Picture the scene. Ed Davey is on Question Time. He has just made the case for fixing social care, rescuing our crumbling roads, or matching our European allies on defence. And then it comes, the question every politician dreads: “That all sounds lovely. But how are you going to pay for it?”
Here is the reply I would love to hear.
“I’m glad you asked, because it’s the wrong question, and I think most people at home suspect as much. You’re asking how we’d fund twenty-first-century public services with a tax system built for a different century. Council tax based on what your house was worth in 1991. A National Insurance system designed so governments can raise your taxes without admitting it. Thresholds frozen so quietly that a nurse is dragged into the higher rate while the genuinely wealthy barely notice. That isn’t a tax system: it’s a museum with a collection box.
“So no, I won’t promise you a magic number. I’ll offer something better: a Liberal Democrat plan to reform the whole thing, simpler, fairer, built for growth, so most working people pay less. It draws together the long-held views of the Institute for Fiscal Studies, the Resolution Foundation and a long list of tax experts. What’s been missing is a party honest enough, and free enough, to act on it. That’s us.”
Of course, Ed did not say that. But there is no earthly reason he could not.
Everyone is stuck in the same trap
Every party is trapped by that question, because every party plays the same rigged game. Promise not to touch income tax, National Insurance or VAT, two-thirds of all revenue, and you’ve boxed yourself into the same dingy corner. What’s left are the levers nobody defends in daylight: frozen thresholds, stealth raids on savers, and a council tax so out of date the Resolution Foundation calls it “the modern poll tax.”
Labour walked straight into that trap, exactly as the Treasury Select Committee warned in 2021, and the Conservatives before them. The script never changes: impossible promises, then the lever voters can’t see, then the U-turn. November’s threshold freeze, billions raised quietly through fiscal drag, is the latest verse of a very old song.
We don’t have to sing along.
Why this is our fight to lead
There’s a reason this argument belongs to us. Reforming the system means saying the system itself is broken, and neither Labour nor the Conservatives can say that, because they built it and still defend it. We can.
We also have form. Our biggest coalition achievement, taking millions of low earners out of income tax by raising the personal allowance, was a tax idea, and a member-led one. A platform that scraps council tax for a fair property tax, ends the National Insurance con by taxing all income the same, and cuts the bill for most modest households is exactly that kind of idea: liberal to its bones, on the side of the person trying to get on.
Honesty is the strategy
The temptation is to win that exchange by out-promising the other side. That’s the trap: our edge isn’t to out-promise, but to out-credible.
So align with those the public already trusts. When the IFS says reform is the prize, a well-designed system raises the revenue you need at lower cost, we should be the party quoting them, not picking another tribal fight.
It also means honesty about the hard part. There’s a real debate, from Gary Stevenson’s case for taxing wealth itself to those who warn the wrong wealth tax drives people away, which we needn’t resolve tonight. But we can hold both truths: that inequality matters, and that credibility means reaching for instruments that actually work.
And yes, the sums still need doing. A reform platform must be costed before it goes near a manifesto. But that is a reason to start now, not an excuse to dodge it.
The ask
So here’s my plea. Let’s issue a call for evidence and find the accountants, economists and council-finance experts already sitting in our local parties. Let’s give tax reform real time at conference, not a fringe slot at nine in the morning. And let’s reach the next election not with a hasty reaction to Labour’s next Budget, but with a comprehensive, expert-grounded plan to fix a system everyone knows is broken.
Because the next time someone leans across a TV studio and asks Ed Davey how he’ll pay for it, I don’t want us to flinch. I want an answer so good that it makes them rethink the question.
* Jamie joined the Lib Dems in 2014 and was elected as City Councillor for West Chesterton in May 2018.
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11 Comments
Ed’s first paragraph was a ‘moan’ about things are; his second was to promise to change it.
What was missing was the “HOW” bit..*
*Promising to call on ‘experts’ is just a ‘cop out’..
The correct question to ask is “how are you going to find the resources?” which often isn’t the same as “how are you going to pay for it?”
If we want more soldiers, care workers, teachers, doctors or nurses etc we have to identify where we find people to do those jobs.
One way is pay the people in desirable occupations more. This will reduce natural wastage besides encouraging new applicants . This will likely be effective but will cost more than simply advertising a number of new jobs on an existing starting salary. There may well be insufficient takers with sufficient attachment to the job to stay the course.
We need to decide how many of those in key occupations we need, and how we are going to prevent employment in occupations we think we don’t need. Like estate agents maybe? 🙂 We could perhaps start with all those who are unemployed or underemployed and find them something useful to do.
People naturally understand all this in times of crisis. When a major war breaks out they might volunteer to do military service even if they had no intention of doing it previously. Many who weren’t doing anything at all if they were lucky to be wealthy enough might volunteer to do something useful.
The use of taxation is one way to shift resources to the public sector but it probably will be harder than it might first appear. A carrot may not be enough.
“The use of taxation is one way to shift resources to the public sector but it probably will be harder than it might first appear”
Clearly there is a limit to the proportion of overall economic activity that is essentially devoted to “consumption ” in comparison to “production”.
That is not to say things like teachers, soldiers, health workers etc are undesirable – of course they are not – but unless enough is being produced in the first place there can be nothing devoted to consumption.
All this overlooks the fact that what might as first sight be solely “consumption” actually contributes to “production” – the most obvious example being education/research. This kind of consumption might be best thought of as increasing/maintaining social natural and/or intellectual capital, all of which contribute to maintaining/increasing financial capital as well as being desirable for their own sakes.
I am currently reading Growth: A Reckoning” by Daniel Susskind. I’m about 75 page in but very interesting so far: https://tinyurl.com/Growth-A-Reckoning
I was holding my breathe but in the end the magic solution to the public sector funding crises did not appear. Lets look at the spending list we are committed to;
Defence
Foreign Aid
Social care
Local Government
Education
NHS
Waspi women
Fixing the water
As the article points out, we always say where we will spend more, but I don’t think voters believe we have anymore idea how to do it than Labour did when they were in opposition.
Geoffrey is right which is of course the reason at the last general election so many of those who actually did vote labour dis so with so little enthusiasm and are so quickly (and to some extent unreasonably disappointed,
It follows that in a world where so many people think they are over taxed anyone with serious pretensions to government has got to be ruthless about their priorities for spending and tell a convincing story about why their priorities are the ones that matter
Our story perhaps should be building a country with resilience to geopolitical threats form the other side of the Atlantic and the otherwide of the Urals while ensuring no one is enslaved by poverty ignorance or conformity. It involves treaiatimg concentrations of power and cooperating with others to do so. Britain is facing a choice between Trumps US and an alliance for growth and defence.
When the SDP was beaten by the Monster raving loonies even David Owen called it a day, having bare got more votes than the combined Count Binface and The Monster raving loonies in Makersfield it is time for Ed to go.
The case for a wealth tax is unanswerable. Tax wealth not work. When they publsihed their tax returns, it showed I paid a higher percentage of my income in Tax and National insurance and capital gain tax than Rishi Sunak and Keir Stramer. The Conservative still repeat the nonsense about high tax – yes for the ordinary people, while they themsleves pay didley squat.
You want to know how else we could “pay for it”? Start making things work. The prison system, clear out the drug addicts and mentally ill and get the rehabilitated. Scrap Trident, we will never use it and it deters no one, get the 16% of people in hospital who should be at home or in care out the hospitals. Switch funding from paying housing benefit which makes landlords rich to building council houses. Reform the benefits syetm so work pays – not in a universal credit style for every £1 you earn extra you keep 15p but in a proper way that supports people into work and people in work. Ban donations from companies and cap them at £100,000 from individuals, so contracts don’t go to lobbyists. Ban the word “think tank” for lobbyists. The more billionaires we have the less growth there is because it strangles enterprise for everyone else.
Might the article below be of interest/relevance in this discussion?
Might an equitably progrssive tax system, which is transparent and understood by all voters, provide a much needed basis for effective taxation discussions?
https://www.taxresearch.org.uk/Blog/2025/10/11/the-inequality-lie/
P. S. Might this article and book help too?
https://www.taxresearch.org.uk/Blog/2026/06/19/everything-they-told-you-about-money-is-wrong/
The point about VAT and Income tax is that their rates are expressed in percentages and the mechanism of changing them is very simple – a sentence or so in a budget or a bill. We have become obsessed by the idea that we are over-taxed, which certainly doesn’t apply to everyone; campaigning parties are far too ready to make promises that they shouldn’t keep. Oh for the days of the 1950s, when in a few years, the Chancellor raised Purchase Tax on new cars from 33% to 67% and then lowered it to 50%. (Purchase Tax was a predecessor of VAT, but much harder to understand.)
It’s always been true that you get what you pay for.
The burning issue is who pays and what share .
The Conversation is asking the question, Can this be sorted by more tinkering and avoiding upsetting too many voters or is a radical, honest shakeup the only solution. I think the latter.
If we are serious about making an impact then rethinking our tax system is key however we also need to decide what government should do. Our tax system is relic of another age and way of working.
As the party of devolution, we should be arguing for regional devolution across England of virtually all domestic policy from health and education to welfare. Let parliament focus on national taxation, foreign affairs and defence while setting minimum standards across welfare, health etc. Let the nations and regions experiment.
Let regions decide on the rates of their local income tax, property taxes and sales taxes. There is definitely scope for a wealth tax but we should be serious about how this will actually work. The rich earn dividends not salaries, borrow against assets to not incur capital gains tax. We should levy a tax against that borrowing on assets because along with taxes on larger/more expensive homes. As a Londoner I believe £5m + this is the only effective wealth tax.
Time for variable VAT across goods, penalising companies who’s business models rely on taxpayers subsidising their poor wages apart from entry level roles and lower corporation and company national insurance rates to encourage employment and payment.
There is a Liberal Democrat approach that encourages enterprise and funds a social lifeboat.