Labour will no longer increase tax on US tech giants, two weeks after visiting Google’s UK HQ

Labour has announced that it will no longer look to impose an additional tax on primarily US-based tech giants which would have raised around £3 billion, just weeks after visiting Google’s UK headquarters.

There are reports that the move was scrapped over fears it could have sparked retaliatory trade measures from the US, while the party has claimed it always intended the policy to be a temporary measure.

Campaigners have previously called for more transparency around lobbying efforts made to Labour, particularly given the party’s focus on building links with the corporate world and the increasingly widespread belief among many large companies that Keir Starmer will be the next prime minister.

Figures inside the party and within the wider labour movement have also raised concerns about what they describe as “a reorientation away from working people… towards wealthy donors”.

Labour visits Google HQ

On 13 June, during London Tech Week, a number of Labour frontbenchers visited Google’s UK headquarters in London.

Shadow cabinet members including Starmer, Deputy Leader Angela Rayner, Shadow Digital Secretary Lucy Powell and Shadow Business Secretary Jonathan Reynolds all attended, as did Shadow Chancellor Rachel Reeves, who a few weeks prior had flown to the US to “promote Labour’s economic plans”.

Tweeting after the event, Starmer said it was “great to be” at Google’s HQ. He said: “We discussed how a Labour government will work in partnership with business to drive technology for public good - creating secure jobs across the whole of the UK.”

Reeves had previously announced plans to increase a 2% levy charged on tech firms’ revenues to 10%, which she said would raise £3.2 billion. Google would likely have been one of the main firms impacted, alongside Amazon and Facebook. This money would then be used to provide assistance to small businesses, the party said.

But the party has confirmed that they will no longer go ahead with the plan, following reported concerns that it could prompt the US government to impose trade tariffs on UK exports to offset the lost revenue.

A Labour Party spokesman told The Times the party had “no plans to raise digital services tax”.

They added: “Our position on the digital services tax referred to the years of 2022/23 and 2023/24 and was a temporary measure, entirely within the rules of the international agreement, that we would be doing in that time to cut business rates and help our struggling high streets.

“In government, Labour have said that we will scrap business rates and replace it with a fairer more modern system that shifts the burden away from the high streets and more on to online giants. We have said we will set out more details on this ahead of the next election.”

Oil and gas u-turn

After announcing the party’s intention to block all new oil and gas developments in the North Sea, it was later reported by The Times that Starmer had personally given assurances to the bosses of a number of energy giants.

The party’s initial announcement was met with criticism from industry and political attacks, with the Conservatives seeking to paint Labour as being in hock to environmental campaigners including Just Stop Oil.

Following criticism, Labour promised not to revoke any licences to extract fossil fuels from the North Sea which are granted before the next general election. This is despite many of the developments relating to these licences being unlikely to begin producing gas and oil for several years.

Starmer reportedly told Equinor, the state-owned Norwegian energy company, that Labour would not block the development of their Rosebank oil and gas field if they win the next election. He also is understood to have held a round of phone calls with energy companies to reassure them about Labour’s willingness to see further developments go ahead.

A Labour spokesman said at the time: “The Labour Party has said we will not grant new licences to explore new fields and has also consistently said we will not turn off the taps by shutting down existing fields or revoking existing licences.

“We recognised that oil and gas will play an important role for decades to come and will not allow a cliff-edge in the North Sea.”

‘A reorientation away from working people’

Transparency campaigners have previously called for Labour to proactively publish details of meetings it holds with private companies and lobbyists in the run up to the next election, while figures within the party and the wider labour movement have expressed concerns about the leadership’s increased focus on the business community.

Current lobbying rules mean there is no requirement to register lobbying of opposition parties, despite warnings from campaigners that this makes the democratic process less transparent. The head of the UK’s lobbying watchdog told MPs recently that extending the scope of lobbying legislation to include the shadow cabinet or opposition MPs would “make it a more comprehensive system”.

During his tenure as Labour leader, Ed Milliband took the step of publishing a list of meetings with donors and media executives.

Duncan Hames, Director of Policy at Transparency International UK, told MPs on the Public Administration and Constitutional Affairs Committee that lobbying of politicians "happens in all political parties," and that "if we are interested in making our democratic process more transparent, we should look not only at the lobbying of government ministers."

Referring to the current lobbying transparency regime, he said: "When you design a system like that, you will inevitably not shine a light on lobbying of people outside of government. Governments change. People enter government having not been in government and having been very extensively lobbied."

Writing in the Morning Star this week, Labour MP Jon Trickett expressed his concern that there has been “a reorientation away from working people… towards wealthy donors and the interests of business”.

He said: “A small group is attempting to change the character of the Labour Party. Moving it away from one traditionally rooted in local communities, workplaces and social justice.

“Recent news suggests the party is becoming increasingly reliant on big donors – such as the former Autoglass boss announcing he is giving £5 million in donations and Lord Sainsbury donating £2 million. These are huge contributions to the fighting fund, and no one argues that the party should lack money to fight this appalling Tory government. But history shows us what might happen when the party relies too heavily on wealthy individuals: the cash for honours scandal under Blair comes to mind.”