Prime Minister Sir Keir Starmer and U.S. President Donald Trump spoke about progress on an economic deal between the UK and United States, amid reports that a tax on tech giants could be slashed and as the government eyes up cuts at the spring statement.
The prime minister spoke with the U.S. president about the agreement on Sunday night, Starmer’s official spokesman said.
Media reports have suggested Britain could slash the digital services tax—a levy on Big Tech companies—in order to stave off American tariffs.
Reports that the tax could be slashed or abolished come as Chancellor Rachel Reeves is expected to announce spending cuts for some government departments in her spring statement on Wednesday, after having made cuts to welfare which have proved unpopular with Labour backbenchers.
The prime minister’s spokesman would not be drawn on whether slashing the digital services tax in exchange for a reprieve on American tariffs was part of Starmer’s discussions with Trump, and insisted the government would only strike a deal “in the national interest.”
Meanwhile, Reeves said she does not “recognise” reports ministers may means-test free school meals as part of the cost-cutting drive across government and insisted the digital services tax was “hugely important.”
Asked whether digital services tax would be scrapped, the prime minister’s spokesman told reporters: “Firstly, just taking a step back, the UK is working with the United States on an economic prosperity deal, building on our shared strength of that commitment to economic security.
“As part of those discussions, the prime minister and President Trump discussed progress made in those discussions last night.
“The UK will only do a deal in the national interest, which reflects this government’s mandate to deliver economic stability for British people.”
Reeves, meanwhile, described the 2 percent tax on social media companies, search engines, and digital marketplaces as “hugely important,” adding that it brings in around £800 million a year.
“So, we will continue to make sure that businesses pay their fair share of tax, including businesses in the digital sector,” the chancellor told broadcasters.
Ahead of the spring statement, the prime minister told BBC Radio 5 Live he wanted to “take some money out of government” and was looking “across the board” at where to make spending cuts.
Starmer insisted the government had made “record investments” at last October’s Budget and that the statement would not “alter the basics” of public spending.
He and the chancellor face a difficult fiscal situation, as Reeves has repeatedly said she will not budge from her fiscal rules, which rule out borrowing to fund day-to-day spending.
This has led to mounting pressure over how to balance the books—by raising taxes or cutting spending—amid disappointing growth figures and higher-than-expected borrowing.
The chancellor appeared to signal that cutting free school meals for younger pupils would not be among the cost-saving measures she will implement, as some media reports suggested.
Reeves told broadcasters: “This government is rolling out free breakfast clubs in all primary schools from April. I don’t recognise those claims that the government are looking at means-testing free school meals.
“In fact, this government are ensuring that all children get a good start to the day with a breakfast club, helping working parents and helping all children get a good start in life.”
The Liberal Democrats had earlier urged ministers against making such a cut, with the party’s education spokesperson Munira Wilson saying: “Children cannot be expected to learn on empty stomachs.
“If the government go ahead with this, they should hang their heads in shame as they slash free school meals while giving a tax cut to [Elon] Musk and other tech billionaires.”
