On November 11, 2025, the Liberal Democrats made a bold pitch to the UK government: slash the standard rate of VAT from 20% to 15% in this month’s budget, targeting relief for Britain’s beleaguered hospitality sector and the millions of people struggling to enjoy even the simplest pleasures. With pubs, restaurants, and entertainment venues still reeling from the aftermath of the energy crisis and the cost-of-living squeeze, the party’s proposal has ignited debate across the political spectrum.
According to BBC and The Guardian, Daisy Cooper, the Liberal Democrats’ deputy leader and Treasury spokesperson, is leading the charge. She’s urging Chancellor Rachel Reeves to take immediate action, arguing that the government should step in to help people reclaim “small joys,” like sharing a meal out or catching a film at the cinema. Cooper’s rationale is simple: as she put it, “People are working with their nose to the grindstone all month and have next to nothing left over after sky-high bills and spiralling food prices. In years gone by people knew they could look forward to fish and chips with their family on a Friday night or a weekend trip to the cinema. Now those small joys – the ones that make life worth living – are becoming an unaffordable luxury for too many.”
This isn’t just rhetoric. Recent polling by More in Common paints a sobering picture: more than half of people now find going out to a pub or restaurant out of reach. The hospitality sector, once a cornerstone of British social life and a vital employer, is feeling the pinch. Footfall is down, and the cost of a night out is up—leaving families and businesses alike searching for answers.
The Liberal Democrats’ solution is twofold. First, the headline-grabbing VAT cut, which they say could be enacted immediately and would last for 18 months. Second, a plan to cut average household energy bills by about £90 a year by axing the main renewables levy—an approach they claim would drive bills down to the second lowest level since the energy crisis erupted in 2022. Together, these measures are projected to save the average family £270 a month between now and April 2027, according to party calculations shared with BBC and The Guardian.
But how to pay for it? Here’s where the proposal gets controversial. Cooper is calling for a new windfall tax on big banks, an idea originally floated by the IPPR think tank. She estimates this could raise about £30 billion in total between now and 2030, with around £7 billion a year flowing into the Treasury’s coffers. Of the proposed £12 billion package, £7.5 billion would be earmarked for the VAT cut and £4.5 billion for scrapping the renewables obligation levy.
“This could be funded by a new windfall tax on big banks,” Cooper explained, “which could raise around £30bn in total between now and 2030.” The party also wants to use part of these funds—about £2 billion—to establish a new Energy Security Bank. The bank, expected to launch in the 2027-28 financial year after a two-year setup period, would support green energy home loans and other capital investments designed to secure the UK’s energy future. The remaining £18 billion raised by the levy between April 2027 and April 2030 would be available for further investment, according to Lib Dem sources.
While the Liberal Democrats’ plan is ambitious, it’s also a clear response to the mood of the nation. The cost-of-living crisis has left many families feeling squeezed, and the hospitality sector’s woes have become a symbol of broader economic malaise. The party’s proposal is designed to offer immediate relief, while also investing in longer-term solutions to the UK’s energy challenges.
The political context is, as ever, complicated. Chancellor Rachel Reeves, representing Labour, is reportedly poised to break her party’s manifesto commitment not to increase income tax, VAT, or National Insurance in the upcoming budget. There’s talk she may also ditch the controversial two-child benefit cap. However, she is not expected to cut VAT, and the Treasury has yet to respond directly to the Liberal Democrat proposal.
Energy policy has become a defining battleground for all the major parties. The Conservatives, like the Lib Dems, are now calling for an end to the renewables obligation—a levy that has long been blamed for pushing up household energy bills. Labour, meanwhile, is sticking to its manifesto pledge to expand renewables, promising to cut energy bills by “up to £300 by 2030” and end the UK’s reliance on fossil fuels, especially those imported from Russia. The Green Party is even more aggressive, focusing squarely on ending oil and gas use altogether. Reform UK, on the other hand, wants to scrap clean energy targets, tax renewable energy, and return to fossil fuels and fracking—a stance that has sparked fierce debate among environmentalists and industry leaders.
For many observers, the Liberal Democrats’ proposal is notable for its pragmatism and its attempt to balance short-term relief with longer-term investment. The VAT cut would provide an immediate boost to the hospitality sector, while the windfall tax and the creation of an Energy Security Bank signal a commitment to tackling deeper structural issues. Yet, questions remain about the feasibility of the plan and whether it will find support in Parliament. Will the windfall tax on banks deliver as much as projected? Can the government afford to forgo billions in VAT revenue at a time of ongoing fiscal pressure?
Critics argue that the VAT cut, while popular, might not be the most effective way to target support to those who need it most. Some economists warn that such broad-based tax relief risks benefiting higher-income households disproportionately, while others point out that the hospitality sector’s problems are as much about changing consumer habits as they are about prices. Still, with polling showing widespread concern over affordability, there’s little doubt that the issue resonates with voters.
The Liberal Democrats, for their part, are undeterred. They see their plan as a way to restore a sense of normalcy and joy to everyday life, while also addressing the root causes of the UK’s economic and energy challenges. As Cooper put it, “Now those small joys – the ones that make life worth living – are becoming an unaffordable luxury for too many.”
With the budget looming and the political stakes rising, all eyes are on the Chancellor’s next move. Whether the Liberal Democrats’ proposals gain traction or not, one thing is clear: the debate over how to help Britain’s families and businesses through tough times is far from over.
