Lib Dem Spring Conference 2023: Party backs basic income and tougher energy levy

The conference, which took place over the weekend 17-19 March, was the party’s first for a year, after the autumn conference was cancelled following the death of Her Majesty the Queen just days beforehand.

Towards A Fairer Society – a Guaranteed Basic Income

The most significant policy vote at the conference was a choice between a ‘Universal Basic Income’ and a ‘Guaranteed Basic Income’, in which party members chose the latter. An explainer issued by the party set out the distinction between these concepts.

A Universal Basic Income (UBI) is described as a payment of £70-90 a week for all working age adults (i.e. regardless of income). It would be equal to the value of existing tax and national insurance personal allowances (which it would replace). It would operate alongside the existing welfare system. Anyone of working age currently paying tax would see no overall change in their financial circumstances; they would receive a UBI but pay an equivalent amount of extra tax. Those who do not have enough earnings to pay tax would benefit from an additional unconditional cashflow.

Guaranteed Basic Income (GBI) is described as ‘a close cousin’ of UBI, but more directly focussed on the goal of ending deep poverty and destitution. Unlike UBI, it is not universal. Like Universal Credit it would be paid to a household based on the household’s income (UBI would be paid to individuals).

Essentially it would work through regular increases in welfare payments. An independent commission – similar to the low wage commission - would determine the appropriate level and the timeframe to reach it. GBI would mainly be delivered through increasing Universal Credit – though financial sanctions would be removed and other steps would be taken to prevent people falling through the cracks as they do in the current system.

How high would a GBI be? The party is not explicit about this, noting that the overall level would be set by the commission referred to above. However, they note that weekly increases in Universal Credit of £70 for a household containing one adult and £140 for a household containing two adults would have the effect of ensuring all households have income at least 50 per cent of median income, and would cost something similar to the proposed UBI.

The party’s explainer states that the timetable for introducing GBI would be flexible – it is set up as a proposal which could be introduced at a different pace depending on economic circumstances. It also argues that the GBI proposals would create less of a poverty trap than the UBI, though this is based on the approach that the UBI would have removed personal allowances, meaning income from the first pound earned would be is taxed, which the party says would not happen under the GBI. This does however pose the question of where the resources to fund the GBI would come from. The party will presumably set out its thinking on this closer to the next election.

Towards A Fairer Society – Skills and other measures

The basic income proposal appears in a policy paper titled ‘Towards A Fairer Society’ which also sets out wider proposals for tackling poverty, devolving money and powers to local communities, improving access to skills and training, and on workers’ rights.

The devolution proposals set a target of shifting 50 per cent of all public spending to regional and local government, including funding for skills training, though no additional tax powers are mentioned. Indeed the paper specifically notes that taxation policy has largely been left outside the scope of this paper and will be tackled elsewhere in the party’s policy processes.

The skills proposals in the Fairer Society paper include expanding the apprenticeship levy into a wider ‘Skills and Training Levy’, and the introduction of a Training Tax Credit to incentivise training in the private sector.

Explaining the new training credit the party notes the existence of an R&D credits regime where, if a company spends £100 on R&D, it is able to treat this as a reduction of between £150 and £230 of its taxable profits. The party proposes to extend this to training, though restricting the scope of the credits to the training of relatively low-paid employees, “so it doesn’t end up being a subsidy for, say, MBAs for the senior executives.” They would consult with business on what types of training should qualify for this incentive and at what employee income level it should be available.

Additionally, the Lib Dems identify a gap in the current system as it relates to training costs which individuals pay for themselves. “Current rules do not allow that these should be treated as tax deductible expenses at all. The government consulted on this in 2018 but decided not to do anything about it. We think that was a mistake.”

There is one other area relevant to tax in the paper. Employee participation proposals in the paper include the idea that a new type of employee trust called an Employee Share Trust (EST) should be created based on the share incentive plan trust that involves a permanent holding of business shares. “Each employee would have an equal say and share in this trust while they are employed or contracted by the relevant business, starting and ending with the employment with no entry pay-in or exit pay-out,” states the paper, adding that any sale of a share or all of a business that is to an EST should incur no capital gains tax.

Further reading: Towards a Fairer Society motion and Policy Paper

Solving the Energy Crisis

The Lib Dems also passed a motion on ‘Solving the Energy Crisis for the Long-Term’.

This calls for the conversion of the Energy Profits Levy into “a proper windfall tax on the record profits of gas and oil producers to ensure they pay their fair share”. It notes disapprovingly the continuing existence of ‘significant exemptions’ for oil and gas companies in the current levy.

By contrast, the motion notes that the proposed Electricity Generator Levy on renewable generation fails to include exemptions if profits are reinvested in new renewable projects. The party calls for the levy to have allowances that permit renewable generators to reinvest their excess profits in new projects.

Party leader Ed Davey highlighted this issue in his leader’s speech to the conference, contrasting the Lib Dem approach of ‘taxing properly the record profits of the oil and gas giants… made on the back of Putin’s illegal invasion of Ukraine’ with the Government’s approach of ‘taking money out of the pockets of struggling families with unfair income tax rises’.

Turning to energy conservation, the motion says government should support households to cut their bills by (inter alia) graduating Stamp Duty Land Tax by the energy rating of the property, and allowing homeowners to offset spending on insulation, low-carbon heat sources, EV charging points and climate adaptation measures against their income tax bills.

Finally the motion passed by party members calls for much closer cooperation on energy policy between the UK and EU, including linking the UK Emissions Trading System (ETS) to the EU ETS, and protecting UK businesses from unfair competition by following the EU in introducing a carbon border adjustment mechanism for high emission products such as metals and chemicals.

Sarah Olney’s speech

Lib Dem Treasury Spokesperson Sarah Olney MP highlighted some of the tax proposals backed by the conference during her address to the conference, as well as wider policy.

This included the proposal to reform the Apprenticeship Levy into a broader, more flexible skills and training levy. She highlighted what she called a ‘precipitous fall’ in apprenticeship starts under the Conservative Government, with around half a billion pounds set aside for on-the-job training through the apprenticeship levy going unspent each year.  Noting that the Association of Colleges estimate that the Further Education sector needs a funding boost of half a billion, she asked: “why doesn’t the Government funnel these much-needed funds to our colleges and train more young people in the skills we need?”

Olney attacked the Conservatives for “constant flip-flopping on tax and investment rules” and for “badly targeted incentives [that] have not achieved the growth they promised us”. What they should be doing instead, she said, is introducing tax breaks for training, “to ensure that employees can continue to develop their skills, both for their own benefit and for the benefit of their employers.  Or allowances for digital investment, to enable businesses to invest quickly and early in the newest digital tools to make productivity gains.”

Olney called on the Conservatives to restore the research and development tax breaks they have cut, to enable businesses to fully explore the opportunities opening up in Artificial Intelligence and Robotics, and to ensure that the UK can continue to be a powerhouse of technical innovation.

Additionally she highlighted that the Lib Dems are calling on the Government to put in place a minimum wage for carers, giving them a pay boost of £2 an hour, which she said that the Government “could comfortably afford if they reversed their massive tax cuts for big banks”.

Further reading: Sarah Olney's Conference speech

Other business

Finally, a motion passed by the conference on access to dental services included a call for the removal of VAT on children’s toothbrushes and children’s toothpaste.

Further reading: Access to dental care for all motion