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Government gets passenger air levy wrong despite insurance industry warnings

The Government has failed millions of holidaymakers with its ill-advised decision to change the way that victims of air travel tour operators are protected.

In 2007 the Government replaced insurance-backed ATOL (Air Travel Organisers' Licensing) Bonds with a flat £1 levy on every package holiday customer. At the time the insurance industry warned the Government and the CAA (Civil Aviation Authority) that the new scheme was flawed and that the levy would prove insufficient. Now, less than two years after its implementation, the Government is proposing to increase the fee by 150% to £2.50 per passenger.


Nick Starling, the ABI's Director of General Insurance and Health, said:


"When the levy of £1 per passenger was introduced in 2007, we warned that it was set at a completely inadequate level. The ABI submitted financial modelling to show that even if the financial climate had remained as relatively benign as it was in 2007, the £1 levy would still have been insufficient.


"The levy was pushed through by the Government, to the detriment of the consumer. We warned at the time that airline and tour operator failures would become more frequent without the strict entry requirements demanded by the insurance industry within the previous insurance bond system, such as financial scrutiny and robust business models."


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Last updated 01/07/2016