Lib Dem tax promise explained: allowances, timetable and EU funding
Sir Ed Davey said the Liberal Democrats will fight the next general election on a promise to cut taxes for millions of workers. He made the commitment in his speech to the party conference, with income tax, National Insurance and EU relations set out as a single offer BBC.
What was promised
Davey said a Liberal Democrat government would raise the annual tax-free personal allowance, the first slice of income you do not pay tax on, to £15,000. He said the starting point for employee National Insurance, a separate tax on earnings, would also rise to £15,000. The threshold for paying the 40p higher rate of income tax would rise from £50,270 to £56,000. Davey said the package would cost £17bn and would mean a £680 cut for "most taxpayers" BBC.
When it would happen and how it would be paid for
The full cuts would not apply until the fifth year of a Liberal Democrat government. Davey said allowances would be unfrozen in year two so they rise with inflation, with the larger cuts to follow in year five. He said the package would be paid for by the economic boost from rejoining the EU single market and customs union. The party said that rejoining would happen in its first year in government BBC.
What Davey has said before
The conference agenda listed Sir Ed Davey MP, Leader of the Liberal Democrats, to speak at 15.30. It included a separate item on joining the European Single Market Conference Agenda. Davey has put economic growth at the centre of his argument. He told the British Chamber of Commerce that failure to grow the economy was the Government's "original sin" Liberal Democrats. In a video message last December he said "You can't tax your way to growth" and accused the Chancellor of copying the Conservatives with a stealth tax.
The link to Europe
The party said its single-market plan would boost growth and cut the cost of living, alongside closer defence ties with the EU Liberal Democrats. In June the party described the route as membership of the European Free Trade Agreement alongside Norway. Davey urged Labour to drop "torpor and timidity" on the EU and back rejoining the single market The Guardian.
The broader context here is the timetable. Year-one rejoining, year-two unfreezing and year-five cuts link a near-term negotiation to a late-parliament tax cut. That puts the focus on delivery risk. Rejoining the single market and customs union would need negotiation and ratification, and the £17bn is tied to future growth rather than money already in the budget.
In my view, the test is not only for the Treasury. Labour and Conservative strategists will prepare their own fiscal responses. Davey is addressing two groups at once. The £15,000 starting point helps lower earners. The higher-rate change helps middle earners caught by fiscal drag at £50,270, where frozen thresholds pull more people into higher tax. The questions to follow are costing, how the Office for Budget Responsibility, the independent forecaster, treats any growth dividend, and whether the party publishes a year-by-year plan to year five.
