Chancellor Philip Hammond has said he believes the government’s target of eliminating the UK’s deficit is “within touching distance”, despite ramping up public spending and tax cuts in the Budget.
Appearing before the Treasury Select Committee this evening, Hammond denied his 2016 plans to reach a budget surplus by the mid-2020s had been abandoned. However, he conceded the government is now taking a “balanced approach” to reducing the UK’s deficit.
The Office for Budget Responsibility (OBR) last week forecasted a reduction of the deficit to 0.8 per cent of national income by 2023-24. It also said the 2018 Budget was the largest loosening of fiscal policy since the OBR’s creation, totalling around £100bn in government spending.
The comments marked a turning point in policy, away from a previous focus on reducing the deficit since the Conservatives gained the keys to Downing Street in 2010.
Hammond also defended the incoming digital services tax, which one MP suggested could anger US President Donald Trump due to its potential focus on the revenues of US tech giants.
The chancellor said the measure, which will require tech giants in certain sectors to pay a tax of two per cent on UK revenue, was a “subject of debate” yet pointed out similarly extraterritorial efforts by the US tax reform act.
Earlier today, credit rating agency Moody’s said the digital services tax would be credit negative for many big tech companies in the coming years.
The agency argued the UK’s decision to impose its own tax could encourage other non EU countries to follow suit, which could have “a significant effect” on the way companies such as Facebook and Alphabet view their business models.