David Prosser: Wolseley's Swiss move threatens the foundations of Chancellor's tax policies

Outlook: Though the worst of the downturn is over and finance directors are returning to such matters, the Chancellorcould be forgiven for feeling betrayed

The departure of Wolseley, the building materials business, for tax pastures new in Switzerland is a warning shot for George Osborne. Having signed up so many leading business figures in support of his tax policies during the election campaign, the Chancellor showed his gratitude with a business-friendly emergency Budget in June. Just three months later, a FTSE 100 company is decamping to Switzerland.

The saving that Wolseley is making from the move – it would have been £23m this year – is quite small even for the company and minuscule in terms of the total tax take. But if other companies follow suit, the lost revenue will begin to add up, particularly if the quitters are more profitable concerns than Wolseley.

For a time, this sort of move was a major headache for the previous Labour government. But after a half dozen or so companies, from Shire to WPP moved their tax base, the rot seemed to stop. There were several reasons for this: Gordon Brown is thought to have read Footsie bosses the riot act, while also offering concessions on the taxation of foreign profits, the issue that most concerned many companies (and which Wolseley pinpointed again yesterday). The recession, in which companies focused on their survival, rather than managing their tax rate, also played a part.

Though the worst of the downturn is now over and finance directors are returning to such matters, Mr Osborne could be forgiven for feeling betrayed by Wolseley. The Chancellor has already promised corporation tax rate cuts and a further review of the taxation of foreign profits is scheduled for the autumn. Even the abolition of capital allowances, which most accountants expected in order to pay for headline business tax reductions, has so far failed to materialise.

Mr Osborne has, in short, done everything he can to limit the burden of tax on business, even during these straitened fiscal times, and also promised a crackdown on the red tape of regulation, about which many businesses feel even more strongly than tax. The VAT rise will hit certain types of company, notably retailers, but we are still far from uncompetitive compared with the rest of Europe.

Still, while the Chancellor will have to take this one on the chin, it might be wise to get on the phone to his pals in the boardroom, just to remind them which side their bread is buttered. Research published last month suggests one in five large businesses would consider leaving the UK for tax reasons. Idle threats can become dangerous realities very quickly when a head of steam builds up.



The Saracens captain may face a sanction after missing the Heineken Cup launch to go on a club trip to Munich's beer festival

Roll up, roll up, for another round of the great British confidence crisis, as China's Bright Food prepares to make an audacious swoop on one of our favourite companies – and this could be a takeover that will literally take the biscuit.

Anxiety about the suggestion Bright Food is near the top of the list of potential suitors for United Biscuits, the manufacturer of such great British foods as KP Nuts, Twiglets and Jaffa Cakes, is already beginning to mount, despite the award of the prize being some way off.

Still, before concern turns into full-blown anger, Cadbury-style, it's worth remembering a couple of things. First, this is not a hostile takeover, but a sale process being conducted by United Biscuits' owners, the private equity concerns Blackstone and PAI. They, by the way, aren't British themselves – if Bright Foods were to secure this £2bn deal, it would be a transfer of ownership from the US and France to China.

Is United Biscuits a strategic company that we ought to worry about? Hardly. And while one could at least understand the sentimental attachment to Cadbury – the history, the philanthropic connections and so on – United Biscuits is not the same sort of company.

Multinational takeovers and mergers are not going away. Indeed, the British miner BHP Billiton is trying to buy strategic assets in Canada in a deal that makes the sale of United Biscuits look like crumbs from the table. And there will be cases when it makes sense to get upset. But this transaction – even assuming Bright Foods clinches it ahead of competition that may include Britain's Premier Foods – is not one of them.



The choice for shadow Chancellor is clear

Having made their choice for leader, Labour Party members have less of a say in who will be its next shadow chancellor. But if judged purely on economic considerations, the choice would be straightforward: the opposition's top duo would be most credible if they shared a given name, rather than a surname.

Ed Balls should get the post for two reasons: partly because his experience of economic affairs in Government is well ahead of David Miliband's, but more because his campaign for the leadership saw him set out the clearest and best alternative to the deficit reduction plans of the Government. Mr Balls offers an analysis of the economic dangers facing this country that will become ever more relevant.

The International Monetary Fund report published yesterday on the state of the British economy read as if it was dictated down the line from 11 Downing Street. No doubt the Chancellor will have been delighted with the support he received from the Fund's deficit hawks. But the report feels curiously out of date. Its picture of an "economy on the mend" and "unemployment stabilising" was accurate two months ago, but ignores all the more recent data suggesting recovery has already begun to falter and that joblessness is once again rising.

Nor does the IMF make any mention of Ireland, a ghastly vision of how George Osborne's debt reduction plan could turn out: spending cuts that destroy the consumer sector and wreck the recovery altogether.

For Labour, only Mr Balls has voiced these fears coherently, while also presenting his own credible plan for cutting the deficit. Give that man a job.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent