Gordon Brown may have given succour to the City with his most recent budget, but he’s still not financiers’ flavour of the month.
At the last count, 60% of 802 voters on our poll said the Conservatives would do best by the City, with a tiny 21% favouring Labour and an even more puny 10% casting a vote of confidence for the Liberal Democrats.
What’s Gordon done wrong?
It’s not great news for Brown, who’s doing his best to be friendly. The Chancellor’s budget was deemed largely favourable to the City after he docked corporation tax by 2%.
“When you tabulate the winners and losers, the financial sector does pretty well out of the budget,” says John Whiting, tax partner at PricewaterhouseCoopers (PWC).
What’s good for the City is likely to be good for City jobs. Merrill Lynch, for example, was rumoured to have shifted some of its operations to Ireland last autumn for tax reasons. And the headquarters of a combined Barclays and ABN AMRO is likely to be in the Netherlands.
“When it comes to corporation tax, Britain is being beaten by countries like Switzerland and Ireland,” says Whiting. Research by PWC suggests the total corporate tax rate (including labour taxes and corporate income tax) is 25.8% in Ireland, 24.9% in Switzerland and – after the recent budget – 33.4% in the UK.
The comparable rate is 48.1% in the Netherlands, but Whiting says the country is taking a different approach to fiscal allure: “The Netherlands is better than the UK when it comes to clearances and rulings.”
Spot the difference
Whether Messrs Cameron or Campbell would make much difference when it comes to fiscal incentives to locate in the City is questionable, however. Following the budget, Whiting says discrepancies between the main political parties’ tax ideas have narrowed: the Conservatives have also mooted a cut in corporation tax and the Lib Dems are all for a ‘simpler’ tax system. “They’re all moving in the same direction,” he says.
What of higher income taxes for ‘immoral’ City bonuses? The Lib Dems appear to have quietly shelved their 50p in the pound proposal for incomes over 100k. Nicholas Bacon, a tax partner at KPMG, says the other major parties are unlikely to give it an airing: “People are highly mobile these days. If you tax them too hard they may just get up and plonk themselves elsewhere.”