Davey promises tax cuts for millions if UK rejoins EU single market

Davey promises tax cuts for millions if UK rejoins EU single market

The Liberal Democrats will contest the next general election on a pledge to cut taxes for millions of workers, Sir Ed Davey said in a speech to his party conference.

The Lib Dem leader said that, if he won power, he would lift the annual tax-free personal allowance to £15,000.

He would also increase the 40p income tax threshold from £50,270 to £56,000, as part of a £17bn package financed by the economic uplift he says would follow the UK rejoining the EU single market and customs union.

He said the plan would deliver a £680 cut for "most taxpayers", although it would not be fully implemented until the fifth year of a Lib Dem government - potentially as much as eight years from now.

The announcement drew prolonged applause from Lib Dem MPs and activists in the Brighton conference centre.

The Conservatives froze the £12,570 income tax allowance in 2021, which has pulled more people into paying tax, and Labour has so far rejected pressure from trade unions and some of its MPs to unfreeze it.

The Lib Dems said they would raise the threshold to £15,000 a year and also lift the starting point for employee National Insurance (NI) contributions to the same level.

At their conference earlier this month, Reform UK pledged to raise the income tax personal allowance to £15,000 within 100 days if it took power.

Sir Ed told Lib Dem supporters that "the difference between us and Reform" is that "their tax cut is paid for through cruelty."

He said "Reform's figures show they'd pay for it by ripping £22bn of crucial support away from disabled people."

Under the Lib Dem plan, based on research by think tank Frontier Economics, external, the economic boost from rejoining the single market would let the party spend £17bn on tax cuts by the end of the next Parliament.

The party says it would unfreeze personal allowances in the second year of a Lib Dem government, allowing them to rise with inflation, before introducing major tax cuts in year five once the economic gains from closer EU trade had taken effect.

However, the move would rely on the party being able to secure a closer trading relationship with the EU within just 12 months.

Stuart Adam, of the Institute for Fiscal Studies think tank, told BBC Verify that the Lib Dem package would cost "much more" than the £17bn cited by the party.

Reform has calculated that its policy, to raise the starting threshold to £15,000 for income tax only, would cost £21bn by the fifth year.

The Lib Dems say their policy would be paid for by an extra £27bn from its plans for a "growth and defence pact" with the EU.

Sir Ed has faced pressure this week to unveil bolder policies, with his party stuck in fourth or fifth place in national opinion polls.

He opened his speech with a bleak and forceful attack on Reform UK leader Nigel Farage.

He stopped short of describing Reform as fascists, but linked fascists in Britain in the 1930s with what he called "thugs, in black shirts and balaclavas" in reference to recent protests in Dover and Portsmouth.

"This is a far-right movement that is given oxygen, and heat, and fuel by politicians and parties who claim to be serious contenders to lead our country," said the Lib Dem leader.

He said the answer was "community politics", which he argued was the defining feature of the Lib Dems.

"It will take more than a manifesto. It will take a movement, rooted in decency, fairness and community. British values. Liberal values," he said.

Presenting the Lib Dems as a tax-cutting party is intended to attract voters they are targeting in traditional Tory heartlands.

Sir Ed also used his speech to criticise Tory leader Kemi Badenoch over her shifts on climate change and human rights law.

"Millions of decent, moderate Conservative voters are getting her message, and they're turning away – increasingly, to us," he told the Brighton audience.

He also criticised Prime Minister Andy Burnham for not committing to rejoining the EU single market, something the Lib Dems say they would do in their first year in government.

Lib Dem sources declined to say whether the income tax plan would be a requirement for entering a coalition government with Labour or another party, saying the party's goal was to win as many MPs as possible.

Sir Ed has ruled out a coalition with Reform UK, and dismissed suggestions that he could strike a deal with the Conservatives, as his party did in 2010.

The Lib Dem leader also spoke about the possible threat from AI, saying that "handled badly, it concentrates more power in fewer hands than at any point in human history."

He said Burnham's AI partnership with US president Donald Trump "doesn't come close to meeting the scale of this threat" and called for "a global treaty to press pause on super-intelligent AI now".

He proposed "a new International AI Safety Agency - like we have for nuclear - to stop anyone from developing this technology recklessly."