Hammond promises Brexit 'dividend', calls for digital services tax

The Chancellor of the Exchequer Philip Hammond has insisted there will be a Brexit “dividend” once the UK leaves the European Union.

Delivering his keynote speech at the Conservative Party conference in Birmingham, Hammond spoke out in favour of Theresa May’s so-called Chequers Brexit plan, adding: “I’m going to stick my neck out here today and make a prediction to you: that when the Prime Minister gets a deal agreed, there will be a boost to our economic growth.

“A deal dividend, which we will share in line with our balance approach between keeping taxes low, supporting public services, reducing the deficit and investing in Britain’s future.”

Hammond also used his wide-ranging speech to reassure businesses that the Conservatives remained committed to their needs. The party’s traditional relationship with business has been severely undermined in recent months by bitter disputes over Brexit, including vocal attacks by former Foreign Secretary Boris Johnson.

Hammond told delegates: “We back business as the cornerstone of a successful economy, as a force for good in our society and as an essential expression of our values. So just in case anyone, anywhere, was in any doubt at all, let me say it loud and clear: the Conservative Party is, and always will be, the party of business.”

He spoke of how capitalism had delivered 200 years of growth and lifted people out of poverty, but conceded that the party now needed to “regenerate capitalism” to make it fit for the 21st century. One measure being considered is a new digital sales tax, to ensure that taxation between technology giants and traditional high street retailers is fair.

He also attacked Labour’s economic policies, accusing the leader Jeremy Corbyn of backing “reckless borrowing” and “short-term gimmicks” that would threaten the UK’s prosperity.

Hammond also said the government was growing impatient and having to wait for a global or even a European consensus on how best to tax internet companies such as Amazon, Google and Facebook, saying: “The global internet giants must contribute fairly to funding our public services.”

With the OECD and the EU both struggling to get agreement from all their members, Hammond acknowledged the best way to tax international companies was through global agreements, but said: "The time for talking is coming to an end and the stalling has to stop. If we cannot reach agreement, the UK will go it alone with a digital services tax of its own.”

CBI director-general Carolyn Fairbairn said: "Pride and confidence in British business has for too long been missing in Westminster. It made a comeback in the Chancellor's speech today."

But she added: "Ultimately actions speak louder than words. Only by working together can every policy and every business investment be aimed at the key prize: a UK economy where prosperity is shared."

Edwin Morgan, director of policy at the Institute of Directors, said the Chancellor was correct to say that the government must find ways to make sure the tax and regulation systems are able to adapt to the realities of the modern economy, with digital technology bringing huge gains for the economy but also showing how out-of-date the UK tax regime is, as the high street is "hammered" by business rates at the same time as shopping increasingly moves online.

“But while the balance between high-street shops and out-of-town warehouses can be redressed, the answer isn’t more tax for everyone. Simple moves, such as lifting many more small businesses out of business rates are the kind of quick action we would like to see the Chancellor take at the Budget," Morgan said.

“Politicians need to be careful what they wish for when suggesting acting alone on taxing global companies. As attractive as a digital services tax may sound to some, in the context of Brexit the UK must look to make itself more internationally competitive, not less. Efforts to level the playing field and update taxes to reflect how today’s economy works are welcome, but not at the expense of the UK’s reputation as a good place to do business.”