YESTERDAY's collapse of the Avon-based coach tour operator Land Travel has left at least 2,500 British holidaymakers stranded. Along with another 30,000 scheduled to travel with the company next month, and thousands more who have made advance payments for later in the year, they stand no chance of recovering their money. It is a harsh reminder of the need for tighter financial protection for people buying foreign holidays that are not covered by existing bonding methods.

The Government is planning such a scheme. For the past year the Department of Trade and Industry has been considering how to comply with the EC Package Travel directive, to be implemented at the end of the year. This says that all foreign holidays sold in the UK must be covered by a bond to protect the consumer against operator bankruptcy or fraudulent trading.

At present 90 per cent of all inclusive foreign holidays sold in the UK are covered by one of the existing schemes administered by the Association of British Travel Agents, the Tour Operators Study Group, the Association of Independent Tour Operators, the Bus and Coach Council and the Passenger Shipping Association.

However, many holidays fall outside these schemes, particularly self-drive holidays to the Continent, and are not protected. Under the DTI scheme, companies not covered by existing schemes would levy a charge on all holidays in order to build up a reserve fund. They would also be bonded under a new system.

It is also likely that a levy will be imposed on package holidays sold by existing bond holders in order to raise money for the Air Travel Trust, which provides a reserve fund to repay people who lose money through the collapse of a bonded travel company. Last year's collapse of the ILG group - and several other tour operator failures - have reduced the ATT from pounds 26.7m a year ago to pounds 3.5m, insufficient to offer protection against the collapse of even a modest-sized travel company.

If the levy is introduced, a percentage amount will be probably added to the cost of every package holiday sold. With tour operators heavily cutting prices at the moment in order to attract bookings, the imposition of a levy could hardly come at a worst time.