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GBP5 Levy On All Package Holidays A Real Prospect

Wed, 26 Nov 2008

Package holidays sold in the UK could soon come attached with a £5 levy in an effort to boost the travel industry’s rescue fund following the collapse of UK tour operator XL Leisure .

The company’s withdrawal from the travel sector this summer left a £70 million bill for the rescue of 85,000 travellers stranded abroad and a further 200,000 people demanding refunds for bookings, despite XL’s insurance limited to just £42 million.

There are now growing concerns that the industry's depleted rescue fund - which raises money through a £1 levy on all package holidays and was £22 million in the red prior to the collapse of XL - may not be enough to cover the remainder.

Alan Bowen, the former head of legal services at the holiday industry trade body ABTA, said there was a 'real prospect' of an increase in the levy to £5 being introduced 'sooner rather than later'.

"We are in a situation of a forecast recession, which creates a higher risk of a major tour operator failure and lower bookings," he added.

"There is a huge black hole in the fund. There is a need to replenish it and the final backstop for doing so is the passenger levy."

Mr Bowen continued: "If bookings fall away, then the amount of money raised from the existing £1 levy, previously estimated at £25 million a year, would also fall."

The package holiday industry is instead calling for a £1 levy to be imposed on all flights with UK airlines to cover the shortfall.
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