The Chancellor delivers lukewarm 2018 budget for future digital policy

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Posted at 3:39 pm on 19th November 2018 by Moss

By Michael O’Sullivan

Labour have long been focused on delivering a strong and vibrant digital future for the UK. Since 2014, we’ve been working on ways create a leading digital economy, drawing up plans to develop our broadband infrastructure so that it matches our aspirations.  

Some see this as the broadband equivalent the HS2 project. Yes, it’s big and bold but it’s also something we need if we are to compete on the international stage in the future.  

The Chancellor’s most recent budget, therefore, was of particular interest around how it is going to address digital policy for the future. With Brexit looming, but the Government still in chaos, thinking ahead to how we compete as a nation on the international stage is vital, not just over the next decade or so but beyond.  

The digital sales tax for tech giants  

Back in March, Labour’s Shadow Chancellor John McDonnell said that the current tax laws relating to large tech companies was an insult to ordinary tax payers: 

“There will be millions of hardworking people in this country who are struggling to make ends meet and will look at the paltry amounts these big companies like Google are paying and rightly be disgusted.” 

We’ve all long understood that tax rules have not necessarily kept up with the developing digital landscape. The world, not just the UK, has been trying to find ways to ensure that big companies pay their full share for some time now. In the 2018 budget, Chancellor Hammond introduced a digital services tax that will come into effect in 2020.  

This will target social media companies, online stores and search engines that make money in the UK but pay little or no tax. It’s aimed at businesses that have a turnover in excess £50 million a year and is not likely to impact most start-ups or burgeoning tech companies. The new digital services tax is expected to realise over £1.5 billion in just four years. While not mentioning the likes of Google, Amazon and Facebook directly, this policy is certainly aimed at these tech giants.  

Labour is already committed to tax transparency and enforcing programmes to reduce tax avoidance and evasion from multi-nationals, not just in the digital world. We welcome the greater energy being put into making large corporations pay their fair share.  

Investment in research and innovation  

While digital services, along with everything else, took a back seat to Brexit, there was some welcome news about investment to the tune of £1.6 billion in areas like AI and quantum computing. There was also an undertaking to expand the National Productivity Investment Fund (NPIF) over the next five years to £37 billion. However, as with most aspect of this Conservative government, this funding doesn’t go anywhere near where we need it to be to remain competitive in a growing world. 

Organisations like Digital Catapult that bring together corporations, start-ups and tech scaleups to help develop their advanced digital technologies have received a boost of a further five years’ funding. According to CEO Jeremy Silver: 

“Digital Catapult provides state-of-the-art digital facilities, navigation of the fragmented start-up landscape and strategic guidance to traditional businesses. We’re helping increase industrial investment in R&D in new ways, taking advantage of digital technology and culture.”   

While these are again welcome investments in our digital economy, the Conservative Party has long been too tied up with the issues surrounding Brexit to spend enough of their time developing this vital part of the UK economy.  

Do the Tories really get digital?  

There is a growing consensus that the Tories don’t get ‘digital’. While David Cameron once accused Gordon Brown of being an ‘analogue politician in a digital age’, the shoe seems to be firmly on the other foot as we approach the end of the second decade of the 21st Century.  

Back in 2017, MP Liam Byrne highlighted in the Guardian that nearly a quarter of the UK population lacked basic digital skills and that this could be costing £63 billion in lost output. There’s no doubt that, as we plough ever more chaotically on towards Brexit next March, we need to be focused on those areas of our economy that can deliver real benefits for the future.  

Labour, contrary to the Conservative government, is committed to making Britain into a leading digital power. One area that really needs to be improved is our digital infrastructure. According to Byrne: 

“Those parts of Britain that will be hit hardest by Brexit are among the least well equipped to make a success of the digital economy. Research by the House of Commons library shows that the 95 council areas expected to suffer most from Brexit have average download speeds that are 65% worse than the areas that will be hurt least.” 

Many parts of the UK have thriving digital hubs, particularly in cities such as London, Edinburgh, Oxford and Cambridge but also Manchester, Sheffield and Bristol. The truth is our delivery of a digital policy needs to empower communities across every other city and region. To do that, we need to have a digital infrastructure that delivers high speeds to all four corners of the UK. In other words, you should get a good connection wherever you are in the UK, and this must be 5G next generation ready. 

Support for a strong digital network was sadly lacking from the Chancellor’s budget for 2018, at exactly the time when investment is most needed. The measures introduced in the budget were piecemeal at best and not designed to address the major challenge we face in the UK, the digital infrastructure required and how it will be delivered and will deliver for businesses in the future.  

Read Liam Byrne’s DIGITAL INFRASTRUCTURE: A People’s Plan for Digital. 

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