Lib Dems would hike tax on big firms rather than high earners, Davey suggests

Sir Ed said the Liberal Democrat commitment – dating back to 1992 – to raise income tax by 1p to improve public services is now unsustainable.

Lib Dem leader Sir Ed Davey alongside West Country MPs and key candidates as they arrive by bicycle for the Liberal Democrat conference at the Bournemouth Conference Centre (Stefan Rousseau/PA) (PA Wire)

The Liberal Democrats would hike levies on banks and large companies rather than high earners, Sir Ed Davey has suggested, as he abandoned a longstanding party pledge to put a penny on income tax.

Reversing cuts to the surcharge on the financial sector and targeting water, oil and gas firms would help to fund the party’s newly adopted multibillion-pound policy platform, the leader indicated.

Sir Ed said the Lib Dem commitment – dating back to 1992 – to raise income tax by 1p to improve public services is unsustainable in the current economic climate.

Speaking from Bournemouth to broadcast studios, Sir Ed suggested the burden should instead fall on companies making “huge profits” while people struggle with the cost of living.

He indicated that the income tax policy would be abandoned even for society’s super-rich.

Asked on BBC Radio 4’s Today programme if he thinks wealthier individuals should pay more tax, Sir Ed said: “I think the taxes are going up quite a lot already under the Conservatives.”

On whether they should go up further, he said: “No… because over the next few years you’re seeing a big increase in taxes that are already baked in and I think there is a real danger that if we don’t ask those organisations who are doing really well, like the oil and gas companies, like the banks, like the water companies, they have the money.”

The party adopted an early version of its manifesto at its annual conference on Sunday with policies aimed at winning over voters in Tory heartlands.

It has promised to lay out a fully costed document closer to the next general election, expected next year.

Among its policies is a £5 billion social care pledge which would see people “be looked after where they want to be at home” and improved GP and mental health services.

Sir Ed has argued that the social care package would help to pay for itself by saving £3 billion elsewhere on the NHS, for example by freeing up hospital beds and relieving pressure on care homes.

Asked where the rest of the money would come from, he told ITV’s Good Morning Britain: “We have argued that we’ll put forward a costed manifesto which will set out all our policies and explain where the money comes from.

“But in this Parliament I’ve given a flavour of that. So we’ve talked about those organisations, businesses, that have been making huge profits, doing really well, and other people are struggling with the cost of living.

“We’ve suggested some taxes on those organisations. So the Liberal Democrats were the first to talk about a windfall tax on the oil and gas companies that are making tens of billions of pounds of profit after President Putin invaded Ukraine… we’ve also talked about reversing the tax cuts that the Conservatives have given to the banks.”

Chancellor Jeremy Hunt announced in his autumn budget the Government would slash its tax surcharge on the banking sector to 3% from 8%.

The Liberal Democrats have become the first major political party to adopt an early version of their manifesto for a general election expected next year as they enter their third day of annual conference.

Keeping the triple lock for pensions and banning sewage dumping are among pledges the party says are central to the newly approved document.

Its focus is on local health services and the environment, which the party believes are crucial to woo traditionally Conservative voters in places such as southern England.

But the position on national issues such as Brexit could open up dividing lines within the party. Sir Ed was heckled on Sunday after insisting to delegates during a Q&A session that he was “campaigning hard on Europe”.

“No, you’re not,” one audience member replied.

Sir Ed has said people on the doorstep just “aren’t talking about Europe”, but senior figures – including former leader Sir Vince Cable – have argued the party should not lose sight of the issue.

An ultimate goal to return to membership status within the bloc is currently official policy, but the leader has appeared reluctant to speak publicly about this and says it is currently off the table.

Sir Ed has advocated “root-and-branch” reform of the existing Trade and Co-operation Agreement (TCA), but framed this as a long-term challenge, arguing a “realistic” approach is necessary.

Newly relaxed housing targets may also prove controversial with activists when they are debated on Monday.

The party has committed to building 150,000 social homes a year – shifting away from a pledge to build 380,000 homes annually in its 2019 manifesto.

But one Lib Dem council leader, speaking at a fringe event alongside housing spokeswoman Helen Morgan, said abandoning national housing goals would be an “abdication of responsibility” and warned against “fluffy local targets”.

The leadership is expected to face opposition from some members of the party on Monday, with a motion put forward by the Young Liberals seeking to insist on the 380,000 target.

Monday morning saw activists agree on a transport motion, with the party reaffirming its support for HS2 amid speculation the Government could abandon the northern leg of the project.

Delegates also heard from Ukrainian MP Kira Rudik, who delivered an emotional speech thanking the UK for its support during the Russian invasion, to a standing ovation.

“What you’re doing is truly generational and on behalf of Ukrainian people I say only one thing: thank you. We will never forget it,” she said.