Blog

The speech made by Ed Davey, the Leader of the Liberal Democrats, in the House of Commons on 26 November 2025.

We look forward to the Treasury Committee challenging the Government on the details of the Budget. This Government were elected on a promise to tackle the cost of living and grow the economy, and this is the second Budget in which they have failed to do either. For millions of people struggling with higher bills, all this Budget really offers is higher taxes.

The OBR sets it out in black and white: disposable income and living standards are down thanks to this Budget. Surely the Chancellor should have learned from her first failed Budget that we cannot tax our way to growth. Under the Conservatives, the UK’s tax burden reached its highest level since 1948 and it hit the economy, yet under this Budget the tax burden will hit an all-time high.

There is an alternative to all these Conservative and Labour taxes, and the shocking reality is that the Government know it: a new trade deal with Europe—a major new deal to cut the cost of living and grow our Toggle showing location ofColumn 410economy. The truth is that Boris Johnson’s Brexit deal has cost the Treasury £90 billion a year in lower tax revenue. Imagine if the Chancellor had adopted our plan to reverse those Brexit costs. Imagine how much more we could be helping families and pensioners across our country with the cost of living. Imagine how we could be ending the cost of living crisis today.

Sir Bernard Jenkin (Harwich and North Essex) (Con)

Will the right hon. Gentleman give way?

Madam Deputy Speaker

Order. You are a senior Member of the House, and I made it very clear earlier that no interventions should be made on party leaders.

Ed Davey

I am happy to talk to the hon. Gentleman in the Tea Room afterwards.

The Government know the damage that the Conservative-Reform Brexit deal has done to every family and business across our country, yet they choose to reject the single biggest policy for ending the cost of living crisis, turbocharging economic growth and boosting tax revenues without raising tax: a new trade deal with Europe. We need to properly fix our broken relationship with Europe, with a new customs union. We can grow our economy by freeing British businesses from the costs, barriers and red tape favoured by the Conservatives and Reform. Rather than trying to tax our way out of debt, as Labour is choosing to do, the Liberal Democrats would grow our way out of debt.

To be fair to the Chancellor, she has recently spoken about the terrible damage that the Conservatives’ Brexit deal has done to our economy—a deal that promised to save us £350 million a week, but which ended up costing the taxpayer £1.7 billion every week. But where is the Chancellor’s urgency and ambition to fix the problem that she rightly identifies? Today she did not even mention the huge hit to the Treasury from Brexit. She is like a doctor who has diagnosed the disease but refuses to administer the cure. She is refusing to take up our plan for a brand-new deal with the EU—a much better deal for Britain than anything the Government have pursued so far, with a new customs union at its heart.

Everyone but the most extreme Brexiteers now realises what a costly economic disaster the Brexit deal has been. Whether they are a young family struggling with ever higher food prices or a high street business just trying to survive the Chancellor’s latest new cost or tax, people are understandably looking for a credible economic policy to change their futures for the better, and it is crystal clear that only the Liberal Democrats are providing the leadership on our economy that people are crying out for.

There are some measures the Chancellor announced today that we do welcome. At last, she has decided to tax the big online gambling firms by raising remote gaming duty, as the Liberal Democrats have been calling for. Problem gambling is related to hundreds of suicides every year, so of course online casinos and the like should pay more tax on their huge profits. Her decision to scrap the rape clause is an excellent one. I may not have heard the Leader of the Opposition, but I was not sure if she welcomed that. I hope the Conservative party will welcome it. The Chancellor’s decision to scrap the two-child limit is excellent. It was in our general election manifesto, and I am glad that she is Toggle showing location ofColumn 411now enacting Liberal Democrat policy. It is clearly the most effective way of lifting children out of poverty, and it will save taxpayers money in the long term.

The biggest relief today for millions of families and pensioners is the action the Chancellor is taking to reduce energy bills, and we welcome it, but even after the Chancellor’s changes, the Budget will leave the typical household paying hundreds of pounds a year more on their energy bills than five years ago. More action will be needed, but we need action on energy bills that works.

Reform and the Conservative party pretend that the answer to rising energy bills is to scrap our climate commitments and stop investing in renewables. They could not be more wrong. The Conservative-Reform energy policy would put up bills and make the UK even more reliant on imported fossil fuels, with their volatile and high prices. That would be a disaster for our economy, a disaster for our environment, a disaster for jobs and a disaster for people struggling with energy bills. A major winner from Reform’s energy policies would be Vladimir Putin, which might explain why the hon. Member for Clacton (Nigel Farage) is so keen on them. I urge the Government not to listen to the Conservatives or Reform, but to be more ambitious in cutting people’s energy bills and to take up our plan to cut energy bills even more right now and cut them in half within a decade, finally giving families and pensioners the relief they need from this cost of living crisis.

While there are some things to welcome, as I have just done, there are quite a lot of measures in the Budget that will cause a lot of pain and unfairness, all of which could have been avoided if the Chancellor had gone for growth with Europe instead. Her plans to tax salary sacrifice will be hugely damaging to savings and pensions, and it looks like it is another NI hit on workers. Why, oh why, when the electricity vehicle market still needs a boost to get going, is she taxing electric vehicles? If she was not spending £1.8 billion on digital ID, many of these tax rises would not have been needed in the first place. Her failure to U-turn on the family farm tax is a huge error. If the Chancellor was really looking to tax those with the broadest shoulders, why not put a windfall tax on the big banks that are making billions at the taxpayer’s expense due to the side effects of quantitative easing?

The worst tax hike of this Budget by far—the biggest tax rise in this Budget—is the Chancellor’s decision to repeat the Conservative policy of freezing income tax thresholds. Freezing these thresholds reduces the amount that people can earn tax-free and hits the lowest-paid the hardest. I have to say that hearing the Conservative leader criticising it now rings incredibly hollow—and I think the “Member for Bark-shire” was objecting to her comments. The Leader of the Opposition cheered Conservative Budget after Conservative Budget that did exactly the same thing as the Chancellor has done—raising taxes on the low-paid. The Conservatives dragged an extra 4 million people on very low incomes into paying income tax, and an extra 3.5 million people into paying the 40p rate. The OBR says that this Government are now planning to drag a further three quarters of a million low-paid workers into tax and nearly 1 million people into the 40p rate. Someone on the average salary is paying an extra £582 this year because of the Conservatives’ policy, and under the Chancellor’s plans they will pay an extra £300 a year by 2031.

Contrast that with our record on income tax. We raised the personal allowance by £4,000. We cut income tax by £825 for millions of people, and took 3.4 million of the lowest-paid out of paying income tax altogether. It is clear that the Liberal Democrats are the only party that believes in cutting income tax for ordinary people; Labour and the Conservatives make them pay more.

As well as adding income tax pain to families struggling with the cost of living crisis, the Budget will add to the cost of doing business crisis facing Britain’s hospitality sector, on which the Chancellor went nowhere near far enough. Our high streets are suffering. Pubs, restaurants, cafés, caravan parks, zoos and even our beloved theme parks are struggling against higher business rates and the Government’s misguided jobs tax. The Liberal Democrats called on the Chancellor to help them with an emergency 5% VAT cut for hospitality for the next 18 months. That would have been a lifeline for some of our most beloved local businesses and for people’s jobs, boosting local economies across Britain, and it is very disappointing that the Chancellor has not listened to our calls.

Finally, can I say how disappointed I am at how little there was for carers in this Budget? As a carer myself for much of my life, I am determined to speak up for the millions of carers less fortunate than I am—the millions of family carers and care workers who make enormous sacrifices looking after loved ones, the carers who keep our NHS going and the carers who keep our society going. They deserve far more support from the Government, and I will keep pressing their case.

I do welcome the carer’s allowance review, but it confirms our argument that the carer’s allowance system is out of date and in need of urgent change, and we are yet to hear commitments to such changes. I welcome the decision to reassess cases where overpayment has caused huge hardship, but with those changes not coming into force for another year, the Government must instruct the Department for Work and Pensions to immediately suspend repayments during that delay and swiftly deliver compensation. More needs to be done to help family carers juggle their jobs with their caring responsibilities, and we urgently need the social care commission to actually start fixing the system on a cross-party basis and make sure that our loved ones get the care they need. The Chancellor cannot claim to be supporting our NHS properly, however much money she puts in, while she and Treasury officials keep blocking the social care reforms that alone can transform the health service across the country and boost our economy.

A caring society, a growing economy and a plan to drive down household bills, boost high streets and go for growth with Europe—that is the vision the Chancellor should have set out today. Instead we got a low-growth, high-tax Budget from a Government who I fear are just not listening.