The Chancellor of the Exchequer’s statements of intent on a digital service tax and competition law reforms reinforce other recent indications that the UK government is looking seriously at making significant changes to the way it approaches online platforms and the so called “tech giants”.
Brexit will potentially allow the UK to create its own strategy for the sector without necessarily needing to reach agreement with, or wait for, other European countries.
Philip Hammond’s remarks at the Conservative Party conference come on top of the clearest statement yet, from Jeremy Wright – Secretary of State for Digital, Culture Media and Sport (DCMS), regarding the way media regulators look at the digital sector.
Both Ministers have stressed the benefits of the digital sector to consumers and the strength of the UK’s role in the global digital economy. Both have gone out of their way to stress the importance of a thriving digital sector to Britain’s post Brexit economic success. But both have also explicitly acknowledged concerns that the competition, regulatory and tax regimes in Britain and elsewhere have failed to keep up with the rapid emergence of digital platforms as significant players.
Mr Hammond acknowledged concerns about whether there is too much power concentrated in the hands of “the global tech giants and digital platforms” and announced that he has asked President Obama’s chief economist, Jason Furman, to lead a review of the UK’s competition/antitrust regime to test whether it is fit for purpose in the digital era. He also floated the idea of the UK going it alone in introducing a Digital Services Tax if international agreement cannot be reached soon.
Some sound economic arguments can be made in support of the principle of such a tax. However, the practical design would raise some very challenging questions; not least how policymakers ensure it applies fairly, does not create unintended consequences and does not stifle innovation.
Mr Wright has made it clear in recent weeks that the Government has now taken the decision in principle that there is a need for enhanced regulation of online news services and the role of platforms in the media ecology. The question now is not whether there will be new rules but when they will be introduced, what they will look like and to whom they will apply. As the number of sectoral initiatives in relation to the regulation of online services grows, there is a pressing need to decide whether this piecemeal approach is the right one, or whether there is merit in a holistic policy review of the industry.
Both Ministers have a reputation for preferring caution and careful thinking over rushing into action. Both are instinctively internationalist and opposed Brexit so have a natural preference for coordinated international action over the UK going it alone. But both are starting to sketch out a future in which the UK contemplates demonstrating its new-found freedom after Brexit to take a lead in tackling the policy challenges of the digital age.
For digital businesses there are two lessons.
First, the policy agenda is moving on. The UK is now expressly aligning itself with those who believe there are new problems to be solved. Simply arguing that there are no new problems is unlikely to secure a hearing in this evolving environment; businesses now need to be constructively engaging in helping government to find solutions which work for the digital sector internationally whilst addressing wider social concerns.
Second, the anticipated shift of UK policy-making initiative from Brussels to London has begun. Given the UK’s significance as a digital hub and its reputation as a centre of excellence for regulation, businesses need to step up their policy engagement in London.