Philip Hammond threatens to impose new tax on technology giants

Chancellor Philip Hammond has threatened internet giants with a new digital services tax to ensure they pay their fair share of the cost of public services.

In his keynote speech to the Tory conference in Birmingham, Mr Hammond said that, with international talks stalling, Britain was ready to go it alone with a levy on the tech companies.

The measure formed part of a programme to “regenerate capitalism” which the Chancellor said was needed to tackle the challenges of the modern world and renew the appeal of the free market to a new generation.

“The best way to tax international companies is through international agreement,” said Mr Hammond.

“But 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.”

Mr Hammond acknowledged that many voters feel “left behind” by economic change and fear they will fall further behind as new technologies like artificial intelligence and driverless cars make their jobs obsolete.

He warned that Tories must persuade these people that the market system can work for them, or see them fall for the “seductive simplicities” offered by Jeremy Corbyn’s Labour.

In a hint that he may be preparing the way for tax cuts or spending increases in this month’s Budget, Mr Hammond told delegates that there was “light at the end of the tunnel” after years of austerity.

And he predicted a “deal dividend” for the UK economy once an EU withdrawal agreement has been reached with Brussels, as companies unlock investment put on hold since the referendum and households regain the confidence to spend.

Any resulting increase in income to Government would be shared between keeping taxes low, supporting public services, reducing the deficit, and investing in the future, he promised.

But he said the Tories must look beyond Brexit to convince millennials and those in later generations that “21st century capitalism” can provide answers to the problems they face.

The party needs to “dare to change” and “renew the mandate for the market economy in the 21st century and with it the mandate of the modern Conservative Party to govern”, he said.

Mr Hammond said that the Brexit vote was driven in part by the fact that “a gap has opened up … between the theory of how a market economy delivers and distributes rising prosperity and the reality experienced by ordinary people”.

He said: “Too many people feel that they have lost control, that they are working for the system but the system isn’t working for them,” before listing a litany of complaints about slow wage growth, insecure jobs and expensive housing.

“Our challenge is to ensure that 21st Century capitalism delivers for them, to convince them that our vision of Britain’s future can meet their aspirations, and that our plan will deliver a better tomorrow for them and their families.”

The Government must show voters that gains from technological advance will not go only to “the few” but will be harnessed to “address their concerns, not make them worse”, he said.

And he warned Tory activists: “If we look for a moment like the party of ‘no change’, then we should not be surprised that some will be tempted by the dangerous populism of our opponents.”

Denouncing the Labour of Jeremy Corbyn and John McDonnell as a “backward-looking party” which is “totally unfit to govern”, he said: “This country now faces a choice.

“A choice between the seductive simplicity of the Brave New World of Corbyn and McDonnell’s populism, where the narrative is all about easy answers, and our pragmatism, which is sceptical of ideologues, which starts with the real world we live in, and seeks to make it better, and recognises that there are no short-cuts and no free-lunches on the road to a better Britain.”

The Chancellor won applause from activists as he declared: “Corbyn boasts that Labour are a government-in-waiting. Well, I say let’s keep him waiting, this year, next year and every year.”

In a conference dominated by differences over Brexit, Mr Hammond called on Tories to “stand together four-square behind the PM” as she seeks to secure a deal based on her Chequers plan.

He promised that he would maintain “enough fiscal firepower” to support the economy in the case of a no-deal Brexit.

Declaring that the Conservatives remained “the party of business”, Mr Hammond announced reforms of the apprenticeship levy to meet companies’ concerns.

He committed £100 million to a world-first National Retraining Scheme in partnership with the CBI and the TUC.

And he announced a £125 million package to boost the number of well-paid jobs across the UK.