Lib Dems call for Biden-style tax on share buybacks at spring conference

The Liberal Democrats will call for a new tax on share buybacks by large companies as the party holds its spring conference in York.

Sarah Olney, the Lib Dem Treasury spokesperson, will use her speech on Saturday to set out the plan to follow Joe Biden’s example and impose a four per cent levy on the share buybacks by FTSE 100 firms.

The measure could raise around £2bn annually for public services and investment in green industries, the party said.

Critics say buybacks – when a company purchases its own shares – are used to inflate share prices and comes at the expense of spending on investment.

The US president introduced a one per cent tax on share buybacks of US-listed companies in 2022 and has now proposed to raise it to four per cent.

The Lib Dems said UK share buybacks have reached record levels in recent years and are mainly used by oil and gas giants, banks and large corporations that own food and consumer goods brands – companies profiting from soaring prices during the cost-of-living crisis.

Party leader Sir Ed Davey said: “Neither the Conservative government or Labour Party have explained how they will fund public services fairly after the next election.

“The Liberal Democrats led the way in calling for a windfall tax on oil and gas giants making eye-watering profits from soaring prices. Now we are leading the way again, with a bold call for a new tax on share buybacks that could raise £2bn a year to fund our public services.

“Large corporations from fossil fuel giants to banks are making huge profits off the back of families facing soaring energy bills, mortgage payments and food prices. It is only fair that we ask these companies to pay more in tax.

“This new levy would not just raise much-needed money for public services, it would encourage investment, help create jobs and boost growth including in the green industries of the future.”

The £2bn the policy could raise is close to what the Labour Party said its plan to tax non-doms could have brought in, before Chancellor Jeremy Hunt deprived Sir Keir Starmer’s party of that funding by adopting the measure in his Budget.

In her speech to the conference, Ms Olney is expected to say: “Some of the biggest and most profitable companies in the world are listed on the London Stock Exchange. And every year, these same companies spend tens of billions of pounds doing nothing more than buying back their own shares.

“In the last two years, share buyback programmes from the hundred biggest firms on the Stock Exchange reached record highs, exceeding £50bn a year. Just think what our economy could have achieved if this money was spent on productive investment — think of the progress we could have made on the green transition.

“President Joe Biden has already put in place a one per cent levy on share buybacks in the US, to encourage real investment and raise funding for public services. And in his State of the Union address last week, he proposed raising it to four per cent.

“So today, Liberal Democrats are proud to put forward that same call. Let’s put a four per cent tax on share buybacks, to incentivise proper business investment, spur economic growth and raise funds fairly for our public services, to the tune of £2bn pounds a year. Let’s take bold action to supercharge green investment and break the cycle of Conservative stagnation and recession.”

The Lib Dems are set to use the gathering to prepare for a further push into “blue wall” seats — traditional Conservative strongholds — ahead of the general election.

Arriving in York on Friday, Sir Ed said his party is “determined to beat lots of Conservative MPs up and down the country” as he expressed optimism about doing so “across the southwest of England and across the whole blue wall where it’s a Liberal Democrat-Conservative fight”.

He told the PA news agency: “The response we’re getting is phenomenal. Lifelong Conservatives switching to the Liberal Democrats, which gives us great, great belief that we can beat many Conservative MPs whenever the election comes.”

Sir Ed has the seats of some of the top Conservative cabinet ministers in his sights, including Mr Hunt’s Godalming and Ash and Communities Secretary Michael Gove’s Surrey Heath.

The Lib Dems won 11 seats at the 2019 general election, but have since gained formerly Conservative constituencies across southern England in a series of by-elections.

These have included Chesham and Amersham in Buckinghamshire, Frome in Somerset, Tiverton and Honiton in Devon, and North Shropshire.

But some polls suggest the far-right Reform UK party has overtaken the Lib Dems in popularity across the UK.

Prime Minister Rishi Sunak this week ruled out holding an election on May 2 to coincide with local elections, having previously indicated he will send the country to the polls in the latter half of 2024.

By Sophie Wingate, PA Deputy Political Editor