Lib Dems propose Biden-style share buyback tax to raise £2bn for public services 

EMBARGO: For Immediate Release

The Liberal Democrats will today (Saturday 16 March) call for a new tax on share buybacks by large companies which could raise around £2 billion for public services.

In a speech to the Liberal Democrat Spring Conference in York, the party’s Treasury Spokesperson Sarah Olney will urge the government to follow the example of President Biden in the US, who introduced a tax on share buybacks of US listed companies in 2022 and is now planning to raise it to 4%.

Share buybacks occur when companies use profits to inflate their own share price, a practice which critics have warned can come at the expense of productive investment in the economy.

The Liberal Democrat proposal would introduce a 4% levy on the share buybacks of FTSE 100 companies. UK share buybacks have reached record levels in recent years, with FTSE 100 companies spending £54.7bn on them in 2023 and £58.2 billion in 2022. If 2024 sees a similar level of share buybacks, the 4% levy would raise around £2bn.

The sectors using share buybacks the most are oil and gas giants, banks and large corporations that own a number of food and consumer goods brands. This suggests the practice is being driven by companies profiting from soaring prices during the cost of living crisis.

The Liberal Democrats argue that the new levy would not just raise much-needed money for public services, but encourage companies to channel profits into productive investment and create jobs including in the green economy. In 2023, BP spent five times more on share buybacks than on investment in low-carbon energy.

The Liberal Democrats were the first party to call for a windfall tax on the excess profits of oil and gas companies in October 2021, before the policy was adopted by the Labour Party and then a weaker version by the Conservative government.

Liberal Democrat Leader 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 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.”

In her conference speech, Liberal Democrat Treasury Spokesperson Sarah Olney MP 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 50 billion pounds 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 1% 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 4%.

“So today, Liberal Democrats are proud to put forward that same call. Let’s put a 4% tax on share buybacks, to incentivise proper business investment, spur economic growth and raise funds fairly for our public services, to the tune of two billion pounds a year. Let’s take bold action to supercharge green investment and break the cycle of Conservative stagnation and recession.”

ENDS

Notes to Editors

Figures on share buybacks in 2022 and 2023 taken from AJ Bell.

BP announced £11bn ($13.8bn) worth of profits in 2023. They also said they spent just over £5bn ($6.5bn) on share buybacks in the year [BP 2023 annual report, pages 1 and 5]. By contrast, the company spent just $1.26bn, or £980 million, on investment in “low-carbon energy”, according to analysis by Energy Monitor.

Liberal Democrat Leader Ed Davey first called for a windfall tax on oil and gas companies in October 2021 [Independent].

In his State of the Union address last week, President Biden said he wanted to quadruple the share buyback tax he introduced, from 1% to 4%. A White House statement said: "President Biden would quadruple the stock buyback tax from one percent to four percent to address the continued tax advantage for buybacks and encourage corporations to invest in productivity and the broader economy rather than windfalls for investors."