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

The Liberal Democrats have made a £17bn income tax cut the centrepiece of their pitch to former Conservative voters, with Ed Davey arguing that the growth created by rejoining the EU single market and customs union would fund the change. Addressing the party's annual conference in Brighton on Monday, the Lib Dem leader said the proposal would raise the tax-free personal allowance to £15,000 and increase the threshold for the 40p higher rate from £50,270 to £56,000.

The plan, based on research by the think tank Frontier Economics, would not come into full effect until the fifth year of a Lib Dem government, potentially as late as 2034. In the interim, personal allowances would be unfrozen in the second year and rise with inflation. Davey claimed the eventual package would mean a £680 cut for "most taxpayers" and would lift millions out of income tax altogether.

The announcement drew sustained applause from MPs and activists in the conference hall, but it also exposed the party to criticism over its funding assumptions. The Institute for Fiscal Studies' Stuart Adam told BBC Verify that the package would cost "much more" than the £17bn quoted by the party. Reform UK has estimated that its own policy to raise the personal allowance to £15,000 would cost £21bn by the fifth year.

Davey contrasted his plan with Reform's, saying the rival party would pay for its tax cut "through cruelty" by cutting £22bn of support for disabled people. "Think about that," he told delegates. "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."

The tax pledge marks a distinct shift in the party's fiscal approach. It is aimed squarely at the many former Conservative voters who backed the Lib Dems in 2024, helping the party take more than 60 Tory seats. But it has caused unease among some Lib Dem MPs who want a bolder, more comprehensive vision for the party, and who note that the party is languishing in fourth or fifth place in national opinion polls.

The plan is predicated entirely on the EU agreeing a swift deal on single market access, which could become more difficult if rightwing populists take power in more EU states. The Lib Dems insist the numbers stand up, citing an independent economics consultancy report that calculated a deal with the EU could generate 0.5% growth in the first fiscal year alone.

Davey used his speech to attack Reform UK leader Nigel Farage and to warn that far-right vigilantes "would tear our country apart". He also called for a global treaty to press pause on super-intelligent AI and proposed a new International AI Safety Agency. The party's aim, he said, was to win as many MPs as possible, though he refused to say whether the tax plan would be a condition of joining a coalition government.