The Liberal Democrat leader, Ed Davey, has used his spring conference speech to call for a cap on donations to political parties so that “even the wealthiest racists cannot buy power and influence”. Davey criticised the Conservatives for refusing to hand back millions in donations from the donor Frank Hester after a Guardian investigation revealed he had made comments about Diane Abbott that have been widely condemned as racist and misogynistic. Rishi Sunak initially declined to comment on Hester’s remarks, made in 2019, but after an outcry the prime minister’s spokesperson said the comments were “racist and wrong”. Hester has apologised for the remarks but denied they were motivated by race or gender. In his speech in York on Sunday, Davey said the prime minister – whose government unveiled its new definition of extremism on Thursday – was “right to warn about the dangers of extremism and division” but said the Conservatives needed to take a “long look in the mirror”. “If this week’s news has shown anything, it’s that we must also cap donations to political parties. So that even the wealthiest racists cannot buy power and influence over the Conservative party,” he said. Rallying his supporters before the general election that must be held before the end of January next year, Davey said the Lib Dems were at a once-in-a-generation moment to win seats where they had previously stood little chance of winning. He said that in “so many parts of the country” only the Lib Dems could beat the Conservatives, whom he said had bought “economic chaos, rising NHS waiting lists and sewage in our rivers”. “This year, let’s knock on 5 million doors,” he told supporters. “Five million knocks to bring the blue wall tumbling down and get more brilliant Liberal Democrats elected to transform our country for the better.” In an effort to differentiate his party from Labour – which has remained 20 points ahead of the Conservatives in recent polls – Davey said the Lib Dems were the only party that would enact reform of the political system by scrapping the first-past-the-post system, which he said left “millions of people feeling powerless and excluded”. Davey also used the speech to call – for the first time in a conference speech – for the UK to rejoin the European single market. He said only the Liberal Democrats had a clear plan to rebuild the UK’s relationship with the EU and put the country back on a path towards rejoining the trade bloc. “Our plan is to repair the damage the Conservatives have done, and in time to restore Britain’s place at the heart of Europe, where we belong,” he said. In an indication of where Lib Dem candidates are likely to focus in local campaigns, Davey stressed the importance of the NHS, taking aim at the Tories in England, Labour in Wales and the SNP in Scotland. “Things have got so bad under this Conservative government, fixing them is an enormous task,” he said. “And not just in England. One of the many great disappointments of the Labour government in Wales and the nationalist government in Scotland is their total failure to get their health services working for patients. “Fixing our NHS will take far more than the timid policy-by-press-release of the other parties.”