Keir Starmer has been cautioned against “appeasing” Donald Trump as he contemplates lowering a significant tax on US tech firms while simultaneously cutting disability benefits and jobs in the public sector.
On Sunday, his chancellor, Rachel Reeves, confirmed that discussions regarding the UK’s £1bn-a-year digital services tax, which impacts companies like Meta and Amazon, are “ongoing.”
She expressed hope that Trump’s 25% tariffs on British steel might be lifted as part of any agreement, but did not rule out potential alterations to the digital services tax, which has faced opposition from the US. “You’ve got to achieve the right balance,” she commented.
Although any adjustments will not be addressed in this week’s spring statement, the Liberal Democrats have warned that Labour risks “losing its moral compass” and that it would be “tantamount to robbing disabled individuals to cater to [Elon] Musk and Trump.”
Labour MPs are nearing a rebellion over £5bn in cuts to welfare benefits for those with disabilities, and trade unions are raising alarms over £2bn in reductions at Whitehall that could lead to approximately 10,000 job losses in the civil service, along with potential widespread layoffs in arm’s-length bodies and local governments.
Rachael Maskell, Labour MP and former shadow cabinet member, expressed concern: “With the chancellor indicating that she is still examining the digital services tax just days ahead of the spring statement, I would be apprehensive if relief were given in what might be viewed as an effort to relieve US tech firms while simultaneously forcing disabled individuals to shoulder the revenue shortfall, jeopardizing their support.”
“While it’s clear the chancellor must work on economic recovery, who bears the cost is crucial, and it should never fall on the most impoverished in our society, as would be the case if the proposals from the Department for Work and Pensions are implemented.”
Clive Lewis, another Labour MP and former shadow cabinet member, remarked, “This was completely foreseeable given the government’s eagerness to appease the Trump administration and the tech elites around them.”
“This represents the worst kind of extractive politics and aligns precisely with the desires of the Maga [Make America Great Again] movement. Instead of aligning with Europe and standing united, we’re permitting ourselves to be exploited.”
He labeled it “an abject surrender” before the government opts for tax reductions for large US tech firms while imposing austerity measures on the most vulnerable, adding: “Honestly, it’s unacceptable.”
The Liberal Democrats have strongly criticized the proposal, with party leader Ed Davey addressing their spring conference: “Now Labour is even considering abolishing Britain’s tax on social media giants. Well, appeasement never succeeds with bullies, nor does it work with Trump. And he has already imposed tariffs on British steel.”
Davey proposed that the UK should respond to the threat of steel tariffs starting April 2 with tariffs on Tesla, the electric car manufacturer partly owned by Musk.
Davey suggested Starmer’s approach toward Trump seems to be “let’s treat him kindly and hope he won’t cause us harm.”
In a recent interview, Starmer told the New York Times that he genuinely “likes and respects” Donald Trump and understands his objectives. “President Trump makes a valid point regarding the need for European countries to bear a greater share of the burden for Europe’s collective self-defense,” he stated.
The upcoming spending review is expected to prioritize increased defense spending, funded by cuts to international aid, and Reeves noted on Sunday that the changing global landscape is the backdrop for her economic proposals and the lower-than-expected growth. The UK is planning three days of rigorous military preparations to back a potential ceasefire in Ukraine ahead of a meeting in Paris with the so-called coalition of the willing nations on Thursday.
Starmer told the New York Times that it is a pivotal moment for the UK, and choosing sides between Europe and the US would be a mistake. “Neither Churchill nor Attlee pursued such a choice. It would be a significant error, in my opinion, to make that decision now,” he stated.
Meanwhile, Trump’s special envoy remarked this weekend that Starmer’s initiative for a “coalition of the willing” aiming to support a ceasefire in Ukraine was merely a “posture and a pose.”
Steve Witkoff, special envoy to the Middle East and involved in Ukraine negotiations, dissociated Starmer’s idea from the complexities at play, commenting that it is overly simplistic to expect UK Prime Minister and European leaders to emulate Churchill. He also expressed admiration for Vladimir Putin, stating he views the Russian president favorably and doesn’t see him as a “bad guy.”
Conversations have resumed among officials in Saudi Arabia involving the US, Russia, and Ukraine, with higher-level discussions set to commence on Monday. Trump is reportedly aiming to finalize a deal by Easter.
No 10 refrained from commenting on Witkoff’s statements. However, Reeves told BBC One’s Sunday with Laura Kuenssberg that she remained undeterred by his remarks.
“We must ensure that any ceasefire can be upheld, and that’s what our prime minister is working to secure with allies worldwide, with the US being a critical participant in that process,” she stated. “Furthermore, it’s essential for European nations, including the UK, to increase defense spending because, in this uncertain world, our national security and domestic safety are vital for numerous factors, such as maintaining a robust economy.”
Business Secretary Jonathan Reynolds has been in discussions with trade counterparts in Washington this week. Regarding the potential reduction of the digital services tax, a Treasury representative stated: “All taxes are reviewed periodically and the 2025 review of the digital services tax has been planned since its introduction in 2020, so it would be inaccurate to suggest any intention to repeal the tax.”
A Labour source commented that the Lib Dems “appear to be detached from reality and lacking credibility” by opposing the rise in national insurance for employers to fund the NHS while simultaneously demanding more funds for public services but opposing changes to inheritance tax affecting wealthy landowners.
