Liberal Democrat leader Ed Davey has unveiled a proposal for a £17 billion income tax cut, a plan aimed at attracting former Conservative voters but drawing mixed reactions within his party. The announcement was made during the Liberal Democrats' annual conference in Brighton.

Under the plan, the personal income tax threshold would eventually rise to £15,000, while the threshold for the 40p higher rate of income tax would increase by around £6,000. A smaller increase would also be made to the 45p additional rate, which currently applies to incomes above £125,000. However, these tax cuts would not take effect immediately; instead, they are planned for the final year of a parliamentary term, potentially as late as 2034. Until then, thresholds would be adjusted only for inflation, effectively maintaining current levels.

Davey and his party attribute the proposed tax cut to economic growth they expect to result from rejoining the European Union’s single market and customs union. The Liberal Democrats argue that re-entry would generate increased economic activity, citing an independent economic consultancy’s report estimating a 0.5% growth boost in the first fiscal year. However, the plan depends on a swift agreement with the EU, which some analysts caution could be complicated by the rise of right-wing populist governments in certain EU member states.

In his speech, Davey criticised "post-Brexit stealth taxes," referring to the freezing of tax thresholds since the UK left the EU. He highlighted how the higher 40p rate now affects nine million people, up from two million three decades ago, arguing that this tax band, initially intended for high earners like stockbrokers, now impacts professions such as teachers and nurses.

While the tax cut proposal could appeal to voters disillusioned with the Conservative Party, some Liberal Democrat MPs have expressed concerns privately, suggesting the party needs a more comprehensive and ambitious vision beyond fiscal policy. Polling data indicates many voters remain unclear on what the Liberal Democrats stand for, prompting internal debate about the party’s direction.

In addition to the tax plans, Davey outlined other policies, including advocating for a global treaty modeled on nuclear non-proliferation agreements to regulate the development of super-intelligent artificial intelligence.

Davey also criticised the Reform UK party, which has pledged to increase the personal tax allowance to £15,000 but proposes funding this partly through cuts to social security benefits. He contrasted this with his own party’s approach, which he said aims to reduce taxes without harming vulnerable groups. Addressing Reform UK’s funding, Davey pointed to significant donations from two cryptocurrency billionaires and accused Reform leader Nigel Farage of exploiting divisive rhetoric for personal gain, warning against the potential normalization of such politics in Britain.

The announcement represents a notable shift in the Liberal Democrats’ fiscal strategy, focusing on tax relief as a means to address the cost of living pressures faced by many voters, even if the benefits would not be realised until well into the future.