Whilst those in the media world and the Westminster bubble speculate about the future of our party leader, Ed Davey, Ed focused on what matters most – a plan to end the squeeze on middle-income earners, put hundreds of pounds back in the pocket of millions of people, and take ordinary workers out of paying the higher tax rate that was designed for stockbrokers.
Ed announced that the Liberal Democrats would raise the tax-free personal allowance to £15,000 and increase the higher rate threshold from £50,270 to £56,000. He said that would mean taking two million more people out of paying tax altogether and giving most taxpayers a £680 tax cut.
£680 doesn’t sound like much to some people, but to others, it means a great deal more – carers doing early morning calls and spending a chunk of their wage keeping a car on the road. Lads on nights in the warehouses off the M62. People on the tills doing 30 hours and still checking the banking app before they go shopping. Taxi drivers who’ve watched fuel, insurance and licence costs go up while fares haven’t kept pace. For them, £680 is a couple of months of gas and electric. It’s school shoes without putting them on a card.
What gets me is that many of these people have been paying more tax for years without anyone announcing it. The allowance has been frozen, so when your wage goes up just to keep up with prices, more of it gets taxed. You don’t feel any richer, but you pay more. Under the current plans that freeze runs until 2031. Ed’s plan would lift it.
He didn’t pretend this is only about low earners, either. The higher rate change helps people on better wages, and some will say that’s where a lot of the money goes. That’s a fair point. But in towns and cities across our nation, the people creeping over £50,000 aren’t bankers. They’re senior nurses, teachers who’ve moved up to deputy head, engineers who’ve been with the same firm for twenty years. Ed said a ‘tax band designed for stockbrokers is now holding back teachers and nurses’, and I think most people would recognise that.
The question everyone asks is how you pay for it, and I’d rather a politician answered that than dodged it. Ed said it wouldn’t come from more borrowing, tax rises or spending cuts that never happen, but from the growth that comes from a new partnership with Europe. The party estimates rejoining the single market and customs union would add about 0.5 per cent to the economy.
Compare it with the other offer. Reform have promised the same £15,000 allowance. But they would pay for it by ripping £22 billion of support away from disabled people. There are thousands of people across our nation who look after a disabled relative. Giving them a tax cut with one hand and taking their support away with the other isn’t a deal I would want.
There’s a track record here too. In coalition, the Lib Dems pushed for increase in the personal tax allowance and people on low wages noticed the difference. Whatever your thoughts are of the coalition, that policy worked.
I am not saying one speech changes everything. The party still has a lot to do to be heard. But for once I heard a leader talk about the money in working people’s pockets and explain where it would come from. That’s more than most have managed.
Well done, Ed.
* Kamran Hussain is the former Chair of Yorkshire & Humber Lib Dems and former Party Vice Presidential Candidate
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8 Comments
My concern with this policy is that a lot of assumptions have been made about the level of growth that would be generated from a Growth and Defence Pact with the European Union including membership of the Single Market and Customs Union. If the level of growth anticipated does not materialise, the party may not be able to raise the income tax thresholds to the levels it hopes, thereby letting down the electorate just like it did with tuition fees.
What’s the basis for the assumptions that have been made with regards to paying for this policy?
So how quickly would it be possible for the UK to join the Single Market and Customs Union from the time the application was submitted? I suspect this would take several months minimum to iron out all the details, and could be years. Unless we have a convincing argument that this can be done quickly, we are basically admitting that we won’t be in a position to delivery on our promises for years.
This is complete nonsense.
The higher rate of income tax kicks in at about the 80th percentile of income. By definition, that is not a ‘middle income’.
This policy of Ed’s (not a policy of the party) would give a £680 tax cut to basic rate taxpayers but an additional £1600 tax cut to the top 20% of earners.
How on earth can anyone argue with any credibility that a handout to the top 20% of earners is a bigger priority than extra funding for the NHS, or for carers or for SEND?
The party website info is very lacking on the details/sourcing of the figures for what the income generated but I’ve posted a link to what I think is the source on the post Caron made. Though that doesn’t seem to back up the stated figures though.
Kamran says “The party estimates rejoining the single market and customs union would add about 0.5 per cent to the economy.” – that’s aklso how I read the research I linked.
Which is problematic….. On a UK GDP of £3.2 trillion that is £16 billion. So unless all of that is taken in tax (which it won’t be) it doesn’t support a £17bn tax cut or a £27bn growth and defence fund. At current levels that would be £5-6bn tax take.
One of my issues with Ed’s proposals is that contrary to what members seem to think, he is not proposing to join *the* Customs Union, but to negotiate a new bespoke customs union with the EU.
This will take much longer, and will inevitably leave some trade friction behind. We’ve previously said that this bespoke deal would exclude agriculture and require the EU to consult us when negotiating new global trade deals, which smacks of ‘cakeism’.
We’ll only get the full economic benefit by fully joining both the existing Customs Union and Single Market, in which case we might as well go all-in and rejoin the EU. I hope to hear Ed say this clearly in public before Andy Burnham does.
“we might as well go all-in and rejoin the EU”
Everyone who opposes this already believes this is our position. Let’s give those who agree with us a clear message. The details of how can go in a policy paper that not even the leader will read.
Nick Baird 25th Sep ’26 – 6:10pm:
…he is not proposing to join *the* Customs Union, but to negotiate a new bespoke customs union with the EU.
The downsides of any customs union for the UK would be absolutely colossal. Why on earth would anyone want to outsource their trade policy to their competitors in the EU? The UK already has full tariff and quota free access to the EU (all 27 markets using 24 different official languages). The only possible benefit would be the elimination of Rules of Origin declarations. For most exporters that’s trivial; the data doesn’t take long to compile and is already needed in any case for non-EU exports. It only needs doing once. Exports to the EU are self-certified – there’s no cost per shipment.
Are Rules of Origin declarations in the UK-EU TCA self-certified?
https://gemini.google.com
Nick Baird 25th Sep ’26 – 6:10pm:
We’ll only get the full economic benefit by fully joining both the existing Customs Union and Single Market, in which case we might as well go all-in and rejoin the EU.
There would be no net economic benefits from joining the EU Customs Union and single market even if such a thing was possible. The EU would demand payments of tens of £billions a year (not least because the UK would need to be seen to be humiliated). The UK would have to abrogate all its new trade deals which are optimal for UK service exports and revert back to the poorly suited EU deals. When negotiating future trade agreements, the EU would ‘sell’ access to the UK’s lucrative market (world’s fifth largest and third largest online market) while keeping reciprocal benefits for themselves (the ‘Turkey trap’). The UK would also have to adopt thousands of suffocating new EU regulations.
As for ‘rejoin’, have a listen to veteran columnist and director of Eurointelligence Wolfgang Münchau and economist and former Greek Finance minister Yanis Varoufakis on their Econoclasts channel. Yanis supported and campaigned for remain in the EU referendum and Wolfgang advocated remain in his FT columns. It’s taken a while, but the pfennig and lepta have finally dropped with these two…
‘The UK will regret this’:
.