Lib Dems admit tax pledge is outdated

The Liberal Democrats are ready to drop their commitment to raising the basic income tax rate by a penny, Charles Kennedy, the party leader, signalled yesterday.

The policy, which is intended to raise funds to improve education and other public services, has been the central plank of the Liberal Democrat manifesto for the past three elections, differentiating the party from Labour and the Tories.

But Mr Kennedy suggested in a television interview on BBC1's Breakfast with Frost yesterday that the policy could be ditched as a way of helping low earners. He even hinted that Liberal Democrats might fight the next election as a tax- cutting party.

"What we go into the next general election with in three or four years' time may not obviously make sense in terms of what we were saying at a previous general election," he said. "The world will have moved on. It is as simple as that.

"We have already been a tax-cutting party because we want to take people at the lower end of the tax spectrum out of tax altogether. At the same time, we have been very focused on the fact that taxation should be transparent, honest and accountable."

He went on: "I don't think we are going to depart from any of those principles, but quite what our specific levels will be in terms of taxation policy and what that helps deliver in terms of quality public services – whether it is decent railways, good hospitals, quality schools and so on – remains to be seen."

Mr Kennedy has deliberately distanced his party from the Labour Government, ending co-operation through the joint cabinet committee and styling the Liberal Democrats as the "effective opposition". Yesterday he made clear the Liberal Democrats were ready to work with the Tories in the Lords to defeat Labour's proposals to reform the Upper House, which he branded "shambolic".

The way Liberal Democrat, Conservative and independent peers had banded together to force concessions over the anti- terror legislation was one of the "unspoken stories since the election", Mr Kennedy said.

"There have been conversations between the Liberal Democrats and the Conservatives in the House of Lords," he said. "The nature of the House of Lords is very different from the House of Commons in that there is, if you like, informal discussions about things on a day-by-day basis.

"There is not some great plot here, but I do believe that if we can pressurise the Government into a more democratic House of Lords, that would be a very good thing."

Ditching the "penny on income tax" pledge is likely to be controversial among some supporters, but could enhance the party's chances of electoral success as it seeks to replace the Tories as the main opposition to Labour. Mark Oaten, the chairman of the Liberal Democrat parliamentary party, recently described the pledge as "tired, out of date, crude and simplistic".