Lib Dem Conference 2025: Taxing banks, not pubs and farmers

Upbeat Lib Dems see opportunities for further advances

Lib Dem conferences always have plenty of policy debates, and this one was no exception, with new policy papers on climate policy, and opportunity and skills, and motions on 20 other topics too, from Hong Kong to hospitals. But this was a conference more about positioning than policy, with discussion on the fringe and in the bars turning often to the subject of how the party can build on its current strength.

Sir Ed Davey’s leader’s speech on Tuesday was notable not for any new policy announcements but rather for its strong criticism of Reform UK and in particular the party’s leader Nigel Farage. In a political environment which is simultaneously becoming both more polarised and more fragmented the Lib Dems are defining themselves as the ‘anti-Reform’, warning that a Reform government would follow the policies being pursued by the Trump administration in the United States. Davey’s call to arms of “Don’t let Trump’s America become Farage’s Britain” is designed to appeal both to left-of-centre voters disaffected with Labour and to moderate former Conservatives unhappy with the direction their party has moved in.

The mood at the conference was upbeat. The 72 MPs elected last year represent the strongest third party in Parliament for a century. The party built on this success in May with a local election round which saw it win more seats than each of Labour and the Conservatives for the first time in its history (though Reform won more than any of them). Activists are optimistic the coming year will see further gains in the Scottish and Welsh Parliaments as well as in English local elections in places like London and Surrey.

However, in a political environment where both of the traditional ‘main parties’ are experiencing exceptional levels of unpopularity there is a sense among many activists that the party is missing an opportunity to do even better. Yes the Lib Dems have ticked up from just over 12% at the 2024 election to around 14% in the polls now, but support for Reform has more than doubled, from 14% to 31%. The sense that the party should be more visible at a national level sometimes manifests itself in criticism of the BBC and other parts of the media for not giving the Lib Dems enough coverage, but it was also visible in calls at the conference for the party to be more adventurous in setting out an ambitious, exciting agenda to capture the public’s imagination.

Europe and energy at heart of Lib Dem economic agenda

The Lib Dems see strengthening co-operation with the EU and other allies as key to standing up to both an aggressive Russia and a capricious United States. This, alongside opposition to what they see as harmful tax increases, is central to the party’s claims that they could deliver faster economic growth.

In his leader’s speech, Ed Davey vowed that “Liberal Democrat change will fire up our economy again”. He offered three main policies in support of this claim:

• Rebuilding the UK’s relationship with Europe, with a new Customs Union and “putting us back on the path to the Single Market”
• Trying to form “a new economic Coalition of the Willing to stand up to Trump’s tariffs” involving European countries and other like-minded nations such as Canada
• A plan to “cut energy bills in half by 2035” funded by a new tax on banks’ ‘windfall’ profits (see below)

A policy motion passed by the conference on ‘Making the EU-UK reset count’ calls on the government to immediately begin talks on a new, bespoke UK–EU Customs Union, “which would cut red tape for businesses across our country and act as an antidote to anaemic economic growth.” While the party already had policy supporting such a Customs Union the call to start talks straightaway represents a strengthening of their position, as does Davey’s reference to the Single Market. The motion reasserts the party’s longer–term objective of rejoining the EU.

The energy plan is centred around what was the biggest new policy announcement of the conference – a proposal to create an ‘Energy Security Bank’ offering affordable loans to homeowners and SMEs to invest in energy efficiency. “In the long-term, all of these loans should pay for themselves,” said Lib Dem Treasury spokesperson Daisy Cooper in her speech to conference. “But for banks to offer a lower interest rate, the government would need to guarantee them by putting around £2 billion aside.” This money would come from the proposed bank windfall tax (see below).

New bank tax targets ‘windfall gains’ from QE

The new bank windfall tax proposed by the Lib Dems takes up a proposal originally proposed by the Institute for Public Policy Research (IPPR).

The IPPR’s research argues that big banks have seen billions of pounds in excess profits due to high interest rates, as an unintended consequence of the Quantitative Easing (QE) programme. The levy would target the ‘windfall’ interest payments received by commercial banks as a result of the QE-related reserves they hold at the Bank of England. Those interest payments to the banking sector are currently funded by the taxpayer.

In a statement on the party website the Lib Dems say that their proposal would not involve any change to the way in which the Bank of England conducts Quantitative Tightening (QT) and cites a revenue figure of around £7bn a year on average by 2029-30, which it says does not assume any change in the pace of QT. The tax would expire when base rate returns to 2%, or when the QT programme concludes. The tax would specifically target only the “windfall” portion of QE-related interest payments, i.e. the portion above 2%.

In her keynote conference speech Cooper argued that the banks “never expected to receive this windfall; they never relied on this windfall; and never took on any risk to reap this windfall” all whilst making “eye-watering profits” at the expense of the taxpayer. The party points out that banking sector profits have nearly doubled in recent years, from less than £25bn in 2019, to almost £50bn in 2025, according to the latest forecasts.

The Lib Dems have also argued for increases to the existing bank levy and bank corporation tax surcharge and it is thought this new proposal would be on top of those changes.

Calls for NICs changes to help hospitality sector

The Lib Dems opposed the employer national insurance increase and are seeking particular relief for the hospitality sector and hospices.

A policy motion titled ‘Backing Hospitality for Growth and Jobs’ argues that the NICs increase disproportionately impacts hospitality by raising the NICs rate while also reducing the salary threshold on which it is levied, significantly raising the cost of employing part–time workers. The motion calls for hospitality SMEs to be exempted from the increase, and for the government to consult on the creation of a new employer’s NICs band from £5,000 to £9,100 with a lower rate, to lower the cost of employing part–time staff.

The motion, proposed by Treasury spokesperson Daisy Cooper, also criticises the government’s recent business rates changes, which lower the rate of relief for retail, hospitality and leisure firms from 75% to 40% while abolishing the cap limiting support to £110,000 per firm, saying the changes “will effectively see small independent bricks–and–mortar businesses subsidise the profits of large corporate chains, who can claim relief across multiple sites.” The party wants the government to ‘urgently correct’ this ‘anomaly’, to ensure that large chains will not benefit at the expense of small and independent hospitality businesses.”

The motion also reaffirms the Lib Dem commitment to abolish business rates and replace them with a ‘commercial landowner levy’ (essentially a land value tax limited to non-residential land and property). Because of devolution the parts of the motion relating to business rates apply to England only.

A separate motion titled “Don’t Nix Care: Protecting our Hospices” calls on the government to exempt hospices from the April increase in employer NICs “to prevent devastating cuts to vital services.”

Inheritance tax – Cooper argues for ‘family farm test’

The Lib Dems remain strongly opposed to the government’s proposed changes to agricultural and business property reliefs for inheritance tax, being particularly exercised by the policy’s impact on farming families.

Treasury spokesperson Daisy Cooper told CIOT that the party maintained its opposition to the changes, which were announced last autumn, but will not be legislated for until this autumn’s Finance Bill. Cooper is arguing for a “family farm test” to “differentiate between real farmers and tax-dodgers”. The party points to what it says are similar policies implemented in France and Ireland. It believes this would stop big equity firms investing in land for tax purposes while protecting family farms. 

Alistair Carmichael, the veteran Lib Dem MP who chairs the House of Commons Environment, Food and Rural Affairs Committee, is also concerned about the impact of the inheritance tax changes on farms. His committee published a report in May calling on the government to delay finalising its reforms until October 2026, to come into effect in April 2027, saying a pause in the implementation of the reforms “would allow for better formulation of tax policy and provide the government with an opportunity to convey a positive long-term vision for farming.” Carmichael told CIOT during the conference that if the legislation is published as planned this autumn, he is keen to work cross-party, including with his committee colleagues, to obtain changes to the bill to ameliorate its effects.

Given the size of Labour’s majority it is unlikely that even a cross-party alliance will force the government to reverse policy on IHT against their will, but the strength of feeling on this issue, including among Labour MPs representing rural seats, means changes to the proposals, even at this late stage, cannot be ruled out. Possibilities include a higher APR/BPR allowance and changes to transitional arrangements.

Party resists temptations of a wealth tax

Notwithstanding the party’s opposition to the government’s IHT changes (see above), plenty at the conference are open to finding ways to increase taxes on wealth. However a wealth tax of the kind being put forward by campaigners is not currently under consideration by the party.

Tax Justice UK and the Patriotic Millionaires (a group campaigning for higher taxes on the rich) held a fringe meeting at the conference, promoting their proposal for a 2% per year levy on individuals’ assets over £10 million in value. TJUK’s Executive Director, Faiza Shaheen, told the meeting that the case for a wealth tax was not simply revenue raising but rather that inequality is harmful in itself, including having a damaging effect on growth. Cornish MP Andrew George had some sympathy with this argument, agreeing that reducing growing inequality was important, though he stopped short of endorsing a wealth tax specifically.

Bobby Dean MP, a member of the House of Commons Treasury Committee, told the meeting he had written his university dissertation on wealth inequality in Britain. He said it was clear that tax reform was needed in the UK but focused his remarks on the effectiveness (or otherwise) of tax reliefs rather than a wealth tax.

Unlike their rivals in the Green Party, who are strong advocates of a wealth tax on the TJUK model, the Lib Dems do not appear tempted by a wealth tax per se. However the party continues to argue for further increases to capital gains tax, roughly equalising CGT rates with those for income tax but with a higher annual exempt amount of £5,000, and a new inflation allowance, so that any gains that are purely the result of inflation are not taxed at all. There would also be a targeted relief for small businesses.

Replace energy profits levy, reform air passenger duty

Environmentalism remains a central part of the Lib Dem agenda and tax incentives and deterrents continue to be a key tool in pursuing their goals. This was reflected in proposals in a climate change policy paper adopted at the conference.

The party proposes that refunds of a portion of Stamp Duty Land Tax should be offered to house purchasers if they carry out energy efficiency improvements within a year of purchase.

The paper notes that the energy profits levy is supposed to be temporary, “but the uncertainty over its lifetime, coupled with frequent previous changes, has contributed to the UK’s reputation as having one of the most unstable oil and gas fiscal regimes anywhere, with a serious impact on industry’s willingness to invest”. The party welcomes the government’s review of the levy. They argue that it “should be replaced as soon as possible with a stable, fair and proportional system ensuring that when oil and gas prices rise to exceptional levels, the tax rate on the profits of oil and gas producers rises accordingly, with the tax rate reducing again when oil and gas prices fall.”

The part of the paper titled ‘Decarbonising Transport’ puts forward the view that government’s main role in respect of road transport is to ensure that the infrastructure is in place for replacing petrol and diesel vehicles with electric vehicles (EVs), to provide the right balance of taxes and incentives across different modes of transport, and to set a clear and consistent framework so that consumers and industry can plan and invest ahead for the transition. In pursuit of the aim of ensuring that capital and lifecycle costs for EVs are comparable to those of petrol cars, the party would reduce VAT on out-of-home charging to the same rate as home charging (5%) and remove vehicle excise duty for EVs until 2030.

On air transport the Lib Dems note that while passengers flying from the UK pay some of the highest rates of air passenger duty (APD), the aviation sector benefits from tax breaks relative to other modes of transport: no fuel duty is paid on jet fuel and no VAT is applied. The party would therefore reform APD for international flights to target the most frequent flyers. The duty level would be set at zero for the first flight and increase progressively for each subsequent flight in a given year. Everyone currently flying would still be able to afford to fly for occasional holidays, but wealthy frequent flyers would pay more. In addition, they would introduce a new super tax on private jet flights, and remove the VAT exemptions for private, first-class and business-class flights.

The paper supports “[w]orking closely with the UK’s European neighbours through a new UK–EU Climate Security Pact, including linking the UK and EU emissions trading schemes and carbon border adjustment mechanisms.”

Working groups are looking at economic policy and start-ups

At the conference Lib Dem members voted to approve the final report of the party’s Policy Review. The result of a widespread consultation within the party, the paper sets out what review chair Ed Davey described as “the vision you [members] want for the future of our country, and the areas where we need bold new policies to make that vision a reality”.

The broad principles identified for Lib Dem economic policy are pretty uncontroversial. They include that economic growth “is not an end in itself, but an essential means to boost people’s living standards, improve their wellbeing, expand opportunity and raise the money we need for crucial public services and defence” as well as that it should be sustainable and fairly distributed. But the priorities identified for future policy development are more instructive.

The paper identifies ten of these across the whole of government policy. One is “Turning the economy around and making sure everyone feels the benefits of growth equitably”. In response to this the party’s Federal Policy Committee has established a new working group on the economy tasked with developing a policy paper for Autumn Conference 2026. The group is chaired by former MP Julia Goldsworthy with other members including Daisy Cooper MP (Treasury spokesperson) and Baroness Kramer (Lords spokesperson) alongside other party members with an interest and/or expertise in economic matters. Bobby Dean MP, a member of the working group, told a fringe meeting at the conference that the working group would look at, and take evidence on, tax policy, but he thought that the tax policies the party would fight the next election on should not be announced until closer to the election.

Another priority identified for future policy development is “Supporting start–ups and scale–ups, small and growing businesses, entrepreneurs and the self–employed.” This will be the subject of a more focused policy paper. Separately another working group focusing on town centres and high streets is also underway, with the aim of bringing a policy paper to the party’s spring conference next year.

A roadmap for tax transformation?

Lib Dems hold two conferences a year. At this year’s spring conference the party adopted a new Science and Technology paper with some interesting ideas on the intersection of tax and technology.

The paper recognises both the benefits and the disruptive potential of technology. “Significant elements of our taxation system are currently based on taxation of either employees or physical assets, that rely on presence in the UK,” it observes. “Similarly, taxes on consumption of certain types of goods, such as fuel, can be rendered obsolete by new technologies.” The paper notes that efforts such as the Digital Services Tax, and work at OECD level on changes to transfer pricing are attempts to redress some of this balance. “While Liberal Democrats support these efforts, they are generally stop gap measures, it states. “Transformative technologies like AI are likely to make these challenges even more acute and evidence suggests international efforts may not keep pace with these changes.”

In response the paper argues that government “should take a much more holistic look at the UK tax base, and develop a roadmap for tax transformation that assesses the impacts new technologies may have and provides a plan for maintaining an appropriate tax base to fund our public services.” Such a plan should, it suggests, include “examining the long term viability of employer and employee taxes, fuel duty, and business rates, among other taxes, and should be based on the principle of seeing as much as possible to tax profits and wealth rather than impacting revenue and meaningful investment.”

Conference news in brief

A policy paper on Opportunity and Skills passed by the conference proposes a comprehensive ‘Skills Tax Credit system’ to incentivise employer investment in training by providing enhanced tax relief on qualifying training costs, with the highest rates reserved for training that addresses critical skills shortages identified by Skills England. The paper also reiterates the party’s policy of reforming the apprenticeship levy, proposing to turn it “into a skills and training account model which would empower employers and individuals to fund training, and make it more accessible to small– and medium–sized employers.”

In her keynote conference speech, Treasury spokesperson Daisy Cooper urged the Chancellor to extend the VAT exemption for energy saving materials, which is set to end on 1 April 2027, for another three years.

The conference passed a motion welcoming the introduction of a statutory levy on all gambling operators to help fund research, prevention and treatment of gambling harm, and calling for remote gaming duty to increase from 21% to 42%.

Daisy Cooper told a lunch meeting that Digital Services Tax should go up, not only because it is a revenue raiser but to establish the principle that companies based abroad but doing business here should pay some tax here. This is an important principle, she said.

A policy motion relating to contaminated blood victims calls for the immediate introduction of legislation to impose a statutory duty of candour on all public officials to promote transparency.