Ed Davey sets out £17bn income tax cut plan at Lib Dem conference

Davey also attacks Farage and Reform over £72m in crypto-linked donations

Ed Davey used his leader’s speech at the Liberal Democrats’ annual conference in Brighton on Tuesday to set out a £17bn income tax cut proposal he framed as a direct response to what he called “the post-Brexit stealth taxes” of frozen thresholds, notably on the higher 40p rate. The plan would raise the income tax threshold to £15,000 and lift the level at which the 40p higher rate applies by about £6,000, with a smaller increase to the 45p additional rate above £125,000.

Setting out what he described as “trusting people to spend their own money, not telling them the state knows best,” Davey took aim at the freezing of tax thresholds since Brexit, telling delegates: “Thirty years ago, just 2 million people paid it. Now it’s 9 million.” He added: “A tax band designed for stockbrokers is now holding back teachers and nurses. That’s not fair. It’s not right.”

The Lib Dems say the cuts would be paid for entirely by economic growth generated through rejoining the European Union’s single market and customs union. Because renegotiating access would take time, the actual reductions would only take effect in the final year of a parliament — potentially as late as 2034. In interim years, thresholds would rise only with inflation, leaving real-terms levels effectively unchanged. The party said the figures drew on a report from an independent economics consultancy, which calculated that a deal with the EU could generate 0.5% growth in the first fiscal year alone. The Lib Dems acknowledge the deal could become harder to secure if rightwing populists take power in more EU states.

The proposal represents a distinct shift in the party’s fiscal posture. While the tax cuts could appeal to the many former Conservative voters who backed the Lib Dems in 2024, with the party hoping to take more than 60 seats currently held by the Conservatives, the plan is likely to cause unease among some of the party’s own MPs. A number of them have called privately for a more ambitious and comprehensive vision of what the party stands for, amid polling that shows most voters do not have much of a sense of this. Davey’s advisers argue the cost of living is the issue that most affects voters, and that tax cuts — even those up to eight years in the future — directly address that concern.

The announcement was framed against Reform UK, which has separately pledged to increase the personal tax allowance to £15,000, paid for in part by significant cuts to social security. Davey said: “Think about that. Reform say you can have a tax cut, but only if they get to punish disabled people at the same time. We say no. We can cut taxes and support the most vulnerable people in our country.”

In the same speech, Davey addressed recent far-right protests in Dover and Portsmouth, opening his remarks by warning that “black-shirted, and balaclava-wearing” demonstrators “would tear our country apart.” He compared groups such as Patriot Platform to Oswald Mosley’s fascists in the 1930s, the National Front and Nick Griffin and the BNP. He said the present far-right movement was “extremely well funded,” promoted by figures including Elon Musk and given credibility by “cynical politicians like Nigel Farage.” Davey told delegates: “Each time, they tried to turn neighbour against neighbour, tried to pit community against community, tried to turn our streets into battlegrounds. But we didn’t let them. The British people said no.”

Davey criticized Farage as a politician who was “not just willing, but eager to fan the flames of hatred and intolerance to make himself richer,” and said: “It is the worst of Trump’s America. We must not let it become Farage’s Britain.” He pointed to £72m in donations Reform UK received from two crypto billionaires, adding: “If there was any doubt before, there can’t be now. We are in the fight of our lives. And it is a fight we must win.”

Other policy announcements in the speech included a previously-trailed proposal for a global nuclear-style non-proliferation treaty aimed at halting the development of super-intelligent AI. The Lib Dems’ deputy leader, Daisy Cooper, and party president, Josh Babarinde, joined Davey ahead of the address. The conference continues in Brighton.