Slash VAT to help families weather cost-of-living storm, demand Lib Dems

Exclusive: At spring conference, leader Ed Davey hopes to position Lib Dems as ‘party of fair taxes’

(Dominic Lipinski/PA) (PA Wire)

Liberal Democrat leader Sir Ed Davey has today set out a bold plan to help families weather the cost of living crisis with a one-year 2.5 per cent cut in VAT, paid for in part by an extended windfall tax on energy companies.

Speaking to The Independent on the eve of his party’s annual spring conference, Sir Ed said Boris Johnson and Rishi Sunak have failed to take the “radical” steps needed to shelter voters from what is shaping up to be the harshest economic storm for 50 years.

He said the cut in VAT from 20 to 17.5 per cent would put an average £600 a year in the pockets of struggling families.

The £18bn cost would be funded partly from borrowing – “the right thing to do in a one-off crisis”, he says – and partly from an increase in the “Robin Hood” tax on North Sea oil and gas giants demanded by Lib Dems.

Having previously called for a £5bn levy, Sir Ed now says he would boost the take to somewhere around £10bn to reflect the additional profits being made “on the back of Putin’s aggression” in Ukraine.

He said it was “bizarre” to see Mr Johnson opposing a levy in the Commons on Wednesday – effectively “defending the profits of oil and gas companies and refusing to do something for families”.

This was another example of the Tories, for all their low-tax rhetoric, “taking voters for granted” when it actually comes to easing financial burdens on ordinary people, he said. The Lib Dem windfall tax was actually “more fiscally responsible” than Sunak’s energy discount – which would have to be repaid – while offering more help to households, he insisted.

“The Tories seem to have lost their way,” Sir Ed told The Independent. “We’re a party of fair taxes. That’s what we’ve always talked about, as long as I’ve been in the party. And, at the moment, fair taxes requires tax cuts.”

The cost of living initiative forms part of a conference which he said would focus firmly on the bread-and-butter issues which helped Lib Dem seize the seats of Chesham & Amersham and Shropshire North from Tories in recent by-election upsets.

To the frustration of many of his members, it will also mean continuing his drive to shake off the party’s image as a single-issue anti-Brexit movement and swearing off calls for an imminent return to the EU – something Sir Ed says is “a long, long way off”.

In place of a Rejoin message, the Lib Dems will be publishing a paper – product of a year’s research – setting out the practical problems caused by Mr Johnson’s Brexit deal to groups ranging from manfacturers to supermarkets, fishermen, farmers and musicians and proposing means of alleviating them.

“It sets out ways we can improve on Johnson’s bad deal, reduce costs, make trade easier, rebuild relationships and trust with Europe,” said Sir Ed. “It takes people through the argument very much in a pro-European way – there’s no change on that. But it’s deeply practical, it’s realistic and it doesn’t ignore Leave voters.”

Leave-voting farmers appalled at the way Johnson’s deals have cut them off from EU markets while paving the way for undercutting by Austalia and New Zealand were part of the coalition which delivered the seismic 37 per cent swing to Lib Dems in Shropshire North in December.

And in typical Lib Dem fashion, the party leader says his troops aim to capitalise on local concerns to target more Tory seats in the so-called blue wall of traditionally Conservative constituencies.

One key issue which rarely dominates political debate but where he feels the government is vulnerable is sewage.

“This is coming from talking to voters on doorsteps,” he said. “So many Conservative MPs – including in blue-wall seats – voted in the way they did to allow utility companies to dump sewage in local rivers and streams and lakes. I mean, people don’t like that. They really, really don’t like that.”

Just three weeks ago, Davey said he was putting his party on an election footing in case of an early poll if Johnson was forced out by Partygate. Today, he’s not so sure, saying only “we have to be ready whenever it comes”.

He insists that Ukraine has not got the PM off the hook for lockdown-breaching Downing Street parties, which he confidently asserts “will come back to bite him”.

And he was equally confident, for the leader of a party struggling to top 10 per cent in the polls, in stating that, whenever the election comes, “we think we can get rid of a lot of Tory MPs”.

The vast majority of Lib Dem target seats – including Dominic Raab’s Esher & Walton – are Tory-held, and he said it was simply an “arithmetical truth” that if voters in many areas want to remove the Conservative government they will have to vote for his party.

He once again denied any formal arrangement with Sir Keir Starmer’s Labour to carve up election battlegrounds.

But he said that recent by-elections have made clear that the two parties are each making their own assessments of where to unleash campaign money and manpower and where to hold back.

“Because we don’t have unlimited resources, you put those resources, if you’re sensible, in areas where you can win, and you don’t waste your resources in areas where you can’t win,” he said. “It’s just logic. I’m not privy to Labour’s discussions, but I’m sure they don’t have lots of money to waste either.”

While restating that – unlike predecessor Nick Clegg – he would “never put the Conservatives back in”, Davey was warier about stating whether he would be ready to prop up a Starmer government in a hung parliament.

And he insisted that his refusal to join Tories in government would be unchanged if they switched leader to someone less unpalatable than Johnson, such as Sunak or Liz Truss.

“I’ve said all along that Johnson is unfit to be prime minister,” he said. “But they are all responsible. They allowed Johnson to become prime minister. They’re all Boris Johnsons now.”

The Lib Dem spring conference takes place online from Friday to Sunday, apart for Sir Ed’s keynote speech to activists in York on Sunday.