Financial Protection For Air Travellers-Follow Up (HC 636-i) Transport Committee 2 Nov 2005

Q58 Mr. David Clelland: Can I ask Sir Roy where this £1 levy came from? What research or guesstimates is it based on?

Sir Roy McNulty: The £1 came from, first of all, establishing how big a fund would you need. We have estimated that at around £250 million, which would cover the cost of the collapse of a major tour operator overseas. If you have set your objective of building a fund up like that and you aim to build it up over three to five years, then a £1 per passenger levy does the trick.

Q59 Mr. David Clelland: Would the CAA administer this fund?

Sir Roy McNulty: That, I think, ultimately, would be for government, but it would seem logical in the sense that we administer the existing scheme and we have the capability to handle repatriation and exercises like that.

Q60 Mr. David Clelland: What would happen, for instance, if the happy day comes and there are never any collapses and we build up a huge, huge fund? Is there a danger that airlines will start arguing for it to be used for damage and lost baggage and that sort of thing?

Sir Roy McNulty: If the fund was built up and the nirvana you describe actually came to pass, and we all agreed that there would never be an airline going bust again or a tour operator going bust, probably we would give the money back.

Q61 Mr. David Clelland: Give the money back?

Sir Roy McNulty: Once the fund had been built up the £1 levy would stop, unless there was a need to replenish it.

Q62 Mr. David Clelland: So the £1 levy is not a forever thing?

Sir Roy McNulty: Not necessarily for ever and ever.

Q63 Mr. David Clelland: How long would the £1 levy last?

Sir Roy McNulty: I doubt if the nirvana you describe will ever happen. I suspect there will continue to be tour operator collapses and periodic airline collapses, but the £1 would probably reduce once the £250 million fund had been achieved.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.