government are putting on two of their most persuasive Ministers for what appears to be a relatively small Bill.
The debate, as my hon. Friend the Member for Worthing (Mr. Higgins) said, is Hamlet without the Prince, or, more aptly, an Agatha Cristie novel in which all the participants are present except those who really ought to finish up in the dock. I have a good deal of sympathy with the hon. Member for Crewe (Mrs. Dunwoody), who listed those who managed Court Line in that respect too, but we cannot bring them here. As my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) said, they are facing the consequences of their mismanagement already, in the collapse of their firm, as, indeed, are all those who put their savings, their lives, into the firm. We must remember that.
1605 But we could have had the real culprit here. I refer to the Secretary of State for Industry. So far he has escaped justice, but no doubt we shall have him in the end. Whatever considerations have moved my right hon. and hon. Friends to give the Bill an unopposed Second Reading, the one consideration which has moved me is that if the House voted upon it we might in some way pre-empt the findings of the Parliamentary Commissioner.
The Bill need never have come to us, at least in this form, but for the fact that the Secretary of State for Industry recklessly induced people to part with their money to a company which, when he spoke as he did, he either knew, or ought to have known, was not financially sound.
§ Mr. Tebbit
I shall not excuse the travel agents, but they do not speak with the authority of a Minister of the Crown. If the hon. Gentleman wishes to intervene or to take part in the debate he will no doubt have the chance to do so, but his unusual sedentary style does not become him.
§ Mr. Ioan Evans (Aberdare)
Does the hon. Gentleman agree that the company got into trouble due to the policies pursued by his Government and the three-day working week? The Conservatives have got rid of the man who was Prime Minister then. The association between the former Leader of the Opposition and the Horizon company is well known.
§ Mr. Tebbit
There is not a shred of truth in that. The former Prime Minister, my right hon. Friend the Member for Sidcup (Mr. Heath), had no connection with the company. If the hon. Gentleman believes that he has evidence to the contrary, he had best lay it before the House.
Those who were primarily responsible for the collapse of Court Line were its directors, aided and abetted by the Arabs, who pushed up the price of fuel, and all the other troubles which fell upon this country, for some of which we all share a degree of responsibility. But the man who, with the authority of a Minister of the Crown, gave the public the impression 1606 that he had safeguarded the Court holiday group—an impression which he never sought to remove—was the Secretary of State for Industry. This folly was further compounded when, in the heat of a General Election run-up, the pledge was given that those who had lost their money would be reimbursed. It was never said at that time at whose expense that would be done. We now know. It is at the expense of those who will take their holidays this year and next year. Like the hon. Lady, I think that there is something thoroughly unsound about that.
Let us get the whole matter into perspective. It is sad that holidaymakers lost their money, but there are many sadder cases. It is possible to lose one's hard-earned savings, put down as a deposit for the purchase of a house, when an estate agent becomes insolvent. It is possible to lose the fruits of a lifetime in terms of job, savings and building up a firm, because another firm goes into liquidation. Some still remember those who suffered from an earlier intervention by the Secretary of State for Industry, in a firm called Beagle. Those people were not bailed out.
Holidaymakers have in the past suffered, and will in the future suffer, loss from many other causes, such as industrial action, which stop them from taking their holidays. Even today there are those who cannot get to work and who are suffering loss because of such action. Industrial action in France is affecting the cross-Channel ferries, and may louse-up some people's holidays. These things have been going on for a long time.
At heart, the Bill is not concerned with saving holidaymakers from the consequences of the failure of holiday companies. If it were, the right hon. Gentleman would have been much clearer in his mind about the way in which the holidaymaker, the customer, the consumer, would be represented in the agency which he proposes to set up.
The Bill is concerned with saving Ministers from the consequences of statements so reckless that if they had made them in the normal course of business they might have been open to prosecution. The extent to which this is a ministerial whitewash has been underlined already. Ministers cannot evade the charge. My 1607 hon. Friend and I have already raised the question of the view which has been put by the Under-Secretary for Trade—the hon. Member for Hackney, Central (Mr. Davis)—that no compensation of this sort should be paid by those who are indulging in the business in future. That was the whole point of the comments about the Nation Life affair.
Yet the Bill totally contradicts those quite unexceptionable sentiments. It is right that those who took the word of a Minister of the Crown in the House as being worth something—as it was proper for them to do—and who accepted that he had said that he was safeguarding their holidays, should be compensated for their losses. As my hon. Friend has observed, it is difficult to distinguish between those who really paid because of that and those who afterwards felt that perhaps they did so. We can never unmuddle those two.
The public should take the word of a Minister on these matters. We are not allowed to call each other liars in the House—least of all to call a Minister a liar. The public expects a Minister speaking at the Dispatch Box to tell the absolute truth. Perhaps we do not all do so here, but at least we restrain ourselves in the manner in which we express a matter.
It is not right that those people who suffered loss due to the Court Line collapse should be compensated at the expense of a minority group, namely, future holidaymakers. If they should be compensated at all—and I think that they should be, in view of what has happened—the compensation should come out of the Consolidated Fund, by means of an ex-gratia payment. The Minister who should propose that is the Minister whose statement led to this fracas and the Bill—the Secretary of State for Industry.
This is a buck-passing Bill. The buck is being passed from all the guilty parties—whoever we may think they are—to those who are undoubtedly innocent parties—future holidaymakers. If that is not bad enough, the way in which it is proposed will for ever be a charge on the responsible to benefit the irresponsible and on the prudent to benefit the imprudent.
1608 It might be appropriate to consider what could happen in the future. Let us take a hypothetical company. In order to avoid offence, let us give it an uncontroversial name, like Stansgate Dreamland Holidays. Probably it would be a member of the old Benn Bucketshop Group—[Interruption.] If the hon. Member for Feltham and Heston (Mr. Kerr) wishes to refer to any company with which I am associated, perhaps he will rise to his feet to do so.
§ Mr. Russell Kerr (Feltham and Heston)
If the hon. Gentleman thought that I was imputing anything against his honour, I hope that he will forget it.
§ Mr. Tebbit
After this Bill becomes law—if it does—let us suppose that Stansgate Dreamland Holidays sets up in business and offers holidays at a less-than-economic price to try to bankrupt its competitors and so seize a majority share of the market. Then let us suppose that, like other companies in the group, it folds. Who is to pick up the tab? Who is to bail out those who have been imprudent enough to book with a company with that kind of reputation? They will be bailed out by the prudent customers who had the sense to go to someone else.
There is another way to deal with this problem, and it lies more in the hands of the industry and its customers than in the hands of this House. Apart from the bonding system operated by the companies, the customer, if he wishes, should insure his hodiday at the time he books it. Naturally, the cost of such insurance will reflect the view taken by the insurance market of the tour operator concerned. That, in itself, should give anyone a guide as to how viable the company is. I cannot help feeling that the premiums charged to those who book a holiday with British Airways, for example, will be substantially less than those who book with Gee-Whizz Airways, which is on the way to bankruptcy with everyone in the trade knowing it.
It is always arguable—there is an implication of it already in this debate— 1609 how far we should legislate to save people from the fruits of ill-fortune, bad judgment or plain imprudence—
§ Mr. Tebbit
Most of us would prefer that capitalism were a little fitter than it is now, and there is a great deal which could be done about that. However, that is for another debate.
The Secretary of State very fairly discussed the point and emphasised that even if this Bill were enacted the buyer would still have to beware, and would still have to make sure that his holiday was one of those covered by the Bill. Sooner or later we should still receive letters from constituents saying that their holidays had gone wrong and that the Government had promised this, that, or the other—because the impression will go out from this debate that everyone's holiday is safe, and once again we shall have to decide whether to bail out these people.
In most vital financial transactions—such matters as house purchase, for example—we ought to go a long way to protect the buyer. In the purchase of consumer goods, however, unless the health and safety of the customer is involved, in my view we should not go nearly so far. In this case, there should be a requirement that each holiday customer should have brought to his notice in a prescribed form a statement informing him that his holiday and money will be at risk if the company collapses, or if industrial or any other action prevents completion of the contract, and that he will be uninsured unless he specifically insures himself. I think that that would be sufficient.
We must draw the line somewhere or we shall find ourselves with a new extension of Gresham's Law—that bad businesses drive out good businesses. That cannot benefit anyone.
If the Bill is given a Second Reading I trust that it will be amended drastically in Committee. Before it comes out of Committee and back to this Chamber, it may be that we shall have had the report of the Parliamentary Commissioner, in which case, on Report and Third Reading we shall be able to do something even more drastic to the Bill, and preferably to at least one of those who bear a great 1610 deal of the blame for the money which was lost last year.
§ 5.55 p.m.
§ Mr. Ivor Clemitson (Luton, East)
Inevitably the Court Line collapse last year is the background to this debate, and much of the criticism of the Bill hinges on what interpretation is put on the events of last summer. Court Line is perhaps a little nearer home to at least two of us than it is to others, because my hon. Friend the Member for Luton, West (Mr. Sedgemore) and I were at Luton airport in the early hours of that Friday morning meeting hundreds of workers who faced the loss of their jobs because of the collapse of Court Line.
Although my sympathy goes to those whose holidays were spoiled, I feel that we ought not to forget that more than 1,000 people lost their jobs, including many highly skilled people like pilots, who are still out of work.
Since we are in the mood for quotations and for various interpretations of statements and imputations about statements, perhaps I may make one or two quotations myself. Let me remind hon. Members of this, for example:We are engaged in industries which are particularly vulnerable in the present economic crisis and general uncertainty … However, I think that it has been too easy to overlook some of the benefits which I believe will materialise in the future … I am confident that the acquisition of Clarksons Holidays and the recent addition of Horizon should, together with our airline, put us in a unique position to turn the inclusive holiday business back into profitability.Another quotation is as follows:The cash flows of our leisure and aviation divisions do suffer from the seasonal nature of their businesses, and this has, of course, been emphasised at the present time due to uncertainty arising from the country's current economic problems. However, I am pleased to say that our bankers have been able to make available to us facilities to meet our requirements.Again, later on:The hard times currently being experienced in the Inclusive Tour Industry will demand an even greater effort to achieve a turn round in the company, but we see no reason to change our view as to the future profitability of the Group.
§ The Under-Secretary of State for Trade (Mr. Eric Deakins)
Is my hon. Friend offering any prizes to Opposition members for guessing who made those statements?
§ Mr. Clemitson
In case anyone has not yet realised, those statements were made by the Chairman of Court Line Limited during the annual general meeting of Court Line on 4th April 1974. Yet, a mere 10 weeks later, the company approached the Government about its position.
The hon. Member for Worthing (Mr. Higgins) quoted the famous statement made on 26th June by my right hon. Friend the Secretary of State for Industry. It was implied quite clearly in that statement that the help which the Government were giving to the Court Line Group by acquiring the shipbuilding interests should have been enough to save holidays, with one proviso—that the company had competent management. That was not said, but surely that would be implied by any reasonable person reading that statement. Of course, the Government were rightly concerned with safeguarding the holidays of holidaymakers, but no Government could give a cast-iron guarantee. The responsibility rested with the company, but the Government were doing all that they could reasonably do to help the company to fulfil its responsibilities towards its customers.
The hon. Member for Worthing (Mr. Higgins) did not remind us of a statement that was made five days later, on 1st July, by my right hon. Friend the Secretary of State for Industry. He spelt out the way in which the holiday side of the Court Line business would be helped with the £4 million which should have been repaid to the shipbuilding side, which was to be retained on a short-term loan basis by the holiday side of the business, plus a £4 million loan from the National Westminster Bank. My right hon. Friend said:The board of Court Line Ltd. has agreed to those arrangements which, it is confident, safeguard its holiday operations."—[Official Report, 1st July 1974; Vol. 876, c. 7.]Not many weeks after that we had the collapse of Court Line and all that that meant.
I have no need to go into the sordid details of the series of events of that week. The reason for my making these quotations and sketching out the story once again, without wishing to go into a long inquest, is that they form an obvious background to the Bill. Further, they go to meet the criticisms of the 1612 Bill which Conservative Members have made, and the imputations that they have made against my right hon. Friend.
§ Mr. Tebbit
I accept what the hon. Gentleman says, but it is clear that when the Secretary of State appeared at the Dispatch Box he had been convinced by the directors of the Court group that the company was viable. Our criticism of the right hon. Gentleman is that he allowed himself to be wrongly convinced of these matters and that his study had not been deep enough before he committed himself. We expect more of a Minister of the Crown.
§ Mr. Clemitson
Surely time was of the essence if the holidays of the holidaymakers were to be saved. If the directors of a reputable company—everybody thought that Court Line fitted that description—assured my right hon. Friend that holidays would be safeguarded if the money were forthcoming, coupled with the loans and the takeover of the shipbuilding interests, it was surely reasonable for my right hon. Friend, given the short time available, to make that assumption. I accept that subsequently it became clear, as the accountants examined the tangled mess of the company's books, that that was not the position. It was then that the whole sordid story became clearer. I am assured by my right hon. and hon. Friends in the Department that right up to the last minute—I do not want to go into the details of what happened during that last week—before the collapse every effort was being made to set up an operation which would have enabled Court Line to continue until the end of September. That would have safeguarded the holidays of the majority of holidaymakers taking their holidays with Court Line.
We should be learning lessons from this affair. I make no apology for repeating that while my concern, as with other hon. Members, is for the people who lost money and holidays, my primary concern was and is with those who lost their jobs. Many of those people are still out of work. The hon. Member for Chingford (Mr. Tebbit) knows that there are still many pilots who, in the depressed state of the airline industry, cannot get work exercising their peculiar skills. I welcome, although this is out of context, 1613 the provisions in the consultative document on the Contracts of Employment Bill. They will at least give some help to people who lose their jobs when a company goes into liquidation. I do not wish to go into the pros and cons of the funding, but I welcome the Bill in broad terms.
I now turn back to the collapse of Court Line and its effect on holidaymakers. I shall quote a letter from one of my constituents which raises a point perhaps a little removed from the Bill but which will be of interest. He writes:I was one of the fortunate ones, being able to stop my cheque for the balance of my holiday cost, having paid it on the day of the collapse.Presumably that was the Thursday. I am told that from the beginning of the week in question the company was advised that no more money should be taken, yet my constituent paid his cheque on the day of the collapse. However, that is not the point that I particularly wanted to make. The letter continues:Some time during December I received a form from the Official Receiver asking for details and proof of the amount owing to me being the deposit of £16. This was duly returned with proof but has since been sent back with the proviso that this must be witnessed by a Commissioner for Oaths. My contention is this, the only people that could have informed the Official Receiver of the amount due to me were the travel agents. … As such this should have been accepted by the Official Receiver as proof of debt. Instead every unfortunate person who lost money in the collapse has to line the pockets of the legal profession before their claim will be recognised by the Official Receiver. This, in my opinion, is adding insult to injury.I agree with those sentiments.
§ Mr. Tebbit
Where is the Under-Secretary of State for Trade, the hon. Member for Hackney Central (Mr. Davis)?
§ Mr. Clemitson
I support those hon. Members who have underlined the necessity for the representation of consumers. I heard a speech recently by a well-known person on industrial democracy. I put it to him that as workers might be represented on boards so consumers might be represented on the agency. He said that consumers are best represented by a good sales director. That struck me as being comparable to saying that the interests 1614 of prisoners are best served by warders. I agree that it is difficult to know who should represent consumers but I believe that in some way they should be represented. I welcome the Bill as perhaps one small good which has come out of the great evil of the Court Line collapse.
§ 6.10 p.m.
§ Mr. Robert Adley (Christchurch and Lymington)
I begin by declaring an interest in a hotel company, but certainly none in any way connected with the grotesque events that we are discussing tonight.
The Secretary of State for Trade did himself and his Government less than justice by seeking to brush aside the involvement in all this of his right hon. Friend the Secretary of State for Industry. He and his activities hang like a ghoul over our proceedings tonight. I echo the hope of many of my hon. Friends that the right hon. Gentleman will at some stage recognise his rôle in this matter and at least have the courtesy and decency to come forward—[Interruption.] If the hon. Member for Feltham and Heston (Mr. Kerr) wishes to intervene, I shall be delighted to give way.
§ Mr. Adley
No, the hon. Gentleman has just come into the Chamber, so he can wait.
At Prime Minister's Question Time this afternoon there was some discussion of collective Cabinet responsibility. Sooner or later the House will have to face up to the question of ministerial responsibility for statements made in the House. We have come a long way from Crichel Down and I sometimes wonder whether there might not be some justification for people outside behaving in a way which we criticise when Ministers and Members here make statements which have such a profound effect on people's lives, jobs and money and then run away and do not even have the courage to put their names to Bills which have been introduced to try to alleviate the damage done by their statements.
I wish to concentrate on two main points. The first is the question of principle, of whether or not it is the duty of the Government to bail out lame ducks. There must come a time to call a halt 1615 permanently to expecting the Government—the taxpayer—to fund people who fail in business. My hon. Friend the Member for Chingford (Mr. Tebbit) made a valuable point. I, too, am certain that if package tour customers had to take out insurance related to the assessment by the insurance industry of the tour company's reliability, the sheep would soon be separated from the goats. It should not continually be the duty of the Government to intervene in this way.
Why is it felt that this should apply only to package holidays? The Government may have found it convenient to say what they intended to do with Court Line just before the last election, but how long will it be before we see the Used Car Reserve Fund Bill or the Shampoo (Dispersal of Dandruff) Reserve Fund Bill? Where does it stop? Where should we draw the line in trying to decide what frustrated consumer expenditure should qualify for bailing out by the Government?
If someone buys cut-price goods—that is what Clarksons were offering—he must expect sooner or later to have his fingers burned. If one bought a pair of trousers off a stall in Petticoat Lane, one would hardly get the same treatment if one took them back as one would expect from Marks and Spencer.
§ Mr. Cryer
I am grateful to the hon. Gentleman for giving way, even though I have been in the House only half an hour or so. Does he not accept that Parliament has a duty to protect people against unscrupulous exploitation? The quotations given by my hon. Friend the Member for Luton, East (Mr. Clemitson) showed that Clarksons played a major part in this. Would not the hon. Gentleman accept that since the 1893 Sale of Goods Act Parliament has been concerned to protect people from exploitation? Surely they should be given more protection by the extension of this legislation to services.
§ Mr. Adley
The hon. Gentleman will be able to make his own speech shortly. It is the retrospective aspects and the effect on future holidaymakers which bother many of us. It is a pity that the hon. Gentleman did not hear the opening 1616 speeches of the debate, because some of his points were touched upon then.
I believe that Clarksons and Court Line have a major responsibility in all this which cannot be shuffled off. Few hon. Members on this side are abject apologists for every activity of any private company. Fortunately, we do not have to defend dogma in the way that Labour Members have to do. But let the offer one small defence of the British package tour industry. It offers the British public a rather better deal than Intourist in its own sweet way tends to offer the people of the USSR. Before we over-lather ourselves about the appalling state of the British travel industry, once in a while we should remember that.
The brief answer to the hon. Gentleman is that insurance is the way to safeguard people and that the Government should not be the vehicle by which those safeguards are sought.
§ Mr. Tebbit
Before my hon. Friend leaves that point, perhaps I might take the opportunity to remind the Under-Secretary of an unfortunate incident—my hon. Friend might wish to refer to this in defence of the British trade as a whole—which occurred to the pupils of a school in the London borough of Waltham Forest. They took a package tour with a certain East European country's State organisation and just about lost their shirts as well as their holidays.
§ Mr. Adley
I am sure that those East Europeans enjoy the good fortune to have a democratically-elected Parliament and an Ombudsman to turn to to seek redress!
My second point relates to the information which was available to the Government and upon which decisions were made by the Secretary of State for Industry. There is a serious point here which has not been brought out in this debate. Possibly because of my involvement in the industry, I have some knowledge which is not widely available to the public about the activities of this company.
The hon. Member for Crewe (Mrs. Dunwoody) referred, fairly, to the tourist industry generally. I do not know whether she can help me, but there was an article in Travelnews on 22nd August last in 1617 which "a Labour ex-Minister", who is nameless, was quoted as saying:We give Court a month before they go broke.I do not know whether that was the hon. Lady and whether she would care to comment. The same article, referring to the Secretary of State for Industry, said:he had either done no sums worth talking about or had ignored the arithmetic.
§ Mrs. Dunwoody
The hon. Gentleman has referred to me. I specifically kept off the whole of the post mortem on this case, but it might help if I give the hon. Gentleman a straightforward statement of the facts as they involve me. I did not give an interview to Travelnews. This was a conversation overheard in another place. I should make that clear. However, I have made no secret in the House, as the hon. Gentleman will see if he studies the Official Report of Questions to the Ministry concerned, of the fact that I was concerned because of the situation vis-à-vis holidaymakers. I made known to the Department at an early stage my severe disquiet about the future of Court Line.
I have never lost my contacts with the travel trade or my interest in it. I believe that it has considerable difficulties, but I also believe that it is occasionally helpful for Government Departments to be given a little early warning which they might not get from other sources. I took great care to make my views known. When the Ombudsman's report is made public, I have no doubt that some reference to my involvement at that point will be made. All I can say is that any comments that I have to make I would rather reserve for that point.
§ Mr. Adley
The hon. Lady touches on a crucial point when she talks about early warning. My hon. Friend the Member for Worthing (Mr. Higgins) referred to the remarks of the Secretary of State, particularly when the right hon. Gentleman said that these were alarming 1618 events and that the collapse was at the height of the season. This is true, but the simple point that has not been raised is that although the Secretary of State for Industry made his statement on 26th June, anyone who has children and studies package tour brochures knows perfectly well that 26th June is not the height of the holiday season as far as the package tour industry is concerned. I hope the Under-Secretary will tell us why so much time was allowed to elapse between the statement on 26th June and the final collapse, when it was quite clear to anyone who knew anything of the industry that Court Line was in severe trouble. And it was known not only in that period of a few weeks.
This company had been over-extended literally for years. If the Secretary of State did not know the history and background of Court Line, he must have a look at the people he has in his Department who are supposed to be advising him about commercial affairs generally. I want to tell the Under-Secretary one or two things about Court Line.
When the Secretary of State blithely used the phrase the "halcyon days" of the travel industry, I am not sure whether he was trying to be funnny. He may or may not be aware that Court Line's problems started with the Halcyon Days Hotel in St. Lucia, and this goes back three or four years. The company with which I am associated has a hotel there. Court Line's building costs of its hotel were 20 per cent. more than ours because of its inexperience. It built the hotel in a wilderness on the wrong side of the island. That was a pretty serious start. It was a marketing nightmare. The company tried to develop traffic for this hotel, which was on the wrong side of St. Lucia, from the United Kingdom and Europe. Anybody who knows anything about the Caribbean and its hotels knows that the overwhelming bulk of the business comes from the East Coast of the United States and Canada. Court Line was not able to fill the hotel. My information is that in the first year of operation the hotel was running on 4 per cent. occupancy.
That was a long time ago and it is inconceivable to me that this was such a well kept secret that nobody knew about it. Even recently, the company was selling its rooms for as low as $11. It is not 1619 good enough for Ministers to pretend, as they have been pretending, that all this information suddenly came upon them. It is not good enough for the Secretary of State for Industry to imply, as he did at columns 1560 and 1561 of Hansard on 26th June, that the problems of Court Line were due to the energy crisis.
Court Line as a company had been in serious trouble for a long time. In 30 months of the operation of that 275-room hotel in St. Lucia there were 575 employees working in it. That is to say, a substantial proportion of the population of the island had at one time or another worked in the hotel. That was not a secret either.
Court Line bought LIAT—Leeward Islands Air Transport—which was not something of which the British Government can have been unaware, because of our relationship with the independent Caribbean territories. This was a farce. A British company bought an airline in the Caribbean and administered it from its sales office from New York. It now has a Venezuelan debt around its shoulders I wonder whether British taxpayers will become involved in any way in this.
After St. Lucia and LIAT, there followed the Clarksons/Horizon problems, which again should have been very well known and understood in the hon. Gentleman's Department.
Finally there was the purchase by the company of the TriStars. Having bought them, it tried to find destinations to which to fly them. It surely must be clear from all this that the whole travel world knew about the problems of Court Line—not a few weeks or even a few months but a long time before the collapse—yet the Department of Trade and the Department of Industry apparently did not.
I hope that when the Ombudsman has completed his work, he will have gone into all this background and will produce evidence which might enable the Department of Trade to look again at the way in which it collects information from commercial organisations, for which it has some responsibility.
§ Mr. W. R. Rees-Davies (Thanet, West)
Is not the real answer that this inescapable lack of understanding of the facts by the Departments of Trade and Industry 1620 arises particularly from the fact that no real department is being brought forward to understand tourist affairs, hotel affairs and the whole tourist understanding and appreciation? We are now practically the only country without a Department of Tourism.
§ Mrs. Dunwoody
I should not want that to go on the record. That is not so. The Department has a very efficient tourist department. But, like all Government departments, it is deeply involved in every aspect of the industry in which it deals. For example, it initiated the original hotel-building scheme. It is very closely involved in all sorts of aspects. To be fair, that must be said.
§ Mrs. Dunwoody
Does not the hon. and learned Gentleman not accept that the department must have a certain amount of advice from outside but that it cannot act on a rumour, which was the position in this case?
§ Mr. Adley
Not personally. I believe that it was a bright idea, but what an appalling waste of public money to give Hilton £600,000 to build a hotel in London which it would probably have built anyway. My company collected large sums of public money for building hotels. The outstanding fault of that part of the 1969 Act was the almost total absence of regional guidelines relative to the allocation of public funds. I do not accept from the hon. Lady, or from anybody who was present in the House during the passage of the 1969 Act, which I was not, that that particular piece of legislation was without fault.
I turn to the point raised by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies), because I think it is a reasonable one. It is a point on which I was going to comment. I have in my hand a document sent to me by the British Tourist Authority. The Secretary of State for Trade, to give him credit, has set about a review of tourist 1621 policies of this country. He made a statement this afternoon about exports. I failed to catch Mr. Speaker's eye. Had I done so, I would have mentioned that in 1973 the tourist industry earned the nation £872 million. We have not yet got the figures for 1974. As the hon. Lady said, it is an industry which comes to the attention of the House only when it is in trouble. Certainly her right hon. Friends never mention the tourist industry as a major foreign currency earner.
I do not know when—but I hope it will be soon—this House will start looking at industries which have a future rather than spending all its time looking at industries which have a past. We should look at industries with potential rather than industries which only have problems. I would ask the Under-Secretary, and I hope I am not trespassing as I do so, a question that I asked his right hon. Friend recently about the review of tourism which he is undertaking. I ask whether he would study the methods not simply of utilising resources within the United Kingdom, and trying to divert resources to parts of the United Kingdom, but of learning what we can from the way in which other countries promote their tourist industries. There is a great deal that we have to learn. In my question the other day I mentioned Hungary of all places, where they have embraced capitalism in promoting tourism, and the way in which Switzerland operates its national tourism policy.
In the review which is being undertaken, the problems to which my hon. and learned Friend the Member for Thanet, West referred—namely the problems and potential of the tourist industry—should be taken into account rather than only the comparatively narrow problem of whether we should seek to divert people away from one part of the country to another.
§ 6.28 p.m.
§ Mr. Brian Sedgemore (Luton, West)
The Hon. Member for Christchurch and Lymington (Mr. Adley) has made some good and telling points, particularly about Court Line management, all of which I would agree with. That was in sharp contrast to the hon. Member for Worthing (Mr. Higgins) who opened the debate for the Opposition. I do not know 1622 whether the change in Conservative leadership means that all Opposition Front Bench spokesmen will adopt a more aggressive attitude, but the hon. Member for Worthing, although usually wrong, makes considered speeches. His speech today, however, was trivial, ill-directed and hysterical party politicking which did nothing for holidaymakers and very little for the dignity and respect of the House of Commons.
I turn straight away to the main criticisms of the Bill. They are aptly set out in the reference sheet provided by the research staff in the Library. They set out three of them. First,It is felt by many that responsibility for repaying losses suffered by disappointed Court Line holidaymakers (the principal sufferers of last year) should be with the Government.Second,The method of financing the scheme by charging, in effect, a levy on future holidaymakers is considered by much of the travel trade to be unfair.Third,The levy proposed will provide financial protection against failure of any licensed tour operator without distinction between those companies which are competently managed and financially sound and those which are not.In looking at where the money is to come from for those particular people who lost their money in Court Line's crash—the position must be sharply differentiated from anything that is done in the future—it seems that it can come from one of only four sources.
First, it could come from the liquidator. Unfortunately this was a spectacular crash, and at the end of the day the assets are puny and the liabilities are enormous. There is a ratio of a few million pounds to something over £70 million. The real nature of that crash we shall not see until we get the Department's report. I suspect that when we receive the report, Court Line Limited and Court Line Aviation will be hung on a skewer by those dealing with the report. When Opposition Members say that we should be delaying the Bill until that time, they are living in cloud-cuckoo land. They do not know what is in store for them.
If the money is not to come from the liquidator, one might adopt the attitude of the hon. Member for Chingford (Mr. Tebbit). One might say "These people invested money in an inefficient rather 1623 than an efficient firm. They are hostages to fortune and it is their own bad judgment." But the House cannot take that attitude in this day and age. Adam Smith died over a hundred years ago, and his laissez-faire philosophy died with him.
If we are not to get the money from the liquidator or from customers, we must get it either from the industry itself—which in this case, to be honest, means from future holidaymakers—or we must get it from the Government.
That is one of the major issues of the debate. I agree with the hon. Member for Worthing at least about that. But how does one approach that question? One can approach it from simple-minded political theory. One can say "I am a member of the Labour Party. Therefore, I support the Secretary of State for Industry." One can say—as indeed happened at the time—"I am a member of the Conservative Party. Therefore, I say that it was the fault of Big Bad Benn, the Secretary of State for Industry."
However, is it possible to have a serious debate along those lines? Like my hon. Friend the Member for Luton, East (Mr. Clemitson), I have had some advantage in this matter. We were both privy to a few of the facts of this issue. First, both of us were fortunate enough to be in consultation with two of the trade unions concerned, BALPA and ASTMS—even before the Government came into the picture—when they were worried about the state of Court Line Limited and about Court Line Aviation.
The hon. Member for Christchurch and Lymington is right when he says that some of the facts concerning the ultimate collapse of Court Line were known long before 15th August 1974. He is right when he says that some people ought to have known. My hon. Friend the Member for Luton, East knew, and I certainly knew about this matter. I was talking openly, saying that it was not a question whether this firm would collapse but when it would collapse. I was telling both trade unionists and the local Press. Most of those concerned with this particular aspect of industry in the City knew it. People in the travel trade knew it. The Government knew it.
The real problem was whether the Government could evolve a scheme which would eventually see this company 1624 through the summer. It is my belief that in trying to see that this company survived through the summer and got through to October, the Government acted in a wholly responsible fashion from start to finish.
§ Mr. Rees-Davies
I agree with every word that the hon. Gentleman has just said. It spotlights the position exactly right. My charge is this. What right had the Secretary of State—the Big Bad Benn the hon. Gentleman was talking about—to gamble with the interests of holidaymakers and of the nation knowing full well that it was a pure gamble as to whether or not he would get through to the autumn?
§ Mr. Sedgemore
I intend to deal with that point in considerable detail. I intend to go through a series of statements of a great deal of factual information rather than opinion. If the hon. and learned Gentleman will hang on for a couple of minutes, he will find, that I come to that essential point.
§ Mr. Adley
I want to clarify one point, as the hon. Gentleman has referred to me. My point was that I am beginning to like less and less this sort of Bill because I do not believe that it is always the job of the Government to go and pick up the bits. Let us suppose, for instance, that it had not been a package tour company which had collapsed but a second-hand car company in which hundreds of people had lost money. Does the hon. Gentleman consider that in such a case the Government should produce a Bill to look after those people also?
§ Mr. Sedgemore
No, I do not think that the Government should pick up the bits of every fly-by-night piece of industry which fails. Indeed, I have doubts about whether the Government should be subsidising the loan in this particular case. To that extent I would agree with the hon. Gentleman. But I believe that the industry has some responsibility towards its customers. In this case, after a series of discussions with the Government, we would hope that some plan would emerge. A plan has emerged. I suspect that partly for party-political reasons—but not wholly—the industry has now come out with a rather churlish statement about the plan at this particular stage.
1625 My hon. Friend the Member for Luton, East and I had certain information which was, perhaps, denied to the House. The two of us were at the airport on the night on which the firm collapsed. We were also engaged in the most startling conversations with the deputy-managing director and the managing director and the board of Court Line Aviation. We have also been privy to discussions with other airline operators at Luton Airport. I shall mention some of the details shortly.
Finally, quite by accident, it has happened that since this crash a number of company documents have found their way into my possession. They would make anyone's hair stand on end. I shall quote from some of them shortly.
Looking at all the facts, I draw five basic conclusions. First, this was a private enterprise firm from start to finish, from the first day to the last, which collapsed as a result of both irresponsible and cynical management. It would be unfair to say that all the managers and directors warrant that description in this particular case, but some of them certainly do. What concerns me even more is that some of the directors of Court Line Aviation, who were technically efficient people and whose managerial abilities in their own sphere could not be criticised, were moral cowards. I regret having to say that. Some of them knew what was going on. Some had been to meetings in London and had informed the unions that they were worried about the conduct of the firm yet they did not have the guts to resign, as they should have done, and to make the facts public.
My second conclusion is that the Government, as I have said, acted responsibly. This is a difficult argument. It is not something that comes off the top of one's head merely for party-political reasons. Having gone through all these matters in enormous detail, however, I am convinced that if the Government had acted in any way other than that in which they did act, more holidaymakers would have lost their money.
The delicate point here—I do not hide it—is that they would not entirely have been the same holidaymakers. I am sure that many people would have suddenly decided that they had booked a holiday 1626 on the basis of the statement by the Secretary of State for Industry when they had done no such thing. There was a small group who were added from the time that the Secretary of State for Industry made his particular statement. But if he had not made that statement after entering into discussions with Court Line Limited and Court Line Aviation, rumours would have run like wildfire through the Stock Exchange and the firm would have collapsed overnight. Other people on the Stock Exchange and the people in the industry knew of the firm's precarious position. Are Opposition Members saying that the Secretary of State should have said "Quite contrary to the information that I have been given by certain people in Court Line Limited, I am going to break your firm overnight by not making a statement"?
§ Mr. Tebbit
The hon. Member seems to be describing the operation of a company which he had reason to suspect—a suspicion shared by Ministers and others—was trading when insolvent and which during the time when Ministers knew it was trading insolvent, attracted new liabilities not only to different holidaymakers but to other creditors. If that is not what the hon. Member is saying, it sounds very much like it. I shall be grateful if he will clarify that.
§ Mr. Sedgemore
I intend to take the House through the time scale of these events because in a discussion such as this it is important to get the time scale right if we are not to get into political polemics which will not help anyone.
My next conclusion is that in the aftermath of the crash the industry did not cover itself in glory by seeking to find scapegoats. Perhaps my next conclusion is a little trivial and does not matter very much. It is that the action of some Conservative politicians who came to my constituency to make political capital out of the loss of jobs and holidays was nothing less than contemptible. I am sorry that the hon. Member for Bury St. Edmunds (Mr. Griffiths) has left the Chamber. The action of those politicians was particularly reprehensible in view of some of the things which were happening between the company and the Conservative Party—[Interruption.] If the hon. Member for Chingford wants this spelt out in black and white I am prepared to 1627 lay it on the line for him, but I do not think it will help the debate very much.
§ Mr. Stanley
Will the hon. Member reconsider what he said about my hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths)? Does he not agree that it is the duty of any hon. Member to refer what he believes to be a case of maladministration to the Parliamentary Commissioner? Surely the fact that the Parliamentary Commissioner has in this case accepted that it is right to investigate these matters suggests that my hon. Friend's action was well founded.
§ Mr. Sedgemore
I accept what the hon. Member says, and I accept the right of any hon. Member to report a matter to the Parliamentary Commissioner. That is a right we all have and I do not criticise it. I do, however, criticise the hon. Member for Bury St. Edmunds for flying into Luton and holding a Press conference for party political purposes, deliberately stirring up trouble in Luton, East.
My right hon. Friend the Secretary of State for Industry made his statement on 26th June. Court Line Limited collapsed on 15th August at 11 p.m., at which time the company issued a Press statement, a copy of which I have with me. One part of it said:In the negotiations,"—that means the negotiations which led up to the Secretary of State's statement of 26th June—it was expressly stated that the Group could not give the Government any assurances that the Aviation and Leisure Divisions could, in fact, complete their 1974 programme, although of course it was hoped that the Shipbuilding and Shiprepairing sale would enable these and subsequent programmes to be carried out.There is documentary evidence which suggests that that statement was deliberately designed to deceive the public. That is regrettable, particularly when people were literally being thrown out of work not knowing where to go the following morning in connection with their jobs.
Hon. Members do not have to take my word, the word of Ministers or the word of senior civil servants for that. On 4th July 1974, just a few days after the statement by my right hon. Friend, Mr. John Young, the whizz-kid in the cockpit who flew this concern to disaster 1628 and Managing Director of Court Line, wrote a letter to Mr. Redhead, Chairman of the Retail Agents Council. That letter contained a concise and unequivocal assurance that the 1974 programme would be carried out.
However, Mr. Young was not satisfied with that. He went further and said in the letter that the Government were only "indirectly involved". He said that not merely Mr. Redhead but all ABTA agents had been given the same assurance by Mr. John Blomfield of the leisure division. I have here a copy of that letter.
It seems extraordinary that the Managing Director of Court Line should say that the Government were only indirectly involved and that he could give unequivocal assurances about the future of his firm and that all travel agents had been given those assurances, and then subsequently say that he had not misled my right hon. Friend in the negotiations.
But lest it be thought to be some abberration on the part of John Young and John Blomfield, let me refer to the minutes of the staff council meeting on 12th July in Luton. The minutes are extraordinary. The meeting was attended by no less than nine directors including the managing director, Mr. Ed Posey, 10 representatives from the management side and 30 from the union side. Paragraph 12 of the minutes shows what the employees were told. It says:Reassurance was sought that we were now financially secure. Court Line Ltd. and therefore its subsidiaries are totally secure. We are in a position to mount programmes for both Court Holidays and Airline provided they are set up to be profitable.
§ Mr. Kenneth Lewis
As I came in I heard the hon. Member say as an excuse for the Secretary of State for Industry that if the right hon. Gentleman had said that Court Line was in trouble—and of course the hon. Member was quite right and I agree with him—the company would have been in a worse state and would have gone bust sooner, affecting more holidaymakers. If that situation applied to the Secretary of State, it must equally have applied to the managing director of the company who was trying to put as good a gloss on his company as he could in order to keep it afloat.
§ Mr. Sedgemore
I regret that the managing director was, either inadvertently or, more likely, in full knowledge of the situation, giving the Secretary of State false information. Nothing in his conduct since that time suggests otherwise. Is the hon. Member for Rutland and Stamford (Mr. Lewis) suggesting that that the 10 managers and nine directors should have deliberately set out at that staff meeting to lie to the employees? If he is, he is introducing a new theory about private enterprise which falls to levels to which even I would not have gone.
Is there a more reliable assurance than to say that the firm is totally secure? That is the sort of statement a Chancellor of the Exchequer makes the day before he is to devalue when he says "I will not devalue." The matter did not end there. The peddling of false information did not stop. In paragraph 16 of the minutes there is a report about travel agents' support for Clarksons. It readsIt was reported that a travel agent had advised against a Clarkson holiday.Thank God there were some sensible travel agents.This may not now be widespread because recently all Agents as well as ABTA had been put fully in the picture as to our stability. If a check on the particular Agent produced the same result, Mr. Posey would like to be told.What in the name of creation did Mr. Posey intend to do if another travel agent told someone that he should not go on a Clarksons holiday? Did he intend to go round to his office and put a gun to his face? In what sort of state had Court Line Limited and Court Line Aviation found themselves by this time?
The minutes are a mine of information. We find that they set up an operation to use TriStar on the route to Mahon in the Balaeric Islands. They were running this operation for Owner Services Limited, one of the few profitable subsidiaries of the company. Court Line withdrew the business from its own subsidiary and gave it to Laker, so that Laker could use its DC10s. I thought that that was called "stabbing your mother in the back". The company was in financial trouble but withdrew trade from one of its own subsidiaries.
Then there is the question of the TriStars. If The Times is right, the company 1630 gave deliberate and false information about the future use of the TriStars. The Times reported on 29th August 1974 that the Court Line board had minuted on 11th July that the airline would cease operating TriStars.
What about the meeting on 12th July, one day after the board had minuted that it would cease to use TriStars? Paragraph 24 of the staff council minutes says:Current decisions to change the TriStar operational pattern does not mean we consider TriStar has no part to play in future expansion. We still see an enlargement of our fleet but not in present conditions before 1976 or, for likely, 1977.The main board meeting was told on 11th July that there would be no future TriStar operations. Yet the workers and the people I represent in Luton, West were told on 12th July that there would be more TriStar operations.
On 25th July Court Line issued a statement in the Courtline News. That statement, which was issued to its workers, was signed by Mr. Ed Posey. It referred to the Price Waterhouse report. That report was one of the earlier reports on the company which was overtaken by the subsequent Peat Marwick reports. On 25th July Mr. Posey told his workers that according to the Price Waterhouse report there would be a significant improvement in the results of Court Line Leisure for the next financial year, based on the current plans of that division. He went on to repeat the TriStar arrangements.
However, by that time the Peat Marwick reports were coming in, and everything was beginning to crash around the ears of Court Line. The Price Waterhouse reports no longer seem to be accurate reports of the state of the company. In view of the fact that the Managing Director of Court Line Limited told his workers that the firm would be prosperous in the years to come, are we to believe that he had no knowledge of those Peat Marwick reports? If that is true, what sort of managing director is he who would deliberately attempt to mislead the workers?
§ Mr. Clemitson
My hon. Friend will agree that we have never met such a loyal group of workers as those at Court Line. Their loyalty to the company was beyond description. Does my hon. Friend 1631 agree with that statement? If so, does he agree that the directors of the company cruelly exploited that loyalty?
§ Mr. Sedgemore
It would be foolish of me to disagree with that. My hon. Friend accentuates the obvious in this case.
There is a combination of fact after fact. Leaving aside all the opinions, the facts suggest that the directors of this company deliberately misled the Secretary of State for Industry and the Court Line workers.
Suppose that Sir Don Ryder, although not in his present capacity, talks to a Minister about help for a reputable company and gives him facts and information. Is it now to be deemed that the Minister will say "I do not believe you. That is a load of lies. Go away"? Is the Minister to say, as did the Ministers involved in the case, "If you give me that assurance, we shall provide you with some temporary loans relating to our nationalisation of the shipbuilding industry, and we shall put in accountants to see whether the public money has been well spent"? Are we to say, if firms or any charlatan get into trouble that they can go to a Minister, give false information and then, when things go wrong, say "I entered into discussions with the Minister. He is responsible, not I"? We are providing an outlet for every hick company to become involved with Ministers and to deceive them—and then the hon. Member for Worthing comes to their defence in Parliament. That seems a tragic situation.
§ Mr. Higgins
The hon. Gentleman should not say what he said in his last sentence. It is not true. I did not stand up and defend that position. The crucial question is whether the Minister is responsible for what he says in the House. The answer to that is that he is responsible.
§ Mr. Sedgemore
Every Minister is responsible for what he says in the House. I agree with the hon. Member for Christchurch and Lymington. It is a pity that the Crichel Down case is not with us. It seems to me that this is an appropriate occasion on which to raise the issue.
The Minister acted in good faith. He acted responsibly. He set up the proper 1632 inquiries and did everything which a responsible person should do. His only alternative was to bankrupt Court Line on that day. I believe that he should not have done that. There was a genuine chance that Court Line could have been seen through the holiday season.
§ Mr. Sedgemore
I shall not give way.
I still hold the view I took in the Tribune on 23rd August 1974. Summarising the collapse of Court Line, I wrote:Anyone who has followed the situation closely over the past year can only realise that Court Line's insolvency was not caused by inflation, the three-day week, oil prices, Cyprus, rumours in the city, acts of god or any of the other excuses now being trotted out.The insolvency came about through the calculated and disastrous policies of the management; the purchase of two bum under-pricing holiday firms, Clarkson and Horizon; too many directors; lack of delegation; a complete reliance on new aircraft; an overextending of the company's financial position with the purchases of Caribbean Hotels, TriStar and an aviation company in the Leeward Isles; financial control systems that daunted even an expert like Rupert Nicholson; a failure to consult staff over important issues; and finaly a refusal to adapt to the decline in bookings, oil crisis, etc.I was sure that was right then, and I am sure it is right now.
I bitterly regret that this was turned into a party political issue, since hon. Members know that Court Line Limited made two payments to the Conservative Party. There was no intention on the part of Court Line to demand payment for the use of "Halcyon Days", the aircraft used by the right hon. Member for Sidcup (Mr. Heath) in the election, or to claim that money which amounted to several thousands of pounds. The Opposition know that the hon. Member for Richmond, Yorks (Sir T. Kitson) was able to use a Court Line executive jet to fly up to a military air station—how did he get permission?—the day after the election simply to look at his count. They must know of taxis being used by the Conservative Party but which were booked by an aviation firm. If I wish to fly on Court Line, the company does not book taxis for me from London to Luton and then mark them down to the cost of the aviation company.
§ Mr. Sedgemore
Conservative Members will know that these were not merely executive flights for which there was no intention to pay but that such special facilities as VIP lunches and clarets were demanded.
I shall not continue this exercise in triviality and develop these crude party political points. A number of serious issues have arisen from the collapse of a private enterprise company. I hope that we have learned something about the Civil Aviation Authority, redundancy payments, bonding and the travelling public.
I am not a fanatical supporter of the Bill. I think that we should give it a cautious welcome.
§ 7.1 p.m.
§ Mr. W. R. Rees-Davies (Thanet, West)
I was sorry that the hon. Member for Luton, West (Mr. Sedgemore) ended his speech with such trivial remarks and asides. They were not worthy of an attempted appraisal of the factors as he saw them in defence of the Secretary of State. During the hon. Gentleman's speech I said that I thought that the Secretary of State had taken an almighty gamble. I do not resile from that observation. I think that is exactly what he did.
Before turning to that aspect I want to say something directly about the Bill, of which not enough has been said. The Bill proposes to set up a reserve fund to be paid for by future holidaygoers in the form of compulsory insurance. Not one clause in the Bill is necessary for that purpose, because it is easy to secure that objective by action which does not require legislation.
The Civil Aviation Authority—this point has not yet been made—has power not only to put up the arrangements for bonding, which it put up from 5 per cent. to 7 per cent. in September 1974 and is to put up to 10 per cent. next April, but, if it wishes, to impose upon any company an obligation to insure. If I am right—I should like the Minister's comments on this important point—the CAA can impose conditions on travel agents wishing to use the facilities to which I 1634 have referred, the result of which would be that they must take out the necessary insurance against going into liquidation. Indeed, the CAA can also insist on insurance against overseas companies, including hotels, going into liquidation. Therefore, it can give the holidaygoer who takes out insurance—as most sensible holidaygoers do—against the cancellation of his own contract, including among the reasons illness or inability to complete, which is extremely common, further insurance guaranteeing the financial viability of the agent with whom he contracts. That insurance could cover the holidaygoer against his hotel in Corfu, Malaga, or wherever it might be, going bust.
The only real value of the Bill, as I see it, is to concentrate our minds on how best these measures can be amended. I am not sure that they can be amended. I advocated voting against the Bill. However, I was told that the public were such fools that they might not understand if I did that. I said that I did not think the public were such fools. I am in a minority. However, I suggest that the Bill will have to be amended.
I invite the Secretary of State, when he has had a good look at the Bill, to consider whether he needs it in view of the CAA's existing powers. The public are entitled to be offered absolute security not only against their holidays being cancelled, but against the failure of holiday companies. I should like to see that security extended to all holidays, whether at home or abroad.
The hon. Member for Keighley (Mr. Cryer), intervening earlier, said that we must protect the public, in effect, from being conned. I agree broadly. However, if I went to a small company of which I had never heard and booked a holiday to somewhere in some part of Italy and the salesman, as he is obliged to do, offers insurance guaranteeing everything and I asked "How much will that be?", he says "That will cost you another £3", and I say "I will not bother about that because I am sure the company is all right", I should not be protected. If people fail to take the slightest precaution they should not be protected at all. I suggest that the public should be given the choice, but to make it compulsory that they are offered that protection.
1635 Those are my views on the Bill. I believe that insurance is the right method and that we should ensure that such insurance is available. If not, let us use the Bill as the vehicle to see that we get what we want.
I have noticed a large measure of agreement on both sides of the House about what may need to be done about this legislation. Disagreement has arisen on the emotive aspect of the debate which turns round what the hon. Member for Luton, West called "Big Bad Benn", on the one hand—who are we to deny that?—and the equally strange and at times dishonest endeavours of some of the directors of Court Line. I do not propose to go into the Court Line affair. I have not got the evidence. I have been trained, as the hon. Member for Luton, West knows better than most hon. Members, to assimilate evidence and to pronounce whether something is or is not criminal. However, as I do not have the evidence upon which to make such an assessment, I do not propose to go into it.
My hon. Friend the Member for Worthing (Mr. Higgins) was wrongly criticised. In my view he was not imputing bad faith on the part of the Secretary of State. I suggest that he was saying that the right hon. Gentleman had made a grave error and that that error made him accountable to this House as the Minister responsible. We are pointing out that, if it was an error, it may be one for which he should resign at the appropriate time. In my judgment, the Secretary of State took a great gamble. It is not for us to consider the situation in the Department. I do not think I want to know. It is the ministerial responsibility that matters.
By June, everybody in the travel and tourist trade knew that this company was in the gravest danger of being unable to get through the summer, and therefore any Minister had to consider whether, in offering to back the company, he was hoping it would get through to the autumn or at least over the important period of the high tourist season.
The Secretary of State for Industry said:It was thought right that holidaymakers who had holidays booked this summer should have some reasonable security, and the Government were anxious to help them. … What we are proposing to do is to bring into 1636 public ownership 16 companies that are owned by Court Shipbuilders. … We propose to do that in consultation with the firm and in a form that is completely agreeable to the firm, thus saving £133 million of shipbuilding orders and the jobs of 9,000 workers in development areas"—and let us not forget that many of them were in Luton—making possible the completion of £48 million worth of expected further orders and safeguarding the holidaymakers."—[Official Report, 26th June 1974; Vol. 875, c. 1558.]It is hardly surprising that the directors of Court Line, when speaking to workers in Luton on 11th July, thought it was safe enough to say that the Government were behind them, that it was the intention of the Secretary of State to get them through the summer and safeguard the holidaymakers. That is when the gamble began, and it was said in the way that it has been said so often in the past. One thinks of the days of the great Sir Stafford Cripps 25 years ago. He said seven times, with that stark austere face which led one to think that he could never tell a lie, "We shall never devalue", but by golly, on the eighth occasion he did.
I should like to see, but I very much doubt whether we shall, the Secretary of State for Industry put his hand on his heart and say he was not fairly certain that that company was bound to go bust by October, but with a pinch of luck it might just get through the season. That is what Ministers ought not to do, and that is what we are saying. We are saying that in the event that that happens it is through the Government, and therefore the nation, that the money must be paid. It would be monstrous to expect future holidaymakers to have to pay for the mistake of a gamble taken at that time by the Minister.
§ Mr. Deakins
The hon. and learned Gentleman began his remarks by saying, as a distinguished lawyer, that he did not make a judgment without having the evidence. He has just made a whole succession of judgments about the Secretary of State for Industry which may be right or wrong. I am not concerned about that. I am concerned with the logic of law. The hon. and learned Gentleman has contradicted himself. He has made statements and accusations not on the basis of evidence, but on the basis of assumptions about what may have happened. He is not behaving as he 1637 would have done had he been following his instincts as a lawyer.
§ Mr. Rees-Davies
I take the point, but I do not agree with it. I said that I did not have the background and facts about the Court Line, and I do not. I said that I should not dream of passing a judgment on that, and I did not, but on the political aspect I drew certain inferences from facts which we all agree, and on that I impugned the judgment of the Minister, which is quite different.
I said that in June we all knew that supporting the company was a gamble. Nearly everybody in the House knew it. The hon. Members for Luton, West and Luton, East (Mr. Clemitson) knew it. The situation was well known in the trade. Those in the trade knew that things were dicey. They knew it was a gamble whether the company could get through, and what I was saying was based on those facts. It was reckless of the Secretary of State to make a statement on 26th June guaranteeing the future for the summer holidaymaker.
The right hon. Gentleman should never have made that statement. He should have made no statement at all at that time. If the company had come to him for assistance he could have said that he was providing help for the shipbuilding orders and in relation to the part that he was proposing to nationalise. He should have made it clear that he was not saying anything on the other aspects of the case. That would have made the matter no worse. Unfortunately, by giving this guarantee, which he had no right to give if the facts were available to him, he was pronouncing a judgment and putting the nation behind this company for the summer. It is on those facts and on that premise that I pass a political judgment which, I believe, is fair and proper.
I want to conclude by dealing with what is admittedly a hobbyhorse of mine, but it is relevant to the debate. What we need in this country is a Ministry of Tourism. It is ludicrous that successive Prime Ministers have refused to set up such a Department. We are the only country in Western Europe that does not have a Ministry of Tourism. The effect is diabolical, because those who try to work in this field are diverted from one person to another.
1638 I ask the House to consider the so-called Home Office fire regulations. At one stage I write to the Under-Secretary of State for Trade, and the next time I write to the Minister of State for the Home Office to try to see that the whole position in relation to fire regulations is dealt with somewhere on behalf of the tourist and hotel industry. These provisions are crucial to holidays this year. If people want better amenities they must not expect all hoteliers to be able to carry out all the fire arrangements and meet the cost out of capital. There is no co-ordination of the work that has to be done. We need a Minister and a Department to deal with this problem of fire precautions.
All the fine arts are with the Treasury or with the Victoria and Albert Museum. Valuable aspects of our heritage and historic homes are dealt with by other organisations. This question of insurance and the right consideration of it is much wider than the matter that we are dealing with today.
Today we are dealing with something which we hope will not happen again. We are here on the narrow issue of trying to do something to mitigate the effects of one of our own companies going bankrupt, but what the holidaygoer wants a Ministry of Tourism to consider is how he can be protected and get improved amenities wherever he goes on holiday.
We need a Ministry which deals with this subject. We need at least a Minister of State with responsibility for dealing with these problems that arise. The Secretary of State for Trade has to deal with a dozen other matters which he regards as of greater importance and moment, but I do not. The tourist industry is the third largest money earner in the country, and it could easily be the largest.
We have an aviation industry. People in this country should recognise that if this industry were properly used and if the price and conditions were right flights would be filled with people coming to this country. But what do we find? We find a battle going on between Laker Airways and British Airways. It is ludicrous, when we want to bring in every possible holidaygoer. There ought to be a powerful Ministry.
1639 Am I right in my reading of this astonishing Bill in thinking that if a person travels with British Airways he does not pay any levy whereas if he travels with anyone else he does? If that is so, and I hope it is not, there will be strikes going on somewhere in addition to all the others. This measure is not necessary. Let us try to make something of it in Committee so that it can be of some value. We will suspend certain judgment, but I hope that we shall have the report of the ombudsman so that on Third Reading we can cover the whole issue at one go. I hope that at that stage the Government will withdraw the Bill. Otherwise, if we do not get the assurances we want, we may adopt a different attitude.
§ 7.21 p.m.
§ Mr. Bob Cryer (Keighley)
I am pleased to be able to engage in these democratic procedures tonight. One or two Tory Members, as is their wont, drew a parallel with eastern European travel organisations. Their purpose in doing so was not particularly clear. We have a democratic Parliament and I have great faith in the two-party system, although it is diminishing as a result of the performance of the Opposition. The Liberals, the Scottish Nationals and the rest have cleared off because it is after Seven o'clock on a Thursday night. We cannot expect them to be too scrupulous in their attendance.
The concerted attack which the Opposition have mounted on the Secretary of State for Industry over a long period reflects little credit on them. It is interesting to examine the record of the occasion when my right hon. Friend made his statement. Opposition Front Bench spokesmen do much better than humble back benchers because they get advance copies of Government statements and can do some checking up and think up some questions. They had better improve their performance because they will be there for a long time.
The hon. Member for Henley (Mr. Heseltine)—I am pleased to see him entering the Chamber—was the Opposition Front Bench spokesman on that occasion. Did he ask for scrupulous detail about the activities of Court Line? Did he ask for the assurances which Court 1640 Line had given the Minister because the matter was so important? Did he investigate, with the full authority of a Front Bench spokesman of what is still a great party in this country, if not in Scotland, precisely what the situation was? Not at all. First, he was worried about the level of his voice and the laughter which his silence had caused. Then he referred to the Chancellor's Budget and then suggested that this was nationalisation by the back door.
There was nothing about the state of Court Line—the nuts and bolts of the statement. He was merely using the opportunity—I regret this because it reduces the function of the Opposition—to make party political points. That is the sort of thing which brings the House into disrepute. People expect the Opposition—alas, they are being disillusioned—to act as some sort of check on the operation of the Government. So often now we are having to provide our own opposition because the official Opposition is so haphazard. The hon. Member had his opportunity. The Secretary of State said that he wanted to assure shipyard workers and holidaymakers. He said:We propose to use the previous Government's legislation in that way. If that is unacceptable to the hon. Gentleman, will he please tell the House why.There was no reply. It is not as though Opposition Front Bench spokesmen do not have that chance. Some of us back benchers do not like the way some Front Bench spokesmen abuse their position to get in time and again during statements. Sometimes they get in as many as four or five times. Quite rightly, the Chair is flexible towards members of the Opposition Front Bench. The opportunity was not taken on that occasion.
Yet as soon as the position of Court Line was known, members of the Opposition, blurring over their own part, not saying that they had not challenged or cross-examined the Minister, tried to mount a savage attack on the Secretary of State for Industry, despite the fact that he had made his statement in good faith before the whole panoply of the House, with all members of the Opposition able and willing—some of them willing, some of them able—to question him. When they begin to attack the Secretary of State they ought to be careful about their own position.
§ Mr. Michael Morris (Northampton, South)
I draw the hon. Member's attention to the Official Report of 26th June 1974, column 1562, in which he will see that I raised a point of order. I said then that because only about 20 minutes had been allowed it had not been possible for many hon. Members to ask a question.
§ Mr. Cryer
The hon. Member is quite right, and to that degree he is a credit to the back bench of the Conservative Opposition. He can well look forward to being involved in the new manoeuvres concerning the Opposition Front Bench which are currently taking place. Another of his hon. Friends—the hon. Member for Sheffield, Hallam (Mr. Osborn)—said on that occasion:I accept that in these circumstances the Government had no alternative but to take this decision."—[Official Report, 26th June 1974; Vol. 875, c. 1558–60.]The hon. Member's sentiments were not echoed by his colleagues. They hardly mentioned holidaymakers until afterwards, when they felt that they could make some political capital.
I have constituents complaining to me about Court Line. An acquaintance of mine works in a travel agency. She tells me that the agency was receiving assurances from Court Line again and again about its sound state of trading. My hon. Friends the Members for Luton, East (Mr. Clemitson) and Luton, West (Mr. Sedgemore) have put the case extremely well. The fact is that private enterprise failed. Court Line collapsed because the company had been badly managed and badly run. I do not think that that is in dispute.
The question is when the bad management and financial chaos started. Members of the Opposition have asked whether we should give protection to those affected by badly-run private enterprise. In an intervention I pointed out that Parliament had been legislating for nearly 100 years about this sort of consumer problem. It has been legislating for 172 years to prevent factory owners behaving as they like. It is nothing new to protect people. I would be interested to know what Opposition Members would do to those who failed to buy insurance, who were foolish and overlooked it, or ignored it. Are we to let the weak go to the wall all the time? Is it not our duty to help 1642 people who need help and to give them guidance, as the Bill does?
§ Mr. Rees-Davies
Does the hon. Member agree with the point I made when I said that it should be compulsory to buy such insurance? Is the hon. Member saying that we must compel a person to pay for it? That is the point.
§ Mr. Cryer
In certain circumstances that would be necessary. The Bill provides protection without the necessity for cumbersome machinery and regulations.
I wish to illustrate my argument by citing the hire-purchase legislation. It was thought that the legislation of 1964 and 1965, flowing from the 1954 and 1938 legislation, would be sufficient. But hire-purchase documents were often printed in pale blue ink on grey paper, with the conditions set out in extremely fine type. It was impossible for the hire purchaser to understand his correct legal position. I investigated these matters at the time and found that such documents followed a common form; I believe that they were deliberately designed to deceive. If we are to have compulsory insurance, I feel that regulations should be made in respect of type size, colour, and the way in which these matters are presented to the buyer. There must be supervisory control to ensure that these matters are complied with.
I was surprised to hear Conservative Members say that there should be no more legislation, since Parliament was already producing too much. Their attitude is that we are spoon-feeding the public. However, legislation on the lines of the Supply of Goods (Implied Terms) Act 1973, which followed the much earlier legislation of 1883, imposed standards on the sale of goods and covered a number of unscrupulous organisations whose exclusion clauses prevented people exercising their full legal rights.
It might be thought that people should not enter into these suspect agreements, and should be clear-eyed when making decisions. We must not forget the frailty of human nature. Anybody can rush into a contract without due thought and careful examination of the consequences. Therefore, the Supply of Goods (Implied Terms) Act was a useful piece of legislation to ensure that legal rights could not 1643 be excluded by a dubiously worded and difficult to comprehend exclusion clause. Although the Bill is concerned with the performance of holiday firms, it contains nothing about standards. It seems to me that the 1973 Act which I have mentioned, or something similar, could usefully apply to holiday services.
I should like to draw attention to a case in 1973. A couple went to a Pontin's holiday camp, where, unfortunately, the husband was drowned. The swimming pool was so dirty that his body was not discovered for some time, because it could not be seen, and there was no attendant at the pool. The widow was left with two children, and she sued the company. The company was able to escape all obligation because of the existence of an exclusion clause which the lady concerned had not read, because it was set out in fairly fine print on the reverse side of the contract document.
I appreciate that it is difficult to lay down a complete set of rules for everybody. Undoubtedly some people are frail, and we cannot cover them all. However, I emphasise that legislation similar to the Supply of Goods (Implied Terms) Act could be made to apply to services connected with holidays. We should aim to lay down standards which will cover the sort of situation I have described, so that exclusion clauses are not allowed to wipe out people's rights. I hope that in Committee something will be done to provide for that legislation to extend to all services.
My hon. Friend the Under-Secretary of State may say that there is some committee or other considering this subject—indeed, I believe that the Law Commission is studying the situation. However, although the Law Commission does useful work, it takes an unconscionable time. I suggest it is not beyond the wit of the parliamentary draftsmen to produce useful provisions which will allow that kind of protection to be afforded. If we are to prop up the air travel industry, surely we can insist that it should impose reasonable standards, so that it cannot escape its obligations by the use of obscure exclusion clauses.
I welcome the Bill, because it gives some promise that the situation will be 1644 improved in the future. Unhappily, we cannot guarantee private enterprise and its continued success. It will have its ups and downs—and at present the trend seems to be downwards. Let me make clear that I am referring to the whole private enterprise system rather than to air travel in particular. The cast-iron method of ensuring continuity is through public ownership, and I am sure that my right hon. Friend the Secretary of State for Trade has that in mind.
We want to ensure that people can book their holidays in the full confidence that their hard-earned savings will be spent on something worth while. At the time of the Court Line disaster many of my constituents came to see me with sad stories and told me that they had worked overtime to save money for such a tour. I do not want to see that sad situation recur. People who go on these holidays work hard to achieve them. We want to give them some security, and we hope that the Bill will do just that.
I wish to endorse the comments made by the hon. and learned Member for Thanet, West (Mr. Rees-Davies). I believe that the Government should consider appointing a Minister for Tourism. Tourism is a large and developing industry, and a valuable currency earner. I believe that all the confusing and complex regulations from various Departments could usefully be drawn together and clarified by such a Minister.
I draw the Secretary of State's attention to the sort of anomaly that arises when a nationalised aircraft industry develops a walk-on, walk-off service between London and Glasgow, often involving high expenditure on secondary aircraft to make sure that the guaranteed seats are provided. This service runs at the same time as the railway service, which is also provided by a nationalised industry, following heavy capital investment by the public in electrification of the line between London and Glasgow. It is nonsensical that there should be competition between two pieces of national enterprise, but this is what can happen when different strands of the Government machine are not co-ordinated. With a Minister for Tourism, the regulations would be concentrated in one set of hands. I hope that the Bill 1645 will have a speedy passage through the House, so that people in my constituency and throughout the country can enjoy some degree of security when taking annual holidays.
§ Mr. Deputy Speaker (Mr. George Thomas)
I do not know about a speedy passage through the House—I remind hon. Members that the last four speeches have taken 90 minutes. There are still a number of hon. Members who wish to speak.
§ 7.40 p.m.
§ Mr. Kenneth Lewis (Rutland and Stamford)
I shall be as brief as I can, Mr. Deputy Speaker.
I first wish to declare an interest, in two connections. First, I am a director of a travel business which I own. It is not a package tour company however, and, therefore, I am not involved in the large-scale activities to which the Bill relates, although I suppose it will concern a number of men in a small way of business who may organise groups from time to time.
Secondly, I am, I think, the only Member of Parliament who was on the last Court Line flight to Minorca. I just made it. If I had been on the plane which flew immediately after, the holiday would have been cancelled. Through the activities of the Court Line staff, I enjoyed my holiday thoroughly, and I can only thank those people, who are a great credit to the British working man and woman, because for a month, I think, they were working there without any knowledge that they would get any money. Yet they were prepared to carry on looking after their passengers and the clients of their company which, of course, had then ceased to be.
I should like to tell the Secretary of State that when he finishes this part of his career, in which he is associated with the Secretary of State for Industry, whatever else he will be known for, the two of them together will be known as "Shore and Benn, the Court Line men". The country will always associated them with this episode.
This debate seems to have shown that there is a great danger to business and 1646 industry when Governments become too directly involved. I do not suppose that right hon. and hon. Members on the Government side will accept that for one moment, but we on this side of the House at least ought to recognise it. This is a classic situation. First, one creates a madhouse situation and then one gets the devil to come in and cure it.
The large-scale tour operators, of course, were to blame for much of what happened. They had for years been living in cloud-cuckoo land, in terms of their own business accounts. They knew that they were not running at a profit. They were offering subsidised holidays at bargain basement prices, not twice a year, as normally happens with the sales in January and June, but all through the year. Of course, as one year followed another they got into a worse situation.
In fairness, one has to accept that they were hit by other things at the same time. The superimposition of the oil charge, the currency difficulties which arose, the floating of the pound, the value of which declined—all these things created complications. Nevertheless, the industry was quickly pulling itself into Carey Street, and was doing it joyfully on gins and tonics every now and again, without regard to what was round the corner. It was almost a joyful funeral wake. Then suddenly there came the crunch.
The strange thing was that the Association of British Travel Agents and the people who had been involved—the tour operators who were members of the association—had nevertheless, over a number of years before, done everything they could to try to help their clients to make sure that they were not caught with this very situation. The truth is that they were looking down at everybody else, thinking "Many little companies might go bust, but not us. We must make arrangements to cover the people who may be travelling with the companies which are not strong and sturdy as we are." When the crunch actually came, of course, it was the big boys who hit the floor.
Where does the Minister come into this? Much has been said in this debate, and I have listened to it with interest. I want to be fair if I can. However, I shall start by being perhaps slightly unfair—at, any rate, contentious. The 1647 right hon. Gentleman will remember that Christmas was coming, in the form of a General Election, and the Government, including the right hon. Gentleman, had to be something of a Santa Claus. In fact, they had already indicated that they were being a Santa Claus. They had told the trade unions that although under the Industrial Relations Act they had to lose £10 million in charities, they were going to get that £10 million back. Why should they help only the trade unions? Many members not of the trade unions went on package tour holidays, and so did their wives, and perhaps it was right that the Government should also do something for them. So they added to what they had offered the trade unions the promise that the Government would underwrite this debt to all those people who had got into holiday trouble.
The Government are not doing it, of course. That is the strange situation. There is not a Santa Claus now. There is no General Election coming up. The Government are getting future holidaymakers to do it for them. That is what the Bill says. But at the pre-election stage of the game, the Government were happy to tell the public that they would look after them and that they would foot the Bill.
As has already been mentioned by one of my hon. Friends, it is interesting to note that when another Minister is asked in another context to go back and help retrospectively those people who have lost their money under the Nation Life Insurance Company Ltd. liquidation, the Government say "No". They call in aid the fact that it is wrong to invoke retrospection in that connection. But we are dealing with retrospection now. I am not one to argue against it, because promises were made, and when promises are made they have to be kept. But I think the Government are at fault, because they really must have known the situation. After all, they were looking at the books of Court Line. They were buying some shipyards from Court Line for quite a sizeable sum of money. It was the first foot on the road towards the nationalisation of the shipyards. They saw their opportunity, and they knew that Court Line needed the money.
Does the right hon. Gentleman pretend that he and his Ministry did not look at the Court Line books when they were 1648 buying those shipyards? They were extremely remiss if they did not do so. They did, of course, but they were not telling, and I think they were right not to tell. I am satisfied that if the Secretary of State for Industry had said at the Dispatch Box that the Court Line company was in a disastrous situation, it would have had a calamitous effect on the company's bookings for the rest of the year. After all, there was just a chance that the company would have got through to the end of September. It must have been better for the company to be encouraged to get through to the end of September. That was the period when the aircraft were full. This was at the profitable end of the market, and Court Line might have got some advantage from the money if it had been able to carry on. So would the liquidator.
I criticise the Secretary of State—I think it is fair criticism—because I believe he had an idea what the situation was. He was hoping for the best, and we know that the best did not happen. But he did not have a contingency plan. He did not arrange or contemplate what should be done if the Court Line company collapsed in August or September, or even later.
The right hon. Gentleman knows that at the time when this happened he and his officials were shocked, and they did not know what to do. That is the criticism—that there was no contingency plan. I believe—I said so at the time—that if the Government had thought about this in advance they would have said "We shall underwrite the difference between what is available in the bond and what is available through the liquidator".
I recently read a report thatAt the Court Travel creditors' meeting it was stated that there would be a 'substantial' distribution—possibly as high as 70p in the £".That may be wrong, but something similar happened with Rolls-Royce. What appears to be a disaster often turns out to be not quite such a disaster, and there is some money available to pay out.
With the bond, with the money to pay out, if the Government had said "We shall bridge the gap", the cost would have been less than the amount involved in the Bill. It would have been a cost 1649 to the Government, but that would have been fair in the circumstances.
The Government said that they were prepared to pay, although they are not now doing so but are landing the cost on future holidaymakers. If they were not prepared to pay, they could have told the travel business as a whole "We shall meet the cost by a loan and then talk to you about how we get the money back, and how we make it possible to avoid such a situation arising again."
The Bill sets up a fund, but that fund is apparently not to be permanent. Under Clause 6 the Secretary of State may arrange to dissolve the Agency. I am not sure that we need the Agency separate from the CAA. I have an idea that it will be dissolved in due course and finish up in the lap of the CAA, anyway. It cannot do anything without the CAA, so it is almost part of it.
I hope that in due course the fund and the Agency will be wrapped up. My hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) was right when he said that, following the disaster, all the lessons having been learnt, the matter can be dealt with by the CAA and through the bonding system.
If we increase the value of the bond—the commitment of the bonding; if we are firm with those who ask the CAA for licences—if their figures and their capital structure are examined; we shall almost create a situation in which such a disaster cannot happen, certainly not on a large scale. It is then easy to cover any small deficiencies which may arise.
The House and any Government get into a serious situation when they try to do the job that business and industry, whether nationalised or free enterprise, should do themselves. I advise my hon. Friends that in due course we should take advantage of Clause 6 to dissolve the fund, taking action to see that people are covered in other ways. Otherwise, we must ask "Where do we stop?" Do we cover everybody who buys anything, whether it is an electric kettle acquired with Green Shield stamps or cash, or a coat bought at a January sale? Where do we stop in the giving of Government guarantees? Where do we stop in the matter of Government collecting extra 1650 taxes—for what we are talking about is a tax—to cover those guarantees?
We need to be careful that we are not caught by our own folly. We should make sure that those responsible for running industries are made aware that they have a duty to their customers which they should carry out without Governments being too much involved.
Then there is the question of what happens to the foreigner who is affected. We are looking after our British tourists going abroad. The foreigners know that we are looking after the people who lost money here, and they know that nobody is looking after them. Twice in the past three years people in various European countries have carried the can of large-scale losses as a result of liquidations. When Clarksons went bust, they were not paid. Clarksons was taken over by Court Line. Court Line went bust, and they were not paid. There is a great danger that in looking after our own people we shall create a bad trading relationship with those with whom we work overseas. The advantage of the bonding system is that if it works it helps not only our travellers but those with whom we are doing business abroad.
My hon. and learned Friend the Member for Thanet, West suggested that we should have a Ministry for Tourism. I would not support such a Ministry. I do not want a separate Ministry, because that would mean an unnecessary explosion of bureaucracy. However, because of the various tourist organisations that exist nowadays, the widespread activities involved in tourism, the amount of money it earns, and the amount it costs us overseas, we should have a Minister who is responsible. If we can have a Minister for Sport, we should have a Minister for Tourism. It is already a large currency earner, and its potential would be assisted by a boost from Government.
The suggestion has been made before, but my right hon. Friends refused to take the hint when they were in government. I hope that the right hon. Gentleman will consider it. Perhaps the Secretary of State for Industry will consider taking on the job, so that we get him out of the country a little more, the happy result of which would be that we would not be quite so often involved with him in 1651 Industry Bills, which cause so much political controversy.
§ 7.59 p.m.
§ Mr. Michael Neubert (Romford)
Since 1960 I have been professionally engaged in the travel industry, specifically in the operation of holidays by air to all parts of the world, which is the subject of the Bill. My interest in the matters under discussion can, therefore, be quickly comprehended and directly declared.
It is a matter of great regret to me that my first opportunity to speak at any length on the subject of travel should be on a Bill which arises from the bleak events of last summer, when, at the height of the season, the collapse of a major tour operating company and independent airline brought financial loss, unhappiness and hardship to many thousands of people throughout the country.
The travel industry does not find it a novelty to be at the centre of sensation and controversy. Unfortunately it attracts a great deal of coverage by the media when anything goes wrong. But, to put matters in perspective, we ought to recognise that the number of people travelling abroad who enjoy their holidays vastly exceeds the very small proportion, by comparison, who have cause for genuine grievance.
Nevertheless, the events of last summer were quite catastrophic, and their seriousness cannot be overstressed. Certainly they have not been overstressed in several speeches today, notably that of the hon. Member for Luton, West (Mr. Sedgemore) whose intemperate remarks did not suffer from the same inhibitions as those of the Secretary of State in anticipating the report of the inspectors appointed to investigate the whole Court Line affair. I am sorry that the hon. Gentleman was not here to hear them, because they are crucial to the issue which is central to this debate.
Looking at the travel industry as a whole, over recent years it has offered people an undreamed of opportunity to travel abroad, to enjoy good food and sunshine and to widen their horizons. The fact that some have been casualties of our system of private enterprise is to be regretted. None the less we must put on the credit side the picture of the past 15 to 20 years which, to be fair, the Secretary 1652 of State portrayed in his opening remarks.
Curiously and peculiarly, travel is a personal matter. As the News of the World might say, all human life is there. Because it is such a human matter, the disappointment is so much greater. The emotional excitement generated by travel can so easily be destroyed. The dream quickly turns into nightmare. So it was last August when the shutters went up on the check-in points at Luton Airport, the home base of Court Line Aviation.
The Bill has its genesis in the statement by the Secretary of State for Industry on 26th June. In saying that I do not suggest that the right hon. Gentleman single-handed was able to bring about the collapse of one-third of the travel industry overnight, although judging by his past record I believe him capable of it. We are saying that, by his crucial statement on that afternoon at the end of June he contributed materially to the scale of the disaster which occurred subsequently.
Perhaps it is not fully appreciated—certainly it has not come out in the debate so far—that clients booking inclusive air holidays normally pay for them in two parts. Normally they put down a deposit which may be of £8 or £10 per person which, according to the price of the holiday, may represent 5, 10 or even 15 per cent. of the cost of the holiday. Then, at some point before departure, they pay the balance, which, equally, could be of the order of 85 or 90 per cent. Normally, that balance would be paid six or eight weeks before departure, again depending on the conditions of the company concerned.
We have a situation in which, with credit facilities from tour operators being so widespread amongst travel agents, many travel agents held back their payments to Court Line for holidays associated with that company because they knew of the doubtful status of the company. I make that point to those hon. Members who have criticised the travel agents. I felt that it was most unfair. After all, why else should there be such a large sum of money in question with the liquidator, the ultimate destination of which may have to be decided by the courts? A large amount of money was held up by the travel agents.
1653 The indictment against the Secretary of State for Industry is that, by his ill-judged statement, he gave an assurance which was accepted not only by people who had booked holidays and those who were about to book holidays but by the travel agents who in these matters act as advisers to their clients. Let it be said, too, that it gave an assurance to Members of Parliament. It is all very well for the hon. Member for Keighley (Mr. Cryer) to complain that we did not probe sufficiently on 26th June. The Opposition are not in a position to know the kind of information which any Minister ought to have to be able to satisfy himself before agreeing to lend £16 million to a private company. Indeed, the very sum which was put forward as a loan would in itself convey an assurance to the general public.
§ Mr. Neubert
That may be the correct definition, but it does not go against my argument, which is that the infusion of money was to safeguard the holidays already booked with companies in that organisation. That was the impression which was left with the public and which was emblazoned across the front pages of many of our popular newspapers.
It is that point to which we are addressing ourselves, and involving and implicating the Secretary of State for Industry. The hon. Member for Luton, West made the quite sensational assertion that he believed that the Secretary of State for Industry knew the state of affairs of Court Line. That is a matter to which I hope that the Under-Secretary of State for Trade will address himself, because it is very serious, and it is not what the Secretary of State for Trade felt it necessary to say in a statement issued by his Department on 21st August.
After referring to the statement on 1st July by the Secretary of State for Industry that the board of Court Line Limited had agreed to these arrangements which it was confident would safeguard its holiday operations, and that that statement had been agreed with the company's legal advisers, the Press release said that the Government had no information which 1654 might be regarded as being in conflict with the assurance given by the board and its advisers. The Government must rest their case on that statement. They cannot agree with the hon. Member for Luton, West that they knew about the Court Line's affairs in all their horrifying detail.
If the Government agree with that, there is a very much more serious charge to be levelled against the Secretary of State for Industry, namely, that knowing the company to be insolvent he allowed it to continue to trade. We are not suggesting that, but it was widespread and common knowledge that this organisation was in considerable difficulties. Even a detached onlooker could see the difficulties. A number of my hon. Friends have referred to them from their own inside knowledge, but outside knowledge should have given some warning that this was not a company with which arrangements of such magnitude should be made and on the basis of which assurances should be given in this House.
I cite just two of the difficulties. One was the acquisition of Clarksons at a peppercorn price. The company was virtually given away by Shipping Industrial Holdings because it was such an embarrassment after years of losses of millions of pounds. That was one warning of the desperate straits of Court Line Aviation. The second difficulty was the acquisition of Horizon which, in its silver jubilee year, had embarked on a programme for 1974 with suicidally low prices.
Those are just two of the warning signals which went up, yet we were told at the material time that the Government had no other information which would lead them not to accept the board's assurances.
We are asked to accept that the Secretary of State for Industry was so deceived or so gullible that that was the reason for his statement. However, I believe it to be another much more human reason. It was that, in his revolutionary zeal the right hon. Gentleman was so eager to acquire the shipbuilding interests that he was careless of other considerations. That is the point to which we address ourselves in our indictment.
Let us turn to the consequences. At the time, the Civil Aviation Authority was conscious of the difficulties in which the company was operating. Was there 1655 no liaison between the two Departments on licensing responsibilities? That is material to the case made out for the Bill. The CAA is cited as one safeguard for future holidaymakers, but we must examine its record, as well as ministerial performance.
We have, of course, the Association of British Travel Agents. In fairness to that body, it was alerted to the dangers, but it was taken in by assurances given with full authority in the House. Whatever may be said about Court Line, the letters that were sent out were issued in the knowledge of the statement made in the House. For example, there was the letter sent to travel agents which said that the Court Line leisure companies were "in a positive and on-going situation." That may prove to be a classic piece of twentieth century jargon. Those letters gave a feasibility and plausibility to the claim that otherwise it would not have had.
So we come to high summer when a considerably greater number of holidaymakers were about to go on holiday. The circumstances were unpropitious for a wise decision because, on the one hand, after the collapse of the company they were many outraged clients hammering on the counters of retail travel agents throughout the country. To be a travel agent in those circumstances is not a comfortable career. On the other hand, there were the Government who could see looming ahead of them only two months away, the prospect of a General Election. That Government realised that there were a great many dissatisfied electors amongst the holidaymakers who had lost their money.
In some desperation both parties had to set about about remedying the damage that had been done. The Association of British Travel Agents in all honour was prepared to undertake its obligation which was implicit in its symbol of integrity and in the guarantee that it gave to people booking with ABTA agents. However, it found that it was unable to do so because of the scale of the collapse. Therefore, it was forced to turn to the Government. It did so with the scheme which has now come forward. Equally, the Government were anxious to get themselves off their own barbed hook.
1656 The decision was made to set up a reserve fund without at the same time deciding who would supply the cash. On 27th September, less than a fortnight before the General Election, the announcement was made that a reserve fund would be established. The commitment was there. It was a commitment which was hastily conceived in pressing circumstances. That brought about the conception of the Bill. The unsatisfactory aspects of it are now apparent.
The Bill has two major defects, to which attention has been drawn. The first is that it is retrospective in that payments are to be made to clients of companies which have already failed and not only those which will fail in future. I shall not take the time of the House to go over the same ground again. I shall merely point out the inconsistency between the Bill and the statements that have been made about the Nation Life policyholders and make the point that we would wish to see those people who were misled by parliamentary statements compensated directly by the Government.
The second defect is that the Bill gives the same blanket cover to all companies whether or not they are competently managed. In any event that would be a serious enough charge, but in the air-travel industry, which has been known for its recklessness, it is an inducement to recklessness. It means that any air-travel organiser knows ultimately that if he makes a misjudgment or ends up in a catastrophic collapse he will be saved by the statutory fund. Ultimately that cannot be in the public interest.
The Bill has a number of minor defects but I shall mention only two which occur to me. The first has been acknowledged by the Secretary of State for Trade. At the moment the Bill contains no provision for the very many other kinds of holiday operations. I particularly draw to the attention of the House the activities of the so-called venture treks and safari people who have been legion in their collapses in recent years. Many of them consist of only one or two mini-buses operating, say, from a disused coal merchant's office or a railway station. They are motivated primarily by undergraduate enthusiasm and a spirit of adventure. Such operators are not covered by the Bill.
1657 This is a complex matter and we are being asked to embark upon a difficult path. The second defect, albeit a minor one, is that the levy is put on the operator. There is no provision that it should be placed compulsorily on the client. From past performance I would hazard a guess that some companies will take the opportunity to take a commercial initiative and relieve their clients of the obligation to pay the levy. In other words, they will absorb it.
That may well be done in an industry where unprofitability is notorious. There should be no encouragement given to further price cutting which could be a consequence and which has already been rumoured in the case of one large company. Those are two of the defects.
I do not feel that the obvious shortcomings which have been revealed by the events of last year can be satisfactorily resolved by the further intervention of the State. If we examine the performance of Ministers and their Departments we can see that they are not equipped either by experience or by the machinery of Government to deal with such situations. The whole unhappy story will be brought out in due course by the reports, but it is already clear from the facts that are known that the Government are not of much protection in an industry which moves so very fast.
With the present concentration of travel interests it is probably true that in some cases there is not a minute of the day or night when there is not an aircraft in the air with clients of that company on board. The industry is not the sort of activity which can allow a three week delay between letters and leisurely telephone calls which tend to characterise the working of huge Departments and officialdom generally.
Further, the client cannot rely too much on the Civil Aviation Authority, bearing in mind its past record. We have spoken specifically about Court Line, but let us consider other companies. For example, Western Jet's licence ran out at the end of March of last year. On 18th April the CAA said that it would not renew its licence unless it increased its bond from £5,000 to approximately £68,000. That shows the scale of growth within the industry. That further cash was not forthcoming and it was only on 1658 14th June that the CAA put its foot down and said that it would not allow the licence to run. Western Jet was forced to abandon its operations. It went into liquidation with debts of nearly £250,000. That is an indication of the problem. Unless the CAA is able to police and enforce this kind of legislation it will offer little protection to the travelling client.
Even bonds have their drawbacks and reservations. We know that one of the directors of APAL appears to be the common denominator between the travel company and the bank where the bond was lodged. The firm collapsed because its bank collapsed—namely, the Anglo-Israeli Bank. The company lost its bond. Therefore, even bonding is not the solution. Perhaps bonding strictly implemented could be the answer. I would much prefer bonding to the setting up of a huge State apparatus, an agency, an appointed board and all the bureaucratic consequences that would flow from such an organisation.
This is a thoroughly bad Bill. It may be well intended, but one of its purposes, I believe, was to fudge the issues, to cover up a degree of ministerial negligence such as we have not experienced in this House in the past 12 months. If, as a result of the reports of the inspectors and the ombudsman, ministerial negligence is revealed, that negligence should be paid for by direct grant to those who lost money and at the price of a ministerial resignation. If we find that the Bill is not necessary I hope that at the appropriate time the House will not hesitate to give it a decent Christian burial.
§ 8.20 p.m.
§ Sir George Young (Ealing, Acton)
It is a pleasure to speak after my hon. Friend the Member for Romford (Mr. Neubert), whose first-hand knowledge of the travel industry enabled him to speak with such experience on the Bill. I should preface my remarks by saying that I am in no way related to the former managing director of Court Line, whose flamboyant mismanagement is mainly responsible for this debate.
I am sorry to see that the two hon. Members for Luton are no longer with us. The hon. Member for Luton, West (Mr. Sedgemore) lit the fuse of a time 1659 bomb under the Secretary of State and then wisely retired. The hon. Member for Luton, East (Mr. Clemitson) indulged in a vigorous defence of the Department concerned which contrasted with some of the things he said at the time, which were highly critical of that Department.
The Bill has two distinct objectives and the Government are trying to merge them into one. One is to compensate retrospectively the holidaymakers who lost their money last year. That objective raises important issues of principle about why the Government think it right to compensate this section of the public. The weakest part of the Secretary of State's speech was his attempt to outline the principles which made it right in this case but wrong in other cases.
The second objective is to prevent future losses. Here the key issue is whether one can obtain the same security as is provided in the Bill by other methods, particularly by reinforcing the existing bonding arrangements through the CAA rather than by setting up yet another statutory body. On grounds of political expediency, the Government have muddled those two objectives together to set up what I believe is a totally redundant statutory agency when those two separate objectives could be met in other ways.
First, on the question of compensating those who lost their money through the Court Line crash, why have the Government taken it upon themselves to compensate this section of the public who lose money through the failure of private enterprise but refused to compensate other sections of the public? There are many instances of collapse, particularly insurance companies in the late 1960s. Perhaps the case was stronger there because the public had a legal obligation to insure their cars, whereas they have no obligation to go on holiday.
The reason that the Secretary of State gave today is similar to the reason given in a circular sent out by his Department to policyholders of Nation Life in January. This had a section on Court Line which said:The circumstances of the failure of Nation Life and of the failure of tour organisers, including Court Line, during the last holiday season are not properly comparable. In the 1660 instance of holidaymakers, there was already a scheme operated by the Civil Aviation Authority and the travel industry, which was intended to provide protection against failures.These are the words that I seek to underline:There was, therefore, a reasonable expectation on the part of the public that they were adequately covered against loss.But there have been similar reasonable expectations surrounding other losses. For example, the Insurance Companies Amendment Act 1973 was intended to provide protection against failure of insurance companies. That led to expectations in the minds of the public that they were covered, yet the Government have made it clear that they will not bail out those policyholders.
The real reasons are less respectable than those which the Government have given but are much more plausible. There are three. The first is the remarks of the Secretary of State for Industry on 26th June, which have been quoted; the second, the Government's failure to make known certain salient facts about the viability of Court Line between 21st July and 15th August; and the third, the imminence of a General Election. That is why the Bill is necessary. It would greatly assist our debate and the attempt to find the right source of future protection if the Government would admit that those were the reasons rather than produce wholly bogus distinctions for singling out holidaymakers from other sections of the public.
The Secretary of State misled the public. My hon. Friend the Member for Worthing (Mr. Higgins) quoted a cogent and persuasive article I wrote in the Spectator a few months ago. I should like to quote a letter I have received from a constituent:Dear Sir George,I am an old age pensioner and have been saving for two years to have a holiday with my husband, which we realised would be the last one we should have in our lifetime. Having gone without so many things to save for this holiday, we finally had enough money to book a cruise with Clarksons, starting at Athens. We were a bit anxious when we heard of their financial difficulties, but when we heard Mr. Benn state that holidays were assured, we paid the sum of £369.28p.Our constituents read the Press, not Hansard. Ministers are right to say that they do not write the headlines, but 1661 they do have the opportunity of letting the public know if they think that the Press have been misleading them. There was no attempt by any Minister to correct the impression given by the popular Press after this statement on 26th June.
§ Mr. Eldon Griffiths
I hope my hon. Friend is not suggesting that the Press could possibly have placed any other interpretation on the Secretary of State's remarks than it did. For once the Press got it absolutely right. It was the Secretary of State who got it wrong.
§ Sir George Young
My hon. Friend is absolutely right. I was seeking to anticipate a possible line of defence to which the Secretary of State might resort by saying that he did not write these headlines. I am obliged to my right hon. Friend for pointing out that the Press got it absolutely right.
Immediately after the collapse, Ministers denied that there was any governmental responsibility. It was only when they realised that a General Election was imminent and that there were 170,000 voters not flying but almost certainly floating that they were persuaded to come to their rescue in an opportune way.
I believe that we are right to press for the resignation of the Secretary of State for Industry. The public are very cynical about politicians. It is incidents like this which bring politicians into disrepute when they fail to apologise to the House. Both the House and the public would accept that. It is the refusal to admit liability when a mistake has been made that brings politicians into such disrepute.
Therefore, that is the first objective—retrospectively to compensate holidaymakers. I believe that the right way to do that is from the taxpayers as a whole rather than foisting it on to future holidaymakers.
On the second objective, that of protecting future holidaymakers against losses, the Bill makes it clear in the Explanatory Memorandum that that is a second line of defence to the existing bonding arrangements. Holidaymakers who are not covered by Section 26 of the Civil Aviation Act are not covered by the Bill. The Bill is a second long-stop, when what one should be doing is covering some of the other gaps in the field.
1662 For instance, the domestic holidaymaker is not covered. At a time when we are trying to encourage people to spend their holidays in this country, is it not absurd to guarantee them their money back if they take a holiday abroad but not if they take one in this country?
The real need of the package holidaymaker is to get his money back immediately after a collapse. It is that sort of solution that Thomas Cook, for example, is now moving towards. How enterprising that company seems to have become since being returned to the private sector. The same protection could be given by stepping up the bonding arrangements. The Secretary of State said that the level of bond would be so high as to be penal. I hope that the Under-Secretary will tell us at what level the bond would have to be pitched so that we can form our own judgment whether or not it would be too high.
But what the right hon. Gentleman has said is in contrast to what the tour operators say. They favour that solution. How odd that the Secretary of State should argue that it would not be acceptable to the tour operators because the bond would be so high when this is the solution for which the operators have been pressing.
I find this a politically opportune Bill, designed to get the Secretary of State off the hook and setting up a totally redundant agency whose objectives could be fulfilled in two much more straightforward ways at much less public expense.
§ 8.30 p.m.
§ Mr. Michael Morris (Northampton, South)
Before going into depth on the Bill, I should like to apologise to the Secretary of State for not having heard his speech. I assure him, however, that I have endeavoured to acquaint myself with what he said.
I can quite genuinely claim to be at least one of those Members most involved, around the time of 26th June, with tour operators. I had attempted, a few days before 26th June, to lodge a Private Notice Question about another operator called Pacesetters. By no means, therefore, could those in the Department of Trade say that Members were not alive to the situation in the market place. The fact that my application was turned down 1663 on that occasion should have been fair warning.
A great deal of the problem of that unhappy day of 26th June came about because of the suddenness of the statement and the confusion of the interests of the Departments of Industry and Trade and, indeed, the very short time that was given to that statement. It is true, and hon. Members, well recall, that on that day the House was very packed. There was a full House and a certain amount of joy on the Government benches at the prospect of taking over the Court Line shipping interests, and little attention was paid by either side of the House at Question Time to the holidaymaker. There was, however, that statement, which assured most hon. Members on this side of the House at that time.
I was not entirely assured and therefore, immediately after raising my point of order, I went to the rear of the Chair to have a word with the Secretary of State for Industry. It is right to place on record the letter which I wrote to the Secretary for Trade on 11th September, when I returned from holiday, in which I said:Following this point of order which was ruled out of order, I approached Mr. Benn in the Lobby at the back of the Chair. Mr. Benn said there was no cause for concern but if I had any specific points to make they should be addressed to you"—in other words, to the Secretary of State for Trade. I immediately spoke to the Secretary of State for Trade and raised two points. I mentioned my point of order, and to quote from the letter, I said:you confirmed what the Secretary of State said i.e., there was no cause for concern at all and the holidays were safeguarded by the Government's action. I then raised with you the case of Pacesetter Travel and, in particular their possible association with Qantas. You asked me to write on this subject and this I did immediately.It is my submission that if I had had the slightest doubt at all, having spoken to both those gentlemen, not only would I have immediately written on Pacesetter, which I did just a few minutes after that, but I would have written another letter on Court Line. I was left in no doubt at all that the statement, plus the two talks behind the Chair, were of great reassurance to the nation's holidaymakers. 1664 Indeed, my feelings were echoed by the national Press, as my hon. Friend the Member for Worthing (Mr. Higgins) has said.
I am certainly in absolutely no doubt, and I suspect that if the Government are absolutely honest they will know that the vast majority of the population were in no doubt either, that the Government had given that reassurance.
I turn to a second point. My constituents, along with, I suspect, every Member, understood from the statement in September, just prior to the General Election, that they would get a payment fairly soon—not a payment immediately, but a payment in the near future. Those of us who listened this morning to the "Today" programme heard the representations made by the spokesman for the Court Line Action Group. We share his concern that return of the holidaymakers' money, which the group had hoped would take weeks, has already taken well over five months. At the present rate of progress it looks unlikely that they will get it this summer or even before Christmas.
The Department of Trade must look very seriously at what happens in a liquidation situation. We are increasingly having situations where the liquidator moves in and it takes months and years before people receive payment. The Government are duty bound either to come clean to the public and to say that if a particular firm is going into liquidation it will be years before they get their money or, if they give the impression that the money will be coming forth in the relatively near future, they must have some swifter, more positive action than we have seen today.
The Secretary of State in his opening remarks made the statement that the collapse could not be anticipated. We have heard sufficient evidence from the two sides of the House that people both inside the industry and outside it were talking about the unstable situation in that particular company. I should have thought that the very least one could expect from a Secretary of State when there has been this degree of common knowledge is that he would be wary before he made any statement and cautious about whether having made a statement, it was likely to be followed.
1665 It is also worth placing on record, as no hon. Member has yet mentioned it, that it is the considered view of the tour operators that this company could have been kept in existence for sufficient time—we are talking of a matter of only weeks—to finish the summer operation and then have a considered rundown. The Under-Secretary may well nod his head, but I hope he will comment on that when he replies.
§ Mr. Morris
I want to ask whether it is really necessary to have the Bill at all. Hon. Members on both sides of the House have mentioned bonding and bonding arrangements. Has the Department of Trade had any conversations with the Department of the Environment on the use of bonding arrangements in the building trade? The Department of the Environment has a wealth of experience on how effectively to use bonding arrangements for major municipal projects. Those of us who have had experience in these matters have learned that effective bonding arrangements can cover matters down to the smallest sub-contractors. That is the reason why there are very few council house projects in which the local authority is left to pick up a debt when someone goes into liquidation. There is is a wealth of knowledge and experience there which could be put to good effect by the Civil Aviation Authority.
If we are to have legislation, however, I should have thought that now would be the time to have a proper Bill. What concerns me is that as far as I can see—and from checking the Secretary of State's speech I find that he admitted it—this Bill will do nothing to safeguard those who go on cruises or to safeguard the public against the fringe companies. Indeed, the hon. Member for Crewe (Mrs. Dunwoody) said earlier today that the public are unable to differentiate between types of tour operators or between one form of holiday and another. The brochures are as well printed for one as for the other. Indeed, in the case I mentioned earlier—Pacesetter—the Qantas logo appeared on the front page. On checking up, however, one finds that there was no association at all with Qantas.
1666 I venture to suggest to the Secretary of State for Trade that if we are to have legislation there must be some means of monitoring these organisations and of picking up where rogue companies are using the logos of other companies,. so that this practice can be stopped. Incidentally, it says little for the operations of Qantas in London that it was not aware that another company was using its logo on the outside of its tour brochure.
Other companies have recently gone into liquidation, companies such as the Mi-Sol Holiday Village, where the chap concerned disappeared with a £¼ million when he was already, as I understand it, in trouble in the United Kingdom, even if he was not quite in gaol. Even in this area—I return to the point raised by my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies)—there are developments such as Sofico in Spain, into which many British people have put money for their holidays. There is this whole area of activities which are quasi-travel activities or to do with the travel industry.
Therefore, if there is to be a safeguard system these are the areas where the Department of Trade could be expected to play some sort of monitoring rôle. Every week more and more "mini-trekkers" are producing varying schemes all over the world, and these will increase in the future. It is incumbent upon the Government if they wish to legislate on adequate safeguards to provide that safeguard for the whole range of the public.
The Minister must have been concerned to learn from the radio programme this morning that notices are going up in certain travel agencies stating that the Government scheme is already in operation. There is clearly something wrong there. I emphasise what was said by the hon. Member for Crewe: that the public are not able to differentiate between one agent or one holiday and another. Therefore, if the industry is not to be left to put its own house in order and if the Government are to interfere, they must do so across the whole range.
This has been an unhappy experience for the Government and I suspect that 26th June will be long remembered by the Secretary of State for Trade and the Secretary of State for Industry. Rightly 1667 or wrongly they found themselves then hoist with the problems of the holidaymakers, and that was the origin of the Bill. I hope that in Committee the Government will bear in mind the wider aspects that have been raised in the debate. I hope that this will be a wide-reaching operation. If we are serious about putting these activities under the microscope and if we are genuinely concerned with safeguarding the holidaymaker, I hope we shall do a proper job and not simply an operation to cover up the tracks of the Secretary of State for Industry and the Secretary of State for Trade.
§ 8.43 p.m.
§ Mr. John Stanley (Tonbridge and Malling)
I do not wish to devote time to picking over the Court Line carcase, because it has received ample attention already. However, I offer one comment on the only serious argument put forward by Labour Members in defence of last summer's public statements by the Secretary of State for Industry, and others—the remarks by the hon. Member for Luton, West (Mr. Sedgmore). He is not here now but I understood him to say that the Secretary of State was compelled to say what he did because if he had said anything different he would have forced the company into bankruptcy. I do not believe that to have been the case.
A perfectly adequate mid-course was open to the Secretary of State. He could have done as he did in his public announcement of financial help to the company that is close to his heart, the Kirkby manufacturing and engineering concern. In that case the right hon. Gentleman gave clear limits to the amount of assistance he was prepared to give and he said that in the event of the company going into liquidation the normal provisions of the Companies Acts would apply.
That would have been a reasonable mid-course, but instead the right hon. Gentleman chose of his own volition to give a positive assurance to those who were booked with Court Line holidays, and having done that he must stand by what he said in the House.
The central portion of the Bill is the proposal to set up the Reserve Fund. I fully accept that it is desirable to provide a double banking of the bonding system, a fall-back provision. I do not 1668 believe that the Reserve Fund is the best or the most effective way in which to provide that fallback position. Clearly, two types of fallback position can be provided. There can either be a statutory levy, which falls on all holidaymakers and which is levied by a statutory fund of this sort, or the risk can be covered by the insurance market, whereby individuals can insure themselves against an identifiable and quantifiable risk, namely, that they might lose their advance payments for holidays as a result of the operator's becoming bankrupt.
It is surprising that the Government has chosen the option of the route of the Reserve Fund. When one compares the arguments for the two routes, it seems that the insurance route is the best.
There are two major objections to the Reserve Fund route. First, as the hon. Member for Worthing (Mr. Higgins) said, any system of flat rate charges on holidaymakers creates no incentive to travel on the soundest tour operators' holidays. Indeed, it creates every inducement and incentive to travel with the cheapest and therefore potentially the financially frailest company on the market. That important argument has not been answered by any Minister.
The second major difficulty and disadvantage of using this route is that it obliges holidaymakers in succeeding years to contribute out of their own pockets into a cash bank which lies idle as a contingency reserve against collapse. Those who take holidays are asked to part with money which is put on ice against the contingent possibility that these funds will be called upon.
I ask the Government to consider the alternative insurance route because I believe that it merits serious consideration. Will the Government consider the following four arguments in favour of that route? First, the financial incentives go the right way if we take the insurance route, because it means that the premiums will be lowest if we travel with the soundest-based companies. That is the right way for the scheme to work. In other words the financial penalty is smaller if we are the most prudent, rather than the reverse.
In addition, this route avoids the need to take substantial money out of the pockets of holidaymakers to build up a 1669 major cash bank, because if we go through the insurance route we use the existing insurance market, with the enormous asset strength of that market.
Thirdly, this method preserves the right for the individual to choose whether he will cover himself against this risk. I do not think that that aspect received much consideration during the debate. There is a legitimate area of personal choice here. Why should that choice necessarily be taken by the Government? People should be able to choose whether they cover themselves against this risk.
Fourthly, the cost to the holidaymaker of using the insurance route will be significantly lower. I should like to illustrate that. It is possible to obtain insurance cover which is needed in these circumstances. A scheme is now being run by Panorama Holidays—a member of the Tour Operators Study Group—in conjunction with the Norwich Union Insurance Company. The scheme provides for a 100 per cent. money-back guarantee in the event of Panorama Holidays becoming bankrupt between the time when a client lodges his advance cash payment and the time when he goes on holiday. On average, the premium is between 45p and 50p per holidaymaker. I shall compare that figure with the one proposed for the Reserve Fund, which next year will be 2 per cent. of the cost of a holiday. If we assume that the average cost of a package holiday is about £80, the cost to the holidaymaker under the Reserve Fund will be between three and four times greater than if he obtains the same cover by means of insurance.
When the Bill goes into Committee there will be two major areas for amendment. First, I entirely agree with my hon. Friends who said that the retrospective element in the Bill should be discharged by the general body of taxpayers and not by future holidaymakers. That is wholly just, in the circumstances.
Secondly, I hope that the Minister will consider enabling the Bill to be amended so that individual tour operators have an option to contract out of the scheme, on the basis that they offer insurance as an alternative. I suggest that that insurance should be offered in the way proposed by my hon. Friend the Member for 1670 Chingford (Mr. Tebbit), namely, that firms which have contracted out should be legally obliged, under the Bill if necessary, to indicate to people who book holidays with them that there is a risk and that insurance cover at certain rates is available, so that prospective holidaymakers may decide whether to cover themselves against that risk. I think that would be sufficient for the Government to discharge their responsibilities, which I acknowledge, to those who go on package holidays. I hope that the Minister will consider such amendments in Committee.
§ 8.56 p.m.
§ Mr. Lyons
—but, having waited until all Opposition Members who wished to speak have done so—though I now gather that there is still one to speak; I was not aware of that—I should like to make a few remarks.
I believe that the Government should encourage overseas travel. There is a narrow nationalism creeping all over the United Kingdom. As a Scots-born Member of Parliament I am horrified at the nationalism in Scotland. Much of the anti-Common Market feeling in England is also based on narrow nationalism. The way to attack nationalism is to enable people to see how others abroad live.
The boast of the South African National Party used to be that the reason why no Prime Minister ever left that country was in order not to be contaminated by foreign influence. It is interesting to observe that South African policy is changing and that its Prime Minister now travels outside the boundaries of that country. Therefore, any scheme which makes people more willing to risk going abroad is, in my view, worthy of a benevolent glance and some support.
I should be likely to bankrupt tour operators because I travel by brochure. There must be thousands, if not millions, of people like me who have increased the overheads of, for example, Court Line by grabbing all the brochures in 1671 sight, living happily on a diet of imagination and colour provided by those brochures, but never going on holiday with those companies. We owe the tour operators a great vote of thanks for providing us with this beautiful escapism.
People who avidly study brochures are dreamers. They do not read The Times to see whether a Minister has said that the Government will give so much money for Court Line's shipping interests. I do not believe for one instant that any significant number of people who agreed to go on holidays organised by Court Line were influenced by anything, whatever it was, that a Minister said.
After the Court Line collapse, some of my constituents who had lost money came to seek my advice. Broadly, they could be put into two categories. Labour supporters did not comment on anything that the Government had announced. However, those who read certain Conservative newspapers and who in any event were antagonistic to the Government and shrewdly realised that this was the best tack for getting their money back said that they had been deceived by the Government.
A large percentage of people who lost money had paid their deposit before June when the Government made their first announcement. I doubt very much whether people, bemused by what they had seen within the covers of the brochures, read what the Government had said, or even knew what was going on. If the Government had taken no part in purchasing the shipping interests of Court Line, the situation at the time of the collapse would have been substantially what it was in any event. But the matter got caught up in the election and there was a great song and dance by many people, including some of my constituents, that they had lost money because of reliance on something which it was said the Government had told the House.
I am in favour of the Bill, because I am delighted that the constituents on whose behalf I have been writing letters will get their money back. I hope they will get it sooner rather than later and I hope, too, that interest will be payable to them on the ground of delay. However, it seems that for the future we are to protect air travellers, but not those 1672 who go by sea, the cruise travellers or those who go by land, although those who go by air are generally better off. It is rather sad that the less well off are not to receive any protection.
I do not believe that because the scheme is a blanket one and does not distinguish between calibres of operators people will go for the cheap-jack operator. There is nothing in the Bill which says when people are to be reimbursed because of a disaster. If a person who has to chose between two tour companies knows that the holiday is sure to come from one but he mistrusts the viability of the other, he will obviously choose the former. If someone is going on holiday, he is not happy if he cannot go and is simply left with the assurance that the money paid will be returned to him six or nine months later. There is nothing in the Bill to say when the reimbursement will be made.
It would be madness for a married couple who have scraped together £100 or £200 for a holiday to book with a company which they believed not to be stable, in the belief that if their holiday were to be cancelled they might get their money back in future. They would much prefer to book with a company which they felt sure would survive and give them their holiday. A holiday is precious to the man in the factory or in business. People need more holidays, and more people should be able to afford them. We want to see more people go on holiday, and perhaps with a Labour Government we can hope for that to happen.
I welcome the Bill. I promised to sit down before 9 o'clock so that the hon. Member for Bury St. Edmunds (Mr. Griffiths) could take part in the debate. I shall not go back to my brochures, but by my sitting down now the hon. Gentleman will have at least two minutes in which to speak.
§ 8.59 p.m.
§ Mr. Eldon Griffiths (Bury St. Edmunds)
I shall take a little more than two minutes, but I shall not detain the House for long.
I shall send the hon. and learned Member for Bradford, West (Mr. Lyons) several hundred letters which will prove beyond peradventure that a large number of people not only believed what the 1673 Secretary of State for Industry said but booked new holidays between the 1st and 14th of the month on the basis of the assurance that had been given to the House.
On the whole, I favour the Bill. I want to see some better arrangements for insuring holidays. However, I want to make three points. First, there is the question of responsibility for those who lost their money in the Court Line affair. The first responsibility is plainly that of the holidaymakers. They took a risk and booked a holiday. Sometimes these things work and sometimes they do not—caveat emptor. Secondly, responsibility quite plainly lies with Court Line. In so far as Court Line failed in its contract to those who had booked holidays with it, its directors must face the responsibility. The Companies Act inquiry is right. When it has been completed we may find that the directors of Court Line have a great deal to answer for. But there is a third responsibility—a responsibility with which the House should mainly concern itself, namely, the responsibility of Her Majesty's Ministers.
The Secretary of State made his statement. I sat some 10 feet from him on that occasion and was convinced, as was every other hon. Member who heard him, that he was putting the good name of the Government behind those holidays. The words are perfectly plain. The Secretary of State then saw the Press. The Press, quite rightly, headlined what he had said. It made it clear beyond peradventure that "Benn has saved the day". That is what he intended it to say. That is what he took credit for having said. The Secretary of State then went on television. No one who watched his performance could possibly doubt that he was putting the good name of Her Majesty's Government behind the holidays.
Therefore, responsibility rests on the holidaymakers who took the risk—caveat emptor—on the Court Line directors—they will still have to face the music—and undoubtedly on the Secretary of State for Industry, who, by his absence today, has shirked that responsibility.
The second question concerns the issue of compensation. The Government having given those safeguards there is a responsibility on this House to provide 1674 some compensation for those who lost their holidays and their money. Where should the money be found to make good the losses that people suffered on the basis of the Minister's assurances? One source must be the liquidator. It is the duty of the liquidator to get what cash he can. No doubt he will get something and no doubt officials are concerned how much he will get and how it will be distributed among the various creditors and holidaymakers.
The second source of potential compensation must be the new fund to which the Secretary of State for Trade will be contributing an interest-free loan. The taxpayer, to some extent, will be held liable for his right hon. Friend's recklessness.
The third source of funds is apparently future holidaymakers. It seems to be regarded as just and equitable that those who are having holidays next year should pay to meet the losses of those who were unable to go last year because they trusted the Government. That is unjust and inequitable, and cannot be defended in this House.
Many people have a good deal of regard, and some affection, for the Under-Secretary. He is an utterly honest man—although I may think again when I have heard his speech. We have a great deal of admiration for the Secretary of State for Trade. When he does not agree with the Prime Minister he says so.
Finally, there is the question of parliamentary accountability, or that old-fashioned but much better phrase "parliamentary honour". There is not a shadow of doubt but that the Secretary of State for Industry made a statement to this House which we believed. He made statements to the general public which they believed and he made statements which the travel agents themselves acted upon. The Secretary of State for Industry ought to be here today, accounting to the House for what he did in its name. The right hon. Gentleman has no authority which this House does not give him. He is the servant of this House.
Here is a Bill which, among other things, seeks to provide cash to compensate those who trusted him. However, the right hon. Gentleman has not put his name to the Bill—which is surprising from a man who has seen fit to lecture 1675 others on the principle of accountability. However, he has not seen fit to come to the House today to face the music, as he should have done. He has been guilty of an act of political cowardice and dishonour that this House will not forget.
§ Mr. Griffiths
If I had not carefully considered my words, I would not have said them. I shall repeat them if the hon. Gentleman wishes—
§ Mr. Griffiths
I say to the hon. Member for St. Helens (Mr. Spriggs), who interrupts from a sedentary position, that the Secretary of State for Industry is guilty of an act of political cowardice, in that he has failed to account to this House for the assurance which he gave to hon. Members. I conclude by saying that I hope that in Committee my hon. Friends will table some important amendments on the lines I have outlined. Nevertheless, I believe that we should give the Bill a Second Reading.
I am grateful to the Secretary of State for Trade for trying to pick up the pieces left behind by his colleague, the Secretary of State for Industry. I make clear that none of the strong words I carefully used apply either to the Secretary of State for Trade or to the Under-Secretary of State for Trade who will reply to the debate.
§ 9.8 p.m.
§ Mr. Michael Shersby (Uxbridge)
Despite the announcement by the Secretary of State for Trade at the beginning of the debate that he was trying to look back in tranquillity, there seems no doubt in the mind of my right hon. and hon. Friends that the Bill is the direct result of the collapse of Court Line last summer and the misleading nature of the statements made to the House by the Secretary of State for Industry.
As was admitted by the Secretary of State for Trade this afternoon, the effect of the Bill when it becomes law will be to put up the cost of package holidays. This fact was powerfully demonstrated in the speech of my hon. Friend the Member for Tonbridge and Mailling (Mr. Stanley). It also means that the British 1676 holidaymaker and not the British Government will have to pay the cost of the Secretary of State for Industry's errors over the Court Line affair. In other words, instead of the Secretary of State for Industry footing the bill for the misleading assurances he gave the British public last summer, he will call upon them to pay for what I think most of us feel was a grave error of judgment.
I feel that this is a shabby episode in British political history. This point has been emphasised by my hon. Friends the Members for Chingford (Mr. Tebbit), Rutland and Stamford (Mr. Lewis) and Romford (Mr. Neubert).
The Bill was first announced in the full flush of the last General Election because the Government were acutely embarrassed by the Court Line collapse after assurances had been given to the House by the Secretary of State for Industry that he would prop up the travel side of that company to see it through the 1974 holiday season. At that time the Government were anxious to assure themselves, the House and the public that another disaster such as that which affected Court Line would not happen again, and that all those who had lost holidays would get their money back. In other words, the Bill is the Government's attempt to hide their embarrassment over the actions of the Secretary of State for Industry—embarrassment caused not only by reports in Conservative-biased newspapers but, for example, in newspapers which are reckoned to be independent, such as the Sun. I quote from that newspaper:Right up to the day the crash came, Mr. Benn went on inviting people to look at the takeover as a successful and beneficial example of his new-style nationalisation.I hope that will be of great assurance to the hon. and learned Member for Bradford, West (Mr. Lyons). It will cost future holidaymakers more money, and could cost the British taxpayer up to £15 million in loans to the Air Travel Reserve Fund.
One thing that has become crystal clear in this interesting debate is that the Bill establishes a new principle—namely, that reputable and prudent air travel organisers have to bail out those companies which, as a result of their poor management, or for any other reason, are 1677 unable to meet their financial commitments. It means that the Government are trying to take future holidaymakers for something of a gentle ride by making them pay the debts of Court Line and other failed tour operators. Moreover, the Secretary of State for Trade and his colleagues are asking Parliament to give blanket financial assistance and protection against the failure of any licensed tour operator, without distinction between companies which are competently managed and those which are not.
All this raises the question whether the proposed levy system will featherbed the undesirable and incompetent holiday firms to the disadvantage not only of future holidaymakers but also the taxpayer. All this has come about because of the statement made in the House by the Secretary of State on 26th June 1974. What was said on that fateful day was that the acquisition by the Government of the entire shipbuilding and ship repairing interests of Court Shipbuilders shouldstabilise the situation in respect of Court Line's interests, including the holidays booked for this summer".—[Official Report, 26th June 1974; Vol. 875, c. 1557.]It was that assurance which was given to this House which caused thousands of holidaymakers to go ahead with their holiday plans with Court Line, even though until the Secretary of State's statement many of them had serious misgivings about the stability of the company.
This is well illustrated by the thousands of letters which I am sure many Members have received, and I am one of them. With your permission, Mr. Deputy Speaker, I should like to quote briefly from one of the letters that I have received. My correspondent writes:After all the rumours concerning Court Line in June 1974, I decided to make alternative arrangements for my holiday and to write off the small deposit of £20.90 which I had paid in advance. However, after Mr. Benn's famous speech I mistakenly assumed the words of a Minister of the Crown, talking on behalf of the Government, could be taken at face value. Having found out that Court Line were shown as having net assets of £18 million as at 30th September 1973, I assumed that a further £16 million from the Government would make sure that the Court Line would be solvent for at least another year—even if they were making a loss of £4 million a year! However, I now understand that the £16 million has not been paid by the Government and by all accounts it is unlikely that it ever will be forthcoming. I believe that the courts 1678 have established that if a person (in this case myself) acts on information given to him by a person who represents authority (in this case the Secretary of State) then I am entitled to sue him for the damage which I have suffered due to his advice, i.e. £439.70.That holidaymaker and thousands of others like him will not have to sue the Secretary of State for Industry because they will, if the Bill is passed, be compensated. That compensation is to be paid not by the Secretary of State but by future holidaymakers, including, no doubt, some of those self-same people who lost money last year in the Court Line crash.
As I have pointed out, package tour prices will rise as a direct result of the establishment of the Air Travel Reserve Fund, which is provided for in Clause 1 of the Bill. Of course, the taxpayer may be involved in contributing to the Reserve Fund. This can happen if the Secretary of State makes interest-free loans to the Air Travel Reserve Fund Agency, if for any reason it cannot obtain sufficient funds from the air travel organisers, or if there is a future run of bankruptcies amongst air travel firms, which we hope will not be the case.
On balance, it seems that although the result of the enactment of this Bill may result in the compensation of holidaymakers who were unwise enough to believe the Secretary of State for Industry, it is nevertheless a Bill which my right hon. and hon. Friends will want to examine with great care when it is considered in Committee. Many of us on the Opposition side of the House believe that the proposals in the Bill are somewhat unethical and, indeed, are unnecessary, and that better means of providing protection to future holidaymakers can be devised.
As has been pointed out by my hon. Friend the Member for Ealing, Acton (Sir G. Young), one of the main objections to the Air Travel Reserve Fund scheme is the proposed method of financing which rests on the principle of future holidaymakers having to pay the past debts of Court Line and other failed tour operators retrospectively. As I understand it, the Bill as it now stands incorporates the proposals put forward to the Secretary of State by ABTA. It was put forward as a result of the travel agents, who are, in effect, High Street 1679 shops, being inundated by people demanding their money back following the Court Line crash.
In other words, the travel agents' customers were seeking the protection of ABTA following the assurances given by the Secretary of State for Industry, which they felt were not honoured. However, even ABTA has serious reservations about the Bill as drafted. It believes that the levy on holders of air travel organisers' licences, and thus the public, should be at a maximum of 1 per cent. and not 2 per cent. as envisaged.
ABTA also feels that the charge on tour operators, and, therefore, on the public, will be onerous and that the public will have to pay more for holiday protection than is likely to be needed. In a memorandum circulated to Members today, ABTA says:Surcharges will have to be imposed on clients in some cases at airports causing public antagonism".It is quite clear that ABTA has considerable reservations about the scheme in the Bill. The tour operators have always had misgivings about the ABTA scheme, and they feel that there was insufficient consultation before the proposals were presented to the Secretary of State for Trade.
I understand that the tour operators have made known to both ABTA and to the Secretary of State their objections to the scheme, but it seems that their objections have not been heeded, if the bill is anything to go by. They consider it unethical and unprecedented to make future passengers pay for past debts. This view will be shared by many both inside and outside the House. The tour operators also believe that if the Government feel that they have an obligation to Court Line passengers—and many people both inside and outside the travel trade believe that they have, because of the assurances given by the Secretary of State for Industry—the Government should make a grant for that purpose, and not a loan repayable by future holidaymakers.
There is little doubt that the tour operators are deeply concerned about the type of blanket financial protection envisaged by the setting up of the Reserve Fund. They feel that the very existence of the fund will serve to encourage only the dubious tour operators and careless 1680 travel agents, because there will be no incentive for the public or the travel agents to distinguish between those tour operating companies which are well managed and financially sound and those which are not.
The tour operators believe that a more satisfactory solution lies in the Civil Aviation Authority requiring each company to be bonded, as under the present bonding scheme, and commensurate with its financial resources—that is, beyond the 10 per cent. bond laid down by the CAA if it considers it necessary in any particular case.
However, if the Government consider that further back-up protection would be necessary, could not each company provide appropriate insurance cover, the premium for which could be commensurate with the risk involved? I hope that the Under-Secretary of State will comment on that possibility in more detail. I understand that the views of the Tour Operators' Study Group were put to the Secretary of State as long ago as last September, when it made it clear that the tour operators were anxious to support every effort to get the fullest possible reimbursement for their ill-used clients. They welcomed measures currently being taken by the CAA to strengthen the bonding scheme. Despite their helpful views, it seems that the tour operators have to some extent been ignored.
I hope that the hon. Gentleman will explain in more detail why the Government have rejected a strengthened bonding scheme in favour of the proposed Reserve Fund. It is worth recalling that the original bonding scheme was introduced voluntarily and independently by the Tour Operators' Study Group for its member companies as long ago as August 1970, as a condition of membership. At that time the bonds were required to be equal to 5 per cent. of turnover, an essential part of that calculation being the reasonable assumption that no tour operator would get into financial difficulties at the height of the season—July and August—when cash flow was greatest.
It is the trade's belief that if it had not been for Government influence, Clarksons and Halcyon-Horizon would have failed in either the spring or autumn of 1974. In both cases it is at least as arguable that the bond moneys would have been 1681 sufficient, as they were intended to be. The fact that these companies continued until August was due to the undertaking about the Court Line companies which was given by the Secretary of State for Industry and which was believed by the tour operators, the airlines, the foreign hoteliers and, above all, by the holiday public. In other words, were it not for the statement by the Secretary of State for Industry on 26th June 1974, Court Line would probably have ceased trading before the peak holiday season, before many members of the public had paid over the balance of their holiday money and at a time when the existing bonding arrangements—
§ Mr. Shore
That is patently untrue, as the hon. Gentleman must realise if he thinks about the timing of the events. When Court Line came to the Government at the end of June, we were already in the summer season. The hon. Gentleman's idea that by delaying the collapse we could have avoided a crisis in the summer cannot be right, and it should be dismissed from his mind.
§ Mr. Shersby
I take the right hon. Gentleman's point, but I do not agree with him. The peak holiday season is in July and August. If Court Line came to the Government in June, it must have known several weeks before that it would be in difficulty.
§ Mr. Clemitson
How does the hon. Gentleman square that with my quotations of statements made in the annual report of Court Line Limited which was presented to the annual general meeting of Court Line on 4th April, only 10 weeks before the first statement by my right hon. Friend the Secretary of State for Industry on 26th June? How can the hon. Gentleman say that Court Line would have ceased trading before that statement was made?
§ Mr. Shersby
I said that Court Line would probably have ceased trading. Whether it would have is a matter about which we can never be certain. I said "probably", and I was careful in my choice of words.
The balance of about £2 million held by the Tour Operators' Trust Fund from Clarkson and Halcyon-Horizon bonds 1682 will be paid out eventually in the most equitable manner possible. But, as my hon. Friend the Member for Northampton, South (Mr. Morris) pointed out, the pay-out has been delayed because of the legal arguments.
In asking the House to give the Bill a Second Reading it is incumbent upon the Government to say why they believe that setting up the Reserve Fund would be preferable to improved bonding arrangements.
As my hon. Friend the Member for Worthing (Mr. Higgins) pointed out, we have to consider the interests of three groups of people. The first is that group of holidaymakers who feel, whether or not the right hon. Gentleman agrees, that they were misled by his right hon. Friend. Surely the right answer to that group of people is for the Government to accept that they were given an assurance by a Minister of the Crown and for them to be reimbursed by the taxpayer.
I am appalled that the Minister has not already resigned and that the holidaymakers concerned have not been compensated long before now. As my hon. Friend the Member for Christchurch and Lymington (Mr. Adley) said, we have come a long way since the days of Crichel Down. My hon. Friend the Member for Tonbridge and Malling made a powerful point when he said that the Secretary of State for Industry should not have gone beyond certain limits in his statement and that a mid-course would have been more preferable along the lines adopted in the case of Kirkby Engineering. We shall want to examine all these matters in great detail in Committee.
If, for example, the Government insist on the Reserve Fund Agency, I hope that they will be ready to consider the tour operators comprising part of its membership and will agree that, above all, the consumers should be adequately represented on the Agency.
It is reported in the Press that ways and means are being studied of extending the Reserve Fund scheme to other types of holidays. The Secretary of State touched upon this briefly in the early part of his speech. I hope that the Under-Secretary will be able to tell us whether the Government intend to introduce further legislation, either in this Session or next, or whether they propose to 1683 introduce amendments in Committee to extend this Bill to cover other types of holidays. When announcing the Government's decision last September to set up a reserve fund the Secretary of State for Trade said that the fund was to providea strong second line of defence for holidaymakers travelling abroad by air.We know that already the Bill has been extended to cover overseas surface travel. We all know and understand the reason for that.
The important matter to realise is that the Bill is capable of considerable improvement in Committee. One of the interesting points that has arisen is the cover given by Thomas Cook & Son Ltd. To some extent it has pre-empted the Bill with the money back guarantee scheme which it is offering to its customers. I had a look at the scheme today. It is a straightforward money back scheme and it rests for its financial stability upon the substantial backing which the Thomas Cook group has from the Midland Bank. Nevertheless, it is a good example of a reputable travel firm setting about the business of guaranteeing the holidays of its customers. That is a matter that we shall want to take into consideration in Committeee.
One of the matters that the House has had in mind during the debate has been the forthcoming report of the Parliamentary Commissioner. We all recognise that to some extent the Bill is sub judice. I recall the remarks of my hon. and learned Friend the Member for Thanet, West (Mr. Rees-Davies) when he was challenged on that point. I think that he made a fair distinction when he was talking about political judgments as opposed to other forms of judgment.
I now turn to some small but important points on the contribution that will be made by the air travel organisers. The regulations that will be made under the Bill will be important. Under Clause 4 the Secretary of State will be able to make regulationsrequiring contributions, calculated in such manner as may be prescribed … for the purposes of the Fund by air travel organisers.…I hope that in Committee we shall be able to consider the enactment of such regulations subject to affirmative resolution 1684 of both Houses instead of the negative resolution procedure as described in the Civil Aviation Act 1971.
Next, there is the minor question of how the levy is to be raised. The issue of Parliamentary control is involved. We must also consider the loans which may be made to the Reserve Fund Agency by the Secretary of State. Clause 5 provides that such loans shall beof such amount and on such terms as the Secretary of State may, with the approval of the Treasury, determine.Bearing in mind the history of the whole affair, I feel that the terms of such loans should be more explicit in the Bill. That is a matter to which we should pay attention at a later stage. Possibly there should be an opportunity for a travel firm to be able to contract out of the reserve scheme provided that it can show that it is providing adequate insurance. That may be the best solution and may be the type of operation whereby we shall have a much better insurance and bonding arrangement, plus individual cover for holidaymakers if they so desire it.
Another interesting suggestion that came up during the debate, and which was put forward by my hon. and learned Friend the Member for Thanet, West, is that there should be a Ministry of Tourism. That idea has much to commend it. I am sure that it will give us all food for thought.
My right hon. and hon. Friends are prepared to allow the Bill to obtain a Second Reading. However, we have considerable reservations about the Reserve Fund scheme. We want to be sure that it is fair both to holidaymakers and to air travel organisers. We shall endeavour to make substantial improvements to the Bill in Committee. We shall if necessary return to the matter on Report and on Third Reading depending on the Government's flexibility and their willingness to consider worthwhile improvements. For these reasons, we shall not divide against the Bill, but look forward to improving it in Committee.
§ 9.30 p.m.
§ The Under-Secretary of State for Trade (Mr. Eric Deakins)
I first have the pleasant task of deservedly congratulating the hon. Member for Uxbridge (Mr. Shersby) on his maiden appearance at the Dispatch Box. I hope that we shall see 1685 more of him in that situation on the Opposition side.
Many points have been raised in this complex debate and I intend to reply fully. First, I want to run through all the speeches, dealing with individual points, and then to take up some more general themes particularly related to certain letters which have been circulated to all Members of Parliament by ABTA and the Tour Operators' Study Group. The hon. Member for Bury St. Edmunds (Mr. Griffiths) has also been in the Press on this subject.
The hon. Member for Worthing (Mr. Higgins) set the tone of the debate on the Conservative side with what I can only describe as the usual "Benn-baiting", in the phrase that a number of hon. Members have used. There was in his speech and in others much synthetic indignation about the plight of holidaymakers as a result of alleged views taken by people of Ministers' statements last year. I will not defend in detail either of my right hon. Friends, since I believe that we are here to discuss the Second Reading of the Bill. Besides, they can look after themselves.
However, I advise hon. Members that if they continue to prejudge the results of investigations for which they have called, they do neither themselves nor the reputation of the House justice. To attack Ministers when the conduct of Ministers and the facts are under investigation both under the Companies Act and by the Parliamentary Commissioner for Administration does not do them or the House justice.
This brings me to a major theme. The hon. Member for Worthing said that he needed to know certain facts. Other hon. Members asked what the Government's views had been, what representations they had had, and what knowledge they had had of Court Line's activities at certain times. I shall not answer any of those points of detail about the facts of what happened last year, since those facts are under investigation and will be considered both by the inquiry under Section 165 of the Companies Act 1948 and by the Parliamentary Commissioner.
§ Mr. Adley
There is one fact, as the Minister puts it, which cannot be disputed. 1686 Thousands of people thought that the Secretary of State for Industry had made a clear statement that their holidays would be safeguarded. We can have Ombudsmen from now till kingdom come, but nothing will change that.
§ Mr. Deakins
I shall come to that fact in a moment.
We also heard from the hon. Member for Worthing and others an exposition of a return to the "lame duck" philosophy. It is interesting that in one of the first debates since the Conservative Party changed leader we should see a swing back to the days of the right hon. Member for Knutsford (Mr. Davies).
Both the hon. Member for Worthing and others made a point which I thought was valid about the literature which the Association of British Travel Agents is putting in windows. The association has told us in discussions that we have had that it will display up-to-date posters when the Bill's provisions are known, as they now are. It has undertaken to do this. The Government themselves will be mounting a big publicity campaign to ensure that the facts of the situation under the Bill are known to holidaymakers.
§ Mr. Deakins
I do not want to be accused at 10 o'clock of not having replied to all the points raised—as would be the case if I continually gave way. I am at the service of the House.
§ Mr. Tebbit
I shall be brief. Will the Minister be quite clear? Is he advocating that travel agents let their clients know the provisions of the Bill now, as they have been published, or is he saying that they should let them know what the Act is when it is enacted? There could be a world of difference. The hon. Gentleman will go down the slippery path taken by the Secretary of State for Industry if he is not careful.
§ Mr. Deakins
Of course they will have to let their clients know what the Bill means when it is enacted. They obviously cannot anticipate legislation.
One of the themes which emerged from the remarks of the hon. Member for Worthing concerned the question why the Reserve Fund should provide compensation for last year's losses. One or two of 1687 my hon. Friends answered that point, but I want to reiterate the situation as we see it. We are now setting out to provide safeguards in which future holidaymakers can feel great confidence. A bonding system, the first line of defence, provided by the trade and accepted by the CAA, was in existence last year. Holidaymakers may reasonably have assumed that this would give them adequate protection. Indeed, until the exceptional circumstances of last summer, this had proved to be so. We are not prepared to make a distinction between this year's travellers, who will be fully secure, and last year's unfortunate victims, in the exceptional circumstances of last summer.
My hon. Friend the Member for Crewe (Mrs. Dunwoody) raised a number of matters with which I shall be dealing later, but she mentioned a particular matter, as did other hon. Members, about the level of bonding that we are proposing—that is, 15 per cent. with 10 per cent. for ABTA members from 1st April—and said that that in itself was inadequate. We have very carefully considered this matter. But in order to cater for a collapse of a major firm at the height of the season, the bonding level would have to be increased very considerably, perhaps to about 25 per cent. of turnover. This would be a very heavy burden on the working capital of the trade and would discriminate in favour of those firms which are members of large groups and which could provide the necessary security, and against independent firms which are providing a perfectly satisfactory and efficient service but do not have direct access to large-scale financial backing.
I now come to the hon. Member for Chingford (Mr. Tebbit), who asked about individual customer insurance. Indeed, this was the theme from the Opposition side. The hon. and learned Member for Thanet, West (Mr. Rees-Davies) also made this point. If we were to have either a system of individual customer insurance or a system of individual insurance arrangements by the holiday firm concerned, there would be a number of difficulties. First, so far as the firm is concerned, such a system would require every licensed air travel organisation to provide a guarantee, or insurance, in addition to the bonding arrangements. 1688 All these guarantees would have to be carefully vetted by the CAA, and such a system would discriminate heavily against individual firms which are providing a satisfactory and efficient service but do not have direct access to financial backing.
On the question of individual insurance, which was raised by a number of hon. Members, including the hon. Member for Tonbridge and Malling (Mr. Stanley), although certain insurance companies are offering such policies, we do not think that a sufficient number are interested to cover all holidaymakers and to provide protection against further major collapses. However, I am willing to look into this suggestion for the longer term, though of course I can make no commitment.
§ Mr. Stanley
The hon. Gentleman says that he does not think that there is the capacity in the market, but has he examined this matter with any thoroughness? What he has said does not conform with my view.
§ Mr. Deakins
It may be that the experts and officials will have to meet and talk about this matter, but our impression so far, from reactions that we have seen in the Press and elsewhere, from insurance firms seeking to protect holidaymakers, does not suggest a widespread provision of this service.
The hon. Member for Chingford also said that Ministers should not always believe what private enterprise companies tell them. There is a lesson for all of us in that remark.
My hon. Friend the Member for Luton, East (Mr. Clemitson), in a very interesting speech, spoke of his concern about employees. That concern has been echoed many times on the Government side of the House—but unfortunately not on the Opposition side. There were many people involved. Their interests must be taken into consideration, as much as the interests of holidaymakers generally. My hon. Friend also mentioned—as did my hon. Friend the Member for Crewe and other hon. Members—consumer representation. The non-industry members of the Agency are likely to include, as well as CAA members, a representative from the National Consumer Council. But if, in Committee, it is felt that that is not sufficient, I am sure that my right hon. Friend and my hon. Friend the other 1689 Under-Secretary would be willing to look again at the matter.
The hon. Member for Christchurch and Lymington (Mr. Adley) started a theme going, which was echoed by the hon. Member for Rutland and Stamford (Mr. Lewis) and the hon. Member for Romford (Mr. Neubert), which raised the whole question of the relationship between Government and industry. If I were to debate that now, it would take us beyond the context of the Bill. The question for the Government—for any Government—is how far we can and should go in intervention in industry in order to protect people or the national interest, whatever it is, beyond top-level talks. Firms should be capable of running their own businesses, but all too often these days they are not. Sometimes that is because of circumstances beyond their control, but sometimes the circumstances are within their control. The hon. Member raised a most important point and we shall certainly not resolve it here today.
My hon. Friend the Member for Luton, West (Mr. Sedgemore), in what I thought was the best back-bench speech I have heard for a very long time and by far the best and most well-prepared speech in the debate, put forward an unanswerable case. It was well researched, factual and devastating. It was based on his view—I stress that it was his view—of the events leading up to the Court Line incident. I am sure my hon. Friend will have made his evidence available to the inspectors and to the Parliamentary Commissioner for Administration.
§ Mr. Neubert
In his praise of the speech by the hon. Member for Luton, West (Mr. Sedgemore), is the Minister implying agreement with the principal contention of that speech that the Secretary of State for Industry knew of the dire state of the affairs of Court Line at the time he made his statement on 26th June?
§ Mr. Deakins
I do not intend to comment on that in any way because to do so would be to prejudge the results of the inquiries, which is what Conservative Members have been doing throughout the debate.
The hon. and learned Member for Thanet, West and I had a dispute over judgment. I thought that he was talking 1690 about legal judgment when in fact he was talking about political judgment. Political judgment does not have to be based on the facts of the case but can be based on assumptions, rumours and so forth.
The hon. and learned Member asked me whether British Airways would be excluded. The scheme would work not on the basis of including or excluding particular airlines but on the basis of particular categories of passengers. Some people travelling on package tours by British Airways will be covered by the scheme, but other passengers may not be covered. I do not want to go into this matter in too much detail. It is a subject that the hon. and learned Member might wish to pursue in Committee.
§ Mr. Higgins
Would not that mean that some passengers taking package holidays would be paying towards the compensation of last year's passengers who were misled by the Secretary of State and others taking package holidays would not? How can the Minister justify that?
§ Mr. Deakins
The hon. Member has misunderstood the position, and I can understand why since it is a complicated matter. People who will pay the levy will be those eligible for benefit under the scheme. Other passengers who will not be protected will not pay the levy. To do otherwise could not possibly be justified, and I agree with the hon. Member on that score.
§ Mr. Michael Morris
The Secretary of State said in his speech that people travelling on scheduled airlines would not be covered.
§ Mr. Deakins
Passengers on scheduled services and with special types of tickets would not be covered, but others travelling on scheduled services—[Interruption.] I am sorry but I cannot go into these Committee points now or I shall not have enough time to deal with all the points raised in the debate.
§ Mr. Higgins
I understand the restraint on time, but this is not a Committee point. It is at the core of the whole matter. The question is whether some passengers travelling with certain tours will be contributing to those who lost their money last year. Surely the Minister cannot justify that situation.
§ Mr. Deakins
All passengers who will be covered by the Bill will be contributing through the levy to compensating last years holidaymakers. Those who are not contributing will not be covered by the provisions of the Bill.
My hon. Friend the Member for Keighley (Mr. Cryer) referred to the need for regulation of services. He also supported the idea of a Ministry for Tourism, and this is a point on which I should like to give the general view of the Government. We think that that would mean increased bureaucracy, and I do not believe that the Opposition would want that. As for tourism generally, which benefits the national economy, we already have the British Tourist Authority and the tourist boards, and the Department of Trade is also concerned with tourism. Tourism could suffer if it were cut off from this mainstream of activity.
The hon. Member for Rutland and Stamford paid tribute to the staff of Court Line, since he was overseas at the time of the collapse. I am sure the House will join him in that tribute to the great loyalty of Court Line employees to their firm, which is an example to us all. The hon. Gentleman also suggested that we were at fault and trying to bribe the electorate before the last election and that we misled the people. When my right hon. Friend announced the interest-free loan from the Government, we knew all the facts and what we intended to do. We did not know all the details which are now in the Bill, but the main outlines were then already in our minds.
The hon. Member for Romford, in a thoughtful speech, joined in the general attack on my right hon. Friend the Secretary of State for Industry. He suggested that my right hon. Friend had contributed to the collapse—that was a new theme—and worsened the situation. A number of hon. Gentlemen said that everybody in the travel industry knew that something would happen. It seems that almost everybody knew what was happening except the unfortunate holidaymakers. I shall return to that point when dealing with the TOSG letter.
The hon. Member for Ealing, Acton (Sir G. Young) attacked my right hon. Friend the Secretary of State. He joined in the game of prejudging the results of an investigation before they are put 1692 before the House, when there will, if necessary, be an opportunity to debate the matter.
The hon. Member for Northampton, South (Mr. Morris) spoke about the delay in payment. We shall make the payments as soon as we can. There are still substantial sums remaining from Horizon and Clarkson bonds. Those must be paid out first. That underlines the theme that bonds are the first line of defence of holidaymakers. The proposed scheme provides the second line of defence. Work has begun to identify the claims and to put the Agency in readiness to start work as soon as Royal Assent is given. However, I cannot give the exact date when payments will begin.
The hon. Member for Tonbridge and Malling (Mr. Stanley) made a number of interesting suggestions. One of his objections was that the scheme provided no incentive for people to go to the soundest firm. If the hon. Member possesses the secret of informing holidaymakers how they can ascertain which is the soundest private enterprise firm, in view of the advertising and other incentives, I hope he will divulge it in Committee. That would be useful. How would last year's holidaymakers have been able to choose between the companies? Would the holidaymakers have been required to investigate the books? That is out of the question. Should they have gone to the most expensive firm? It is not always the case that the most expensive firms are the safest, as witness the example of Rolls-Royce.
§ Mr. Rees-Davies
The ones that charge the least insurance and have the best insurable risk are the best, because Lloyd's knows them to be the best.
§ Mr. Deakins
It may be that Lloyd's is better at investigating the books of companies than Price Waterhouse. I am not sure. I defer to the best informed City opinion on the Opposition benches.
My hon. and learned Friend the Member for Bradford, West (Mr. Lyons) made the interesting point that people want holidays but that at the same time they must have reasonable assurance of protection. Even if the Opposition disagree with some of the details, that is what the Bill will do. Holidaymakers have every right to such protection, so that when 1693 they go away in the summer, provided the Bill receives Royal Assent, they will have a reasonable assurance of protection.
The hon. Member for Uxbridge (Mr. Shersby), who wound up the debate for the Opposition, wanted improved bonding. Improved bonding by itself would be beyond the resources of a number of good independent firms which do not have access to the financial backing of a larger group. In the travel industry the distinction is not necessarily between good and bad companies but between those which form part of larger groups and which, although they may be unprofitable, can survive because of the injection of money from the larger group, and those which may be soundly managed but which, when the crunch comes, have no access to financial resources.
The hon. Gentleman asked whether we intended to extend the scheme and, if so, how quickly it could be done. Indeed, he talked about the Committee stage. Our ideas for this part of the scheme are not yet fully developed. We must give serious consideration to the way in which we extend the scheme. We have looked at this matter closely over the past few months. It will not be easy. There is no easy solution to extending the scheme once we get away from the idea of licensing travel operators through the CAA system.
I turn now to the more general theme of the debate—the relationship between the Government and Court Line.
§ Mr. Cryer
My hon. Friend's remarks about my speech were almost entirely satisfactory, but not quite. Will he take on board my suggestion about the standards of service and the possibility of applying sale-of-goods implied terms standards to prevent tour operators including exclusion clauses in their contracts with a subsequent lowering of standards?
§ Mr. Deakins
My hon. Friend has hit on an important point which cannot go into the Bill at this stage. I remind him that the ABTA has put out a code of conduct which I hope will be satisfactory. We must give it a chance on a voluntary basis to see whether it will work. I hope that it will work effectively. If not, we shall have to return to the point and consider legislation.
1694 The main reason for the Bill, although one would not think so to hear some hon. Gentlemen speak, is that a major private enterprise company collapsed last year. Whatever the causes, I am informed that its deficiency as regards unsecured creditors is well in excess of £70 million. That is quite a collapse.
The hon. Member for Christchurch and Lymington (Mr. Adley) and my hon. Friend the Member for Luton, West (Mr. Sedgemore) referred to the collapse perhaps coming earlier or later. There was some bandying about of figures. There is a misunderstanding about the number of holidaymakers who would have been involved if Court Line had collapsed in June at the start of the season. We have looked into this matter. Our estimate is that about 400,000 people would have lost their holidays if Court Line had collapsed in June but that about 140,000 people were affected when the company actually collapsed.
§ Mr. Adley
Before the Minister and his hon. Friend wear out their lips with licking at the prospect of a private enterprise company, as they constantly refer to it, going bankrupt, will the hon. Gentleman tell us whether any banking or commercial organisation would have provided funds for British Rail after all the money that it has gone through in the last 15 to 20 years? Had it not been nationalised, it would long since have been bankrupt.
§ Mr. Deakins
After that intervention, I shall be strong in my resolve not to give way again.
According to The Times of 15th February, the hon. Member for Bury St. Edmunds is reported as having sent a letter, of which I have a copy—hon. Members may not have seen it, so I will not quote it—to the Chairman of the Select Committee on the Parliamentary Commissioner for Administration in which heis pressing for the Bill to be delayed until the Ombudsman has completed his investigation".I am glad to note that the hon. Gentleman has changed his tack. What would the hon. Gentleman and his colleagues have said if we had not brought in the Bill until the autumn and a tour company had collapsed in the summer? They would have rounded on the Government 1695 and said that we should have taken action earlier. The hon. Gentleman's letter is playing politics with the welfare of this year's holidaymakers and the best interests of last year's disappointed holidaymakers. Indeed, my hon. Friend the Member for Luton, West made the point that the hon. Gentleman played politics last year by his visit to Luton Airport at the time of the Court Line collapse.
I turn now to the two major letters which have been circulated to hon. Members. The ABTA letter is a fair-minded, temperate letter which supports the principles of the Bill. At the same time it dissents from certain of the provisions of the Bill and makes suggestions for detailed alterations. We shall no doubt consider those in Committee. I pay tribute to the support of and the collaboration we have had with the ABTA. We have had our differences, but we are united on the objective that we want to achieve of safeguarding people's holidays.
I turn now to the Tours Operators' Study Group's letter. The TOSG is entitled to write and put its case, but we are entitled to examine it carefully. The first thing to emphasise about this letter is its lack of balance. Only five words are devoted to the failure of Court Line and the rest is devoted to the alleged record of the Government. It says nothing about the collapse or the possible reasons for it. Why this reticence on matters of public concern? Could it be that two of the Court Line companies, Horizon and Clarksons, were members of the group? Whatever the reason, the Court Line collapse led to a considerable loss and this letter should be treated with considerable caution.
The Court Line people think that the Bill is unethical. They and Conservative Members who have repeated the letter may be experts in knowing what is unethical. I am not. But is there nothing unethical about the collapse of a private enterprise company? The letter also says that the Government have obligations, but the Government's real obligation is to set up a viable scheme to protect holidaymakers and to take care of those who lost money last year.
§ Mr. Deakins
The hon. Gentleman and his hon. Friend the Member for Christchurch and Lymington have repeated the words in the letter that the blanket cover of good, bad and indifferent companies would be unfair. I am not sure which category TOSG claims to represent. Perhaps the loss of Clarksons and Horizon means that it has purged those which are not good. With such a current of virtuous superiority in the letter, it must obviously be the good operators whom it represents. We must be charitable and assume that.
In that case, however, why not inform the public now which operators they should steer clear of and which operators fall into which category? That would be in the interests of this year's holidaymakers, but I suspect that TOSG will not do that because it does not know.
How does it know about each other's managerial competence and financial ability? Trade groups and associations do not usually function on this basis. Besides, if it can distinguish between the good, the bad and the indifferent, why did not the study group take action on the two Court Line companies that were in membership of its organisation last year? It says that the Reserve Fund will encourage dubious operations—a sinister phrase. It knows what it means. If so, why not warn the public?
My last point on the letter is that, because of the kind of argument and logic deployed in it, I could undertake to the House to prove that TOSG is a collection of complacent, smug, self-satisfied, holier-than-thou tradesmen putting on airs and graces above their station in life.
§ Mr. Deakins
I hasten to assure the House, however, that they are not. They are a group of responsible business men, including some major companies, but they are concerned with the welfare of the industry. It will be very difficult to prove they are these responsible things when they write in such an irresponsible fashion to Members of Parliament.
The debate has been interesting and a pointer to the attitude that we shall get from a number of Conservative Members in Committee. The interest which the subject has aroused on both sides of the 1697 House indicates the importance of giving approval to the Bill with all possible speed. I am sure there must be few hon. Members who do not have many constituents who suffered losses as a result of the events of last year. I am sure, too, that hon. Members will wish to see the arrangements that are in the Bill brought into operation as quickly as possible. I hope that the House will wish to see our proposals increase and strengthen the protection in the event of any further collapse of this kind. I commend the Bill to the House and hope that it will be given a speedy passage.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee, pursuant to Standing Order No. 40 (Committal of Bills).