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

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

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

He would also raise the 40p income tax threshold from £50,270 to £56,000, in a £17bn package funded by the economic boost he says would come from the UK rejoining the EU single market and customs union.

He claimed the plan would mean a £680 cut for "most taxpayers" but it would not come into full effect until the fifth year of a Lib Dem government - potentially up to eight years away.

The announcement was greeted with sustained applause by Lib Dem MPs and activists in the Brighton conference centre.

The £12,570 income tax allowance was frozen by the Conservatives in 2021, resulting in more people being dragged into paying the tax, and Labour has so far resisted calls 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 increase the starting point for paying employee National Insurance (NI) to the same level.

At their conference earlier this month, Reform UK promised to increase the income tax personal allowance to £15,000 within 100 days if they won power.

Sir Ed told the Lib Dem faithful "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 allow the party to 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 bringing in big tax cuts in year five when the economic benefits of closer trading with the EU had kicked in.

However, the move would depend on the party being able to negotiate a closer trading arrangement with the EU in just 12 months.

Sir Ed has been under pressure this week to set out bolder policies, with his party languishing in fourth or fifth place in national opinion polls.

He began his speech with a sombre and punchy attack on Reform UK leader Nigel Farage.

He stopped short of calling Reform fascists, but drew a link between the fascists in Britain in the 1930s with what he called "thugs, in black shirts and balaclavas" in reference to the protests in Dover and Portsmouth in recent weeks.

"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.

His solution is "community politics" that he argues is the hallmark 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.

Repositioning the Lib Dems as a tax cutting party is aimed at appealing to voters they are targeting in traditional Tory heartlands.

And Sir Ed used his speech to attack Tory leader Kemi Badenoch over her policy 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 audience in Brighton.

He took a swipe at Prime Minister Andy Burnham for failing to commit to rejoining the EU single market, something the Lib Dems say they would do in their first year in government.

Lib Dem sources refused to say whether the income tax plan would be a condition of joining a coalition government with Labour or another party, saying the party's aim was to get as many MPs as possible.

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

The Lib Dem leader also addressed the potential threat posed by AI in his speech, 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."