Comment: What might today mean for the travel industry?

Comment: What might today mean for the travel industry?

The general election could mark a turning point in UK politics and there are implications for the sector, says Ian Taylor

Unless the polls are seriously wrong, today’s election looks set to deliver a minority government for the first time since the 1970s.

The world as we know it won’t stop on Friday, but the election could be the start of a prolonged period of uncertainty and not its end.

In many respects this reflects a wider trend in Europe – the decline in popularity of established parties and rise of new political formations. In Greece, Syriza now governs. In Spain, Podemos poses an electoral challenge.

In Britain, the SNP is poised to wipe out Labour in Scotland and may hold the balance of power at Westminster, while Ukip challenges for the Conservative vote.

If the polls are right, neither Conservatives nor Labour may be able to command the Commons in coalition with a partner.

The Tories can look to the Liberal Democrats and Northern Ireland Unionists for a deal. They can probably rely on the odd Ukip MP for support on most issues.

Labour can expect SNP backing – Ed Miliband has ruled out a coalition – and rely on the Welsh nationalist Plaid Cymru, on Northern Ireland’s nationalists and any Green MPs. The party could also look to a coalition with the Lib-Dems led by Vince Cable rather than Nick Clegg.

A second election – in the autumn or early next year – seems likely. But a way around the rules on fixed-term parliaments introduced by the Cameron-Clegg coalition will need to be cleared first.

No doubt the Cabinet Office has a plan to present to the new prime minister. Without one, it’s conceivable a PM could be unable to command a majority in the Commons and unable to call an election.

The last time Britain saw anything like this was in 1974 when one inconclusive election led to another and to a minority Labour government.

The last time a nationalist party won a majority of seats in its ‘nation’ was in Ireland in 1918. We are not set for civil war and partition, but a degree of instability appears inescapable.

Financial Times political columnist Philip Stephens pointed out last week: “Whitehall Mandarins fret that the formation of a new government may take weeks and that the new administration may be precarious.

“Business leaders say the country needs a prime minister with a governing majority. City analysts say the markets could be ‘spooked’ by an inconclusive result and the prospect of a second election.”

Sterling’s recent fall reflected nervousness about the outcome. Obviously, a prolonged fall won’t help the outbound market. Imagine the impact of a second election and an EU referendum, perhaps with a fresh move for Scottish independence.

Certainly, any kind of Conservative ‘victory’ will require Cameron honour his pledge of an ‘in-out’ vote on EU membership.

Travel featured little if at all in the campaign, yet has a good deal riding on the new government.

What might be the implications for the sector and its stock list of concerns: airport capacity, APD, VAT, visas, tourism policy and Atol/package travel reform?

Let’s take them in reverse. Abta head of public affairs Stephen D’Alfonso warned last week of potential delay and inertia in implementing the new Package Travel Directive if the election result is unclear.

Whoever comes out on top will stick with a minister responsible for tourism and sport within the Department of Culture Media and Sport. The focus on domestic and inbound tourism will remain.

The case for improved visa facilitation is widely appreciated, but it will be hard to relax visa controls without relaxing the rhetoric on immigration and it is hard to see that happening.

Indeed, the rhetoric may only ratchet up if the Tories descend into infighting if Cameron fails, or if Cameron returns and proceeds to a referendum on the EU.

Hope of a reduction in hotel VAT appears fanciful. There is little disagreement on deficit reduction between the major parties and there are spending pledges to finance. The government will need money from somewhere.

The same applies to Air Passenger Duty, but with a twist. The fag end of the coalition saw the Treasury stance on APD unravel as first it conceded devolution to Scotland, then Wales, and acknowledged this could adversely affect airports in England.

The SNP is committed to cutting APD by 50%. The downside of devolved APD could be a move to a ‘congestion duty’ in the southeast – because no government will want to wave goodbye to £3 billion a year (and rising) collected on its behalf.

It’s worth noting a ComRes survey of 150 outgoing MPs in January found APD way down a list of priorities for action on air travel or transport and off the radar of Tory MPs.

That leaves airport capacity. The Davies Commission will report, probably in June, on whether Heathrow or Gatwick should get a new runway.

No doubt the government, of whatever hue, will accept its recommendations. The question is what they do – or whether they can do anything.

Here, there is a difference. A Labour minority government tacitly supported by the SNP could be a) more likely to make a decision and b) more likely to plump for Heathrow.

Why? First, Labour will want to prove itself to business (just as Cameron wanted to prove his ‘new Tory’ credentials by halting a third runway in 2010).

Second and most important, the SNP seeks connectivity for Scotland to and through London, and that means Heathrow.

The fly in the ointment is how long such a government might last. Heathrow or Gatwick expansion would loom large in any second election.

Should the Tories form the government, Heathrow would still have support. George Osborne would see to that.

But Boris Johnson will be in Parliament, jockeying for the leadership and opposed to Heathrow. Other priorities would loom. Heathrow could be less deliverable without making Gatwick any more so.

The industry has plenty of cause for frustration with the last government (and its predecessors). Let’s hope it does not come to look fondly on the certainties of the period now ending.


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