Keir Starmer has been urged not to appease Donald Trump as he considers cutting a major tax on US tech companies, following sweeping cuts to disability benefits and public sector jobs in the UK.
The 2 per cent levy, which was introduced in 2020, raises about £800m a year for the UK.
Rachel Reeves was optimistic that the steel tariffs could be scrapped if the UK strikes a deal with the US, but failed to deny there could be changes to the tax.
“You’ve got to get the balance right,” Ms Reeves said.
But the Liberal Democrats warned Labour is in “danger of losing its moral compass”, adding that cutting the tax would be “tantamount to robbing disabled people to appease [Elon] Musk and Trump”.
It comes after ministers unveiled £5bn worth of welfare cuts last week, primarily hitting those with disabilities, alongside plans to make £2bn worth of cuts to Whitehall departments leading to about 10,000 civil service job losses.
Left-wing Labour MP Rachael Maskell - who is strongly opposed to the welfare cuts - urged the government to avoid a “dash to let the US tech companies off the hook”, while cutting lifelines for disabled people.
“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”, she told The Guardian.
“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.”
Meanwhile, Labour MP for Norwich South, Clive Lewis, added: “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.”
Addressing his party’s spring conference over the weekend, Lib Dem leader Sir Ed Davey said: “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.”
He claimed that the PM’s approach to Mr Trump is “be nice to him and hope he won’t hurt us”.
While the European Union responded to Mr Trump’s tariffs by announcing trade counter-measures and hitting American goods with retaliatory levies, the prime minister has resisted calls for the UK to immediately hit back.
It comes after Sir Keir told the New York Times over the weekend that he “likes and respects” the US president.
He warned that the UK is facing a critical moment and it cannot attempt to pick a side between Europe or the US.
“Churchill didn’t do it. Attlee didn’t do it. It’d be a big mistake, in my view, to choose now,” he said.
The Department for Science, Innovation and Technology has been contacted for comment.
This article was written by Millie Cooke from The Independent and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.