Travel firms 'won't pay levy'

Thomas Cook and Tui, the UK's two biggest tour operators, are set to play hardball with the Government and the Civil Aviation Authority over the likely rise in the cost of the consumer protection levy on package holidays to £3.

With just weeks to go before Geoff Hoon, the Secretary of State for Transport, is expected to wave through the increase, Thomas Cook and Tui are set to stop paying the levy on behalf of customers using their flight-only services through the Atol Protection Contribution (APC).

Under the current rules, travel firms have to pay a £1 levy only on package deals, but Tui and Thomas Cook cover all their customers anyway.

The move could cause confusion, with many customers likely to be unaware that they are not covered in the event of either of the pair's collapse. The decision will also put another hole in the already shot finances of the Air Travel Trust Fund, which backs the consumer support and is thought to be nearly £60m in the red after the collapse of XL Leisure last year.