Let’s start with the good news: having hot-footed it to Ireland to cut WPP’s corporation tax bill, Sorrell says he’s now likely to recommend a return to London – a (suspiciously) timely endorsement of Osborne’s plan to make the UK the most business-friendly location in Europe. As part of this, he’s cutting corporation tax by 2% instead of 1% this April (to 26%). It'll then fall by another 1% in each of the next three years, leading to an eventual rate of 23% - the lowest in the G7 (or at least it would be currently). He's also relaxed the tax rules on Controlled Foreign Companies and foreign dividends, with a view to making Britain a more attractive place to be based. He’s clearly convinced Sir Martin, at any rate.
Companies of all sizes stand to benefit from his drive to make the tax code simpler, more efficient and more predictable (a laudable ambition if ever there was one). This may eventually include merging income tax and NI, which would make payroll a lot easier for employers – though don’t hold your breath, because the consultation process for this fiendishly complex issue is likely to take years. The Chancellor was also making all the right noises on red tape, promising to cut £350m worth of regulation, while implementing Lord Young's health and safety reforms and streamlining the planning process.
The big surprise, of course, was that 1p cut to fuel duty (he’s also scrapped Labour’s fuel escalator), to be paid for by what's effectively a tax on the big North Sea oil companies. This morning the Government has been furiously denying Labour suggestions that they’ll just pass this on via higher price pump prices – pointing out, not unreasonably, that the people who get the black stuff out of the North Sea are not the same people who own the petrol stations (although Labour’s other charge – that all this does is slightly offset the price hike from the VAT rise – is harder to dismiss). Since fuel can be such a big cost to business, that's also a welcome move.
So, lots to welcome. But there was one catch. The Chancellor had to admit that the independent Office for Budget Responsibility has downgraded its UK growth forecast for this year and next year (and some argue that the 1.7% pencilled in for 2011 still sounds optimistic). In other words, the OBR is saying the growth outlook has worsened in the last few months. That's not exactly going to convince any doubters that the Government knows what it’s doing with its 'Plan for Growth'...