Three Big Ideas #26
Talking tax, examining Everythingism, and making a splash
Welcome to our weekly Three Big Ideas roundup, in which we serve up a curated selection of ideas (and our takes on them) in entrepreneurship, innovation, science and technology, handpicked by the team.
💸 Eamonn Ives, Research Director
While being interviewed by Laura Kuenssberg on Sunday, Rachel Reeves was asked whether there was any truth to the rumour that the Treasury is looking at junking the Digital Services Tax (DST). Her inability to deny it spoke volumes and raises the possibility of a not insignificant tax change being on the cards.
Introduced in 2020, the DST slaps a 2% tax on the revenues of large tech companies – like search engines, online platforms and marketplaces – and currently raises around £800 million a year. In order to be in scope for the DST, companies must make over £500 million a year from ‘digital activities’ and £25 million of that has to accrue from British users. In effect, this means that those who bear the (direct) brunt of the DST are invariably household American names like Amazon, Meta and Alphabet.
As implied by the Chancellor’s response when questioned, the Government sees this as an opportunity to barter with President Trump and potentially avoid being the victim of any new tariffs. We should absolutely use the prospect of scrapping the DST as a bargaining chip to not only dodge tariffs but also pave the way for a long-awaited trade deal between the UK and the US.
As the DST goes, it is an example par excellence of terrible tax policymaking in theory and in practice. By the way it effectively cherrypicks which firms it impacts, it violates the principle of neutrality. By the way in which it taxes revenues and not profits, it unfairly penalises low-margin or loss-making firms, potentially hampering productive investment which we desperately need more of. Meanwhile, the empirical evidence we have of the DST shows that those who do pay it simply pass on higher costs to users – such as advertisers on Google or small third-party sellers on Amazon.
Even if the motor of world trade was humming along nicely, canning the DST would still be in our own self-interest. This fact is only rendered more true if it could help us to negotiate closer economic ties with the world’s biggest economy at a time of heightened global tensions. In a strange way, simply having the ability to shelve the DST might be the best thing it achieves in its short life to date.
🤹♂️ Anastasia Bektimirova, Head of Science and Technology
A new essay by Joe Hill, Policy Director at Reform think tank, identifies ‘Everythingism’ as a pathology undermining effective policymaking. Joe writes:
“Governments try to advance their objectives through many different instruments – policies, legislation, economic measures, national infrastructure and public services. Not only do they struggle to prioritise between the objectives, but also to identify which instruments are best used to deliver those objectives.”
This creates a system that struggles to learn. When every policy is expected to optimise for growth, sustainability, social inclusion, regional balance, and other objectives simultaneously, it’s hard to isolate variables to determine which approaches work for which purposes.
I see a parallel with the scientific method here. Imagine running an experiment where you’re not allowed to control variables to establish correlations or causality. The same happens when every policy must serve every goal. Science advances through testing hypotheses and isolating variables; our policy approach assumes that the answers are known in advance. One system is designed to learn, the other pretends to already know.
The institutional culture that sustains Everythingism makes it difficult to overcome. Joe’s essay quotes Dame Angela McLean, the Government Chief Scientific Adviser, who contrasts the civil service’s aversion to disagreement with academic standards of challenge:
“It is very frequent in a civil service meeting that as somebody stands up the very first thing they will say is ‘I agree with everything that has been said’, and you are sat there thinking ‘well you can't have been listening then’.”
While I had previously noted Dame Angela’s observation on academia’s culture of disagreement at the expense of action, Joe points out how the civil service itself could benefit from the academic tradition of robust challenge. Everythingism thrives in conflict-averse environments – where policies can accumulate objectives because no one feels incentivised or empowered to question their compatibility or trade-offs.
The scientific community understands that progress often comes from focusing resources on specific questions rather than diffusing attention across every possible line of inquiry. We need a similar discipline in policymaking – recognising that when everything is a priority, nothing truly is. Joe’s diagnosis points to a clear prescription: we must recover the courage to prioritise, to match specific instruments to specific purposes, and to build institutions where honest, evidence-based disagreement is the expectation.
💧 Jessie May Green, Events and APPG for Entrepreneurship Coordinator
World Water Day last Friday shone the spotlight on innovators working to improve water security globally – from solar-powered desalination in Egypt, to mangrove forest restoration in India, to desertification reversal in Saudi Arabia. Looking at these arid landscapes, it seems absurd that we – in perpetually drizzly Britain – also face challenges when it comes to managing our water supplies.
You’d be forgiven for thinking this country is wet enough – our green fields and grey summers are all too convincing. But the truth is that we waste a lot of the water that falls on these lands, causing shortages in populous areas such as the South East of England, with huge economic impacts. As Public First’s Bertie Wnek comments on their recent report on the subject:
“Water availability is becoming a very serious issue, already constraining new commercial and housing development in parts of the country. Our research suggested 60,000 new homes could be blocked in the East and South East of England alone over the next five years. Worse still, the problem is most severe in some of our highest productivity areas, like the Oxford-Cambridge Arc, which recent Public First analysis - referenced by the Chancellor in February - suggests has the potential to contribute £78bn to our economy by 2035.”
Thus, there is plenty of need for innovation in this country, too. Some projects to watch that are currently in R&D include: Pipebots – tiny autonomous robots that inspect underground water pipes and repair damage; FreeOx – a hydrogen-based formula for water treatment; and ‘lightning in a jar’ – Anamad’s low-energy, lightning-inspired alternative to chlorination. Budding entrepreneurs in this area, let this be your inspiration!
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