Even as the United Kingdom hurtles inexorably closer towards October 31 – the legal default date for exiting the European Union with no deal – official data continues to confound the received wisdom of most economic commentators.
Just yesterday, figures from the Office for National Statistics showed wages rising at their fastest level in more than a decade, while the number of people in work has never been higher. Though national output might have contracted by 0.2% in the last quarter, the UK economy remains remarkably healthy.
These encouraging data have not occurred by chance. Credit must be given to the careful stewardship of the British economy since the 2008 financial crash, whereby successive governments have pared back the state, and cut the headline rate of corporation tax. Indeed, next spring, it will stand at a much more manageable 17%, down from the 28% which the then Chancellor, George Osborne, inherited in 2010.
Doubtless, the reduction of the corporate tax burden has been a welcome reprieve for hard pressed firms and small traders who just want to get on with producing more stuff and hiring more people. It should also be noted that the cuts to corporation tax actually went hand in hand with increasing government revenues – up from around £36.6 billion in 2009-10, to £56.2 billion in 2017-18. Once again, the scaremongering peddled by left-wing commentators of the time has been proved false.
That said, some of the positive effects of the cuts to corporation tax were blunted by changes to the tax code which allow businesses to write off the cost of capital expenditure – known as ‘cost recovery’. According to the Tax Foundation’s International Tax Competitiveness Index (which evaluates the merits of OECD countries’ tax systems), the UK ranks second to last in terms of cost recovery – and the aforementioned changes have certainly not helped in this regard.