Lib Dems unveil new privatisation programme

State-owned assets, including prisons, could be privatised by a Liberal Democrat government, the party signalled yesterday in a departure from its "tax and spend" image.

Vince Cable, the Liberal Democrat Treasury spokes-man, indicated that the party now "has no difficulty with the idea of selling off assets that would be better placed in the private sector".

In a speech setting out the party's spending plans, he revealed that the party was "looking at all public sector assets" for privatisation and had already drawn up a list to sell off, which includes the Royal Mint.

The proposals are part of an attempt by Charles Kennedy to shed the party's high-tax image, which he inherited from his predecessor, Paddy Ashdown. But the new policy, to cut at least £5bn a year from government expenditure, is likely to be unpopular with some Liberal Democrat MPs who opposed the privatisation plans of the last Conservative government.

Mr Kennedy said more spending on public services could no longer be met by more tax rises. Cuts in expenditure - including the abolition of the Child Trust Fund - would have to pay for them.

He said: "It is time for tough choices to deliver Liberal Democrat priorities. No political party can rule out tax rises, under any circumstances. But the Liberal Democrats cannot simply argue that extra spending on our priorities must be met automatically by an increase in the total level of taxation. We will bring forward proposals for a programme of privatisations and asset disposals across government."

The party has revised its spending plans after the Government committed an extra £200bn a year to public spending. But the Liberal Democrats still plan to raise the rate of tax for those earning over £100,000 a year to 50 per cent.

David Laws, the Liberal Democrat deputy Treasury spokesman, said: "For the first time we believe that the increase in public expenditure is now adequate. We want to stabilise public expenditure in relation to the economy."

The party also pledged to scrap costly government commitments, including the Euro-fighter programme - saving about £2bn - and the Child Trust Fund, which would give a cash sum to each baby at a cost of £1.25bn over a parliament.

Mr Cable also set out plans to privatise some prisons, such as those which are "old and incapable of supporting constructive regimes for offenders". He said commissioning new private finance initiative prisons would save "up to £500m over a parliament".

The party also plans to sell the Royal Mint and several government-subsidised organisations which promote arms sales and UK exports. But the policy is likely prove unpopular with trade unions and Labour MPs, who will argue that it could cost jobs and close factories.

Yesterday Mark Serwotka, the general secretary of the Public and Commercial Services union, reacted angrily to the party's privatisation plans.

He said: "It's staggering that the Liberal Democrats have managed to find so many areas to privatise, going way beyond even the arch privatisers of the Tory government."