Five Prime Ministers later

With the government again looking for ways to stay on the right side of the fiscal headroom, why are the Treasury still accepting Billions of Pounds of liability for under-capitalised travel companies? 

Thomas Cook failed just over 7 years ago, leaving many hundreds of millions shortfall in Client pre-payments for holidays, which they had spent without customers knowledge. This wasn’t illegal as the ATOL scheme allows it (of course it shouldn’t do). The cost to the Air Travel Trust (funded by holiday makers) as well as the cost to tax-payers was enormous and this precipitated a commitment to review and reform ATOL.

Dates promising the conclusion to this reform have come and gone, again and again. The CAA have failed to reform this, seemingly held back by successive governments. Governments led by three Conservative and two Labour Prime Ministers have sat on their hands regarding this issue. 

The solution is obvious and relatively simple: Travel must observe the same rules regarding Client pre-payments as every other industry already does. In short: You cannot spend Client payments until you have delivered the goods or service and any pre-payments must be safeguarded until then. 

Trailfinders adopted this approach voluntarily many years ago, with all funds safeguarded in a CAA approved trust with independent trustees. The structure already exists and works well. 

There are travel companies that have spent significant amounts of Client pre-payments that would need to recapitalise, but the implementation can be staged over a few years without the need for a cliff edge. The important thing is to start solving this long running problem. 

The Air Travel Trusts latest accounts show there were 9 ATOL failures last year, all small companies. However, a large failure will happen again at some point. We are at a loss to understand why successive governments would prefer to accept Billions of liability rather than address this anomaly in travel.

It seems easier to do nothing, than make a decision which might invite criticism. Albeit in this case, bringing travel in line would be to the benefit of every holiday maker and every tax-payer.