Consumers are to be given broader coverage under the Atol protection scheme irrespective of where they buy their holiday.
People who book trips online will get new protections so they are not left stranded abroad or lose money if their travel firm goes bust.
The first Bill to be debated in the Commons since the Queen’s Speech aims to make it easier for law to keep pace with changing technology.
The new legislation, which was debated in a second reading in Parliament yesterday, aims to ensure Atol protection extends to travellers who book flights, hotels or car hire that are not sold as package holidays.
The move will cover a gap in the growing internet travel market by bringing up standards to those expected on the high street, according to the government.
Holidays will be covered from next year by a government protection scheme when people book a flight and are then directed by the airline to a separate company to book accommodation within 24 hours.
The second reading of the Atol Bill is the first step in delivering a programme of improvements to the travel protection scheme.
The measures in the Bill are designed to give government the ability to set up appropriate protection that is flexible enough to handle the modern travel industry, by allowing it to establish separate funds for different types of holiday and booking method.
The changes recognise that there are many different ways in which people book travel and holidays. The aim is to ensure that the right support is there for them if things go wrong.
It will also make it easier for UK businesses to sell air holidays across the EU, as they could offer consumers in Europe the same protection and as they offer in the UK.
Prime minister Theresa May said: “This government is committed to making our country fairer by ensuring consumers have the protections they deserve both online and offline.
“Technology has transformed the way people book holidays, and this Bill will mean the Atol scheme can keep pace both now and in the future.
“Whether you book a well-earned getaway on the internet or the high street should not make a difference to knowing you won’t be stranded or left out-of-pocket if something goes wrong.”
The Atol scheme protects more than 20 million holidaymakers a year, with a promise to provide a refund or a flight home if their travel provider goes bust. This is funded by a £2.50 contribution from travel companies for each protected passenger.
Transport minister John Hayes added: “Atol was set up for good reason – we go on holiday to relax, not worry about ‘what ifs’.
“But people who buy their flights and hotels separately sometimes miss out on the protection, and peace of mind, that comes with this protection.
“This change will make the law fit for the modern age – and better able to adapt to any future advances in the technology that people use to book their getaway.”
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