Gooley has described the current Atol consumer protection scheme as “misguided since its inception” in a letter to CAA chief executive Richard Moriarty, according to a report in The Mail on Sunday.

The entrepreneur, who set up Trailfinders in 1970, attacked current rules allowing firms to use money from customers’ bookings to “meet general and current running costs”.

“The pipeline funds generated by innocent travellers are not in any way ringfenced,” said Gooley in his letter to Moriarty.

“All other similar transactions in society are rigidly controlled and regulated while travel has always been allowed to misappropriate these future funds and use them to meet general and current running costs.

“Embezzlement is not too harsh a description of this common practice which, without regulation, fuels both the frequency and extent of the misery caused by undercapitalised operators when their business plan fails.”

Gooley argued that ringfencing pipeline money from customer bookings, which is owed to airlines, hotels and other travel suppliers, would lead to fewer firms running into financial difficulty.

He added a rule change would also protect consumers’ holidays, as their trips would still have been paid for, even if the company taking their booking collapses. This would also save taxpayers having to pay for the costs of repatriation and refunds following a failure.