A victory for UK plc – or just a PR coup for Osborne?

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Indy Politics

One of the most powerful men in world advertising, Sir Martin Sorrell, delivered a purposely timed publicity coup to the Chancellor, George Osborne, yesterday by announcing that his global business, WPP, would be relocating its headquarters to the United Kingdom.

In doing so, Sir Martin, a long-standing Conservative supporter, has achieved extensive media coverage for his network of companies, which includes many famous advertising agencies – such as Ogilvy & Mather and JWT.

When WPP, the world's largest marketing services group, switched its headquarters to Dublin in the autumn of 2008, it was a slap in the face for the Labour government. Sir Martin said the company stood to save £80m a month by relocating to Ireland, where the 12.5 per cent tax rate on corporate earnings is less than half the UK rate of 28 per cent. WPP paid £204m in UK taxes in 2007 despite conducting almost 90 per cent of its business outside the country.

But in other respects, the move to Ireland made little difference. The Irish office is situated in Ely Place, an elegant Georgian street in Dublin. The London base is in Farm Street, in the similarly genteel environs of London's Mayfair. From the outset there was never any suggestion of a major relocation across the Irish Sea. "The presence [in Ireland] will be a very, very tiny part of the operation," said Richard Oldworth, a spokesman for WPP at the time of the transfer.

"The only physical change will be that some board meetings will be held in Dublin. A handful of people, probably from the financial area of the business will be based there," he added. But the WPP move was part of a pattern of relocations in which the publishing company United Business Media (UBM) also moved to Ireland.

Sir Martin decided to switch the name plaques again after Mr Osborne chose to cut UK corporate tax to 23 per cent by 2014 and to charge a flat rate tax of 5.75 per cent on foreign subsidiaries with a three-year waiver for groups repatriating to the UK.

"It looks as though the attitude has changed," he said, stepping forward in timely fashion on BBC Radio 4's Today programme.

Soon afterwards UBM issued its own statement, saying it was "actively considering whether to relocate its corporate tax domicile to the UK".

Having turned Wire and Plastic Products, a former shopping basket manufacturer, into a company making post tax profits of $901m last year, an annual rise of 28.5 per cent, Sir Martin is an influential figure. Not all of his comments are helpful to Mr Osborne, though. Earlier this month he made a speech in which he said Britain was languishing in the third tier of the world economy. Always fond of a metaphor, he chose football, saying that while Brazil was in the economic Premier League and the United States in the Championship, the UK was in League Division One.

"Perhaps the UK, with its Coalition Government's emphasis on deficit reduction and long-term growth will gain promotion to the Championship," was all he could offer the Chancellor.

Think things are bad now? Just wait until all this kicks in...

April 2011

* One percentage point increase in all National Insurance rates.

* 750,000 more people will pay the higher 40 per cent rate of income tax, when the threshold is reduced from £37,401 of taxable income to £35,001.

* 20,000 public sector jobs to go within 12 months, the first of about 400,000 to disappear within five years.

* Families with gross income above £41,300 lose their tax credits.

* Benefit payments won't rise as quickly as retail prices because of the change to using the Consumer Price Index to up-rate benefits instead of the Retail Price Index, which tends to go up by more. (Most means-tested benefits will go up by 3.1 per cent rather than 4.8 per cent.)

* Very rich hit by new £50,000 a year limit on contributions to pension funds.

* Tax break for work canteens is withdrawn, probably meaning price rises.

* Childcare schemes tax breaks withdrawn meaning higher charges.

* Company car tax charges increase, with more punitive anti-pollution charges. From now, there will also no longer be a limit to the charge employees must pay for having a company car.

* Stamp duty: new 5 per cent rate for residential properties over £1m.

* No more crisis loans for items such as cookers and beds from the Department for Work and Pensions. Will particularly hit those in housing poverty.

* Tougher rules on incapacity benefits, including medical examinations to test whether people are fit to work.

May 2011

* Inflation peaks at around 5 per cent.

August 2011

* Bank of England likely to raise base rates. After several years of record low mortgage rates monthly payments will rise by an average of £40 with more to follow.

January 2012

* Fuel duty rise of 3p/litre, postponed from April 2011.

* Cuts to housing benefit payments, postponed from October 2011.

March 2012

* Bad news for first-time buyers, estate agents and the construction industry: the stamp duty zero-rate "holiday" on properties valued up to £250,000 ends.

April 2012

* Further 10,000 public sector jobs to go within 12 months.

* More people will be sucked into paying the higher (40 per cent and 50 per cent) rates of income tax, and inheritance tax as thresholds frozen.

* Council tax cap due to end.

* Non-doms (UK residents who are "non-domiciled for tax purposes") will have to pay a new £50,000 charge after living in Britain for 12 years.

* Hikes in alcohol and tobacco duty.

* More people will have to pay more National Insurance and capital gains tax when the threshold is frozen again.

* ISA threshold frozen so savers hit.

* A cut to the National Insurance rebate for contributions to pension funds.

* Tax relief on late night taxis ends.

August 2012

* Further fuel duty rise of 3p/litre

January 2013

* Households with one higher (40p rate) taxpayer lose child benefit.

April 2013

* Further 90,000 public sector jobs to go within 12 months.

* New £500-a-week cap on welfare benefits to hit big families.

* Housing benefit will be reduced by 10 per cent after 12 months out of work.

* Hikes in alcohol and tobacco duty.

* More tax rises/spending cuts possible if borrowing figures start to move seriously out of line with expectations.

* The working age disability living allowance to be replaced by a new personal independence payment which may be less generous.

April 2014

* Further 190,000 public sector jobs to go within 12 months.

April 2015

* Further 80,000 public sector jobs to go within 12 months.

April 2020

* State pension age for men and women increases to 66 rising to 68 later.