Starmer is warned against ‘appeasing’ Trump with tax cut for US tech firms

Labour MP and Lib Dem leader express concern social media companies could be let off the hook just as benefits are cut

Keir Starmer has been warned against “appeasing” Donald Trump as he considers reducing a major tax for US tech companies while cutting disability benefits and public sector jobs.

His chancellor, Rachel Reeves, confirmed on Sunday that there were “ongoing” discussions about the UK’s £1bn-a-year digital services tax that affects companies including Meta and Amazon.

She expressed optimism that Trump’s 25% tariffs on British steel could be removed in any deal, but did not deny there could be changes to the digital services tax, which the US has lobbied against. “You’ve got to get the balance right,” she said.

While any changes would not take place in this week’s spring statement, the Liberal Democrats warned Labour was “in danger of losing its moral compass” and it would be “tantamount to robbing disabled people to appease [Elon] Musk and Trump”.

Labour MPs are already on the brink of rebellion over £5bn of welfare cuts to disability benefits and trade unions are concerned about the £2bn of Whitehall cuts leading to about 10,000 civil service job losses, plus the risk of wider redundancies in arm’s-length bodies and local government.

The Labour MP and former shadow cabinet minister Rachael Maskell said: “With the chancellor saying that she is still looking at the digital services tax, just days before the spring statement, then I would be concerned if relief was granted in what would be seen as a dash to let the US tech companies off the hook, while at the same time as making disabled people pay for the revenue loss, with their lifelines being cut.

“I recognise that the chancellor has to rebuild the economy but who pays for this matters, and it must never be the poorest in our society, which will be the outcome should the Department for Work and Pensions proposals go through.”

Clive Lewis, the Labour MP and another former shadow cabinet minister, said: “This was entirely predictable given how desperate the government is to appease the Trump administration and tech oligarchs around it.

“This is extractive politics at it worst and exactly the kind of deal the Maga [Make America Great Again movement] wants. Rather than move closer to Europe and stand together we’re allowing ourselves to be ripped off.”

He said it was “an abject surrender” even before the government chooses tax cuts for big US tech and austerity for the most vulnerable, adding: “Frankly, it’s unacceptable.”

In addition, Chi Onwurah, the technology committee chair, warned on Sunday that concerns about the safety of artificial intelligence were at risk of being ignored by ministers, as the government delayed regulating the industry to curry favour with Trump.

The Liberal Democrats led opposition criticism of the tax cut idea, with Ed Davey, the party’s leader, telling his spring conference: “Now Labour’s even talking about scrapping Britain’s tax on social media giants. Well, appeasement never works with bullies, and it doesn’t work with Trump. And you can see that he’s already put his tariffs on British steel.”

Davey suggested the UK should respond to the threat of steel tariffs from 2 April with tariffs on the Tesla electric car company, which is part-owned by Musk.

He said Starmer’s approach to Trump appeared to be “let’s be nice to him and hope he won’t hurt us”.

In an interview this weekend, Starmer told the New York Times that he personally “likes and respects” Donald Trump and understood what he was trying to achieve. “President Trump has a point when he says there needs to be a greater burden borne by European countries for the collective self-defence of Europe,” he said.

The spending review is likely to focus on higher defence expenditure, paid for through cuts to international aid, and Reeves said on Sunday that the backdrop to her economic plans and lower-than-expected growth is that the “world has changed”. The UK is planning three days of intensive military preparations to support a possible ceasefire in Ukraine before a meeting of the so-called coalition of the willing countries in Paris on Thursday.

Starmer told the New York Times that it was a critical moment for the UK and it would not be right to pick either Europe or the US to side with. “Churchill didn’t do it. Attlee didn’t do it. It’d be a big mistake, in my view, to choose now,” he said.

At the same time, Trump’s special envoy said this weekend that Starmer’s plan for a “coalition of the willing” to support a ceasefire in Ukraine was just a “posture and a pose”.

Steve Witkoff, who is special envoy to the Middle East but also playing a role in Ukraine talks, said the idea was based on a “simplistic” notion of the UK prime minister and other European leaders thinking: “We have all got to be like Winston Churchill.” Witkoff also praised Vladimir Putin, saying he liked the Russian president and did not “regard Putin as a bad guy”.

Talks have resumed among officials in Saudi Arabia between the US, Russia and Ukraine, with higher-level discussions to start on Monday. Trump is said to be seeking a deal by Easter.

No 10 had no comment on Witkoff’s remarks. But Reeves told BBC One’s Sunday with Laura Kuenssberg that she was “not put off by that”.

“We will need to make sure that if there is a ceasefire it can be enforced, and that’s what our prime minister, along with allies around the world, is trying to secure, and of course, the US has got to be an important part of that,” she said. “But it is right that European countries, including the UK, [are] upping defence expenditure because in this uncertain world our national security, our domestic security, is incredibly important for so many things, including a strong economy.”

The business secretary, Jonathan Reynolds, has been talking to trade counterparts in Washington this week. On the possibility of a cut to the digital services tax, a Treasury spokesperson said: “All taxes are kept under review and the 2025 review of the digital services tax has been planned since it was implemented in 2020 – so it would be wrong to imply any intention to repeal the tax from this.”

A Labour source said the Lib Dems “were living on another planet and not credible” by opposing the national insurance rise on employers to fund the NHS and wanted more money for public services while opposing inheritance tax changes for rich landowners.

Source: The Guardian