The Chancellor has taken aim at online giants and offered financial support to Britain’s struggling high streets as part of today’s Budget.
Delivering a Budget that he said “paves the way for a brighter future”, Philip Hammond revealed that the Government was introducing a new 2% Digital Services Tax, which will be paid by “tech giants” that generate more than £500m in annual global revenues.
Hammond admitted that tax rules “have not kept pace with changing business models” and said the new system would be “carefully designed to ensure it is established tech giants – rather than our tech start-ups – that shoulder the burden of this new tax”.
The Digital Services Tax will come into force in April 2020 and is expected to generate around £400m per year, Hammond said.
In what was the first Monday Budget since 1962, Hammond also pledged additional cash to help Britain’s high streets, which he said were “under pressure as never before”.
Help for high streets
The Government announced £675m of co-funding to create a future high streets fund.
Hammond said it was designed to help councils draw up plans for the transformation of their high streets and facilitate the redevelopment of commercial property into residential units.
There was further help for smaller high street operators, as Hammond revealed, as expected, a cut in business rates for small businesses.
Those with a rateable value of less than £51,000 will have their business rates bill slashed by a third for the next two years.
And small business will also see the amount they contribute to the apprenticeship levy cut from 10% to 5%.
Hammond had previously stated that he would deliver a new Budget if Britain exits the European Union without a deal – and today he set aside an extra £500m to prepare for a no-deal Brexit, in addition to the £1.5bn he had already pledged for 2019/20.
However, despite ongoing Brexit uncertainty, Hammond insisted that the UK could “look confidently to the future” and said that the “era of austerity is finally coming to an end”.
Data from the Office for Budget Responsibility (OBR) demonstrated that the UK’s economic growth would be “resilient”, no matter what shape the UK’s exit from the EU eventually took, he said.
Forecast growth in 2019 has been revised up to 1.6%, from 1.3% predicted at the Spring Statement.
The OBR estimates that the economy will grow at 1.4% in 2020 and 2021, 1.5% in 2022 and 1.6% in 2023.
The independent body added that it expected to see “sustained real wage growth in each of the next five years”.
Hammond said that he had “fiscal headroom” that he was “holding in reserve”, should the UK fail to strike a deal with the EU.