Mr Ashdown guaranteed a stormy party conference later this month as he unveiled his "mid-term manifesto" to reposition the party away from the old-style politics of tax and spend and towards private enterprise and individual initiative.
Among the policies most likely to cause uproar are plans to take schools out of the control of local authorities, to make prisoners work and to introduce compulsory private second pensions.
Mr Ashdown admitted he was prepared for "strenuous debate" of the proposals.
The blueprint, which follows an exhaustive six-month review, is intended to offer a brand new Liberal Democrat approach for the forthcoming elections to the European Parliament, Scottish Parliament and Welsh Assembly.
Mr Ashdown said that the Liberal Democrats should become the "pathfinders" of British politics, mapping out innovative ways of creating a nation of strong citizens backed by an enabling, non-interfering government. "It is the most radical repositioning and recasting of a party's agenda ... in the last five or ten years," he said.
The 113-page document, entitled Moving Ahead: Towards a Citizen's Britain, proposes performance-related pay for ministers and senior civil servants as part of a new public service contract between government and the people.
The flagship policy of putting one penny on income tax to fund education remains intact, as does a commitment to proportional representation, but other ideas show a marked shift away from what Mr Ashdown called "the Nanny State". He contrasted his party's approach with that of the Government, which he claimed had a strong "smell of moral authoritarianism". He added: "Look at beef on the bone. Mr Blair says he's a democrat, but his government acts like a government of control freaks."
A new style of governing body for education - Neighbourhood School Trusts, whose members would be taken from the local community - would take over the running of schools from local education authorities.
Mr Ashdown said: "There are some people in the party who will not find [this] terribly easy to accept."
The paper also proposes radical financial reforms, including taking 10 million people out of paying income tax by increasing personal allowances.
Compulsory private second pensions would be introduced, with the Chancellor able to alter the level of contributions to keep inflation under control.
The document proposes greater entrepreneurship and experimentation in the delivery of public services to allow voters to monitor politicians' pledges. The idea would mean that a minister's pay could be docked by up to 15 per cent if promised results did not materialise.
An early indication of opposition to the review came from Jackie Ballard, MP for Taunton, who said the idea of neighbourhood committees running schools was deeply flawed.
"There is a danger you will have a second tier of schools," she said, "whereas with the local education authorities, they have the duty to make sure all the schools in their area achieve a certain standard."
Philip Willis, the Liberal Democrat spokesman on education, acknowledged the schools proposal was going to meet opposition. "It's certain that parts of our party ... will feel that we are going to undermine our strong base in local government. It will scare the pants off many of them, but those fears are unfounded. Giving power back to individuals is the very essence of liberal democracy.
"There are many individuals in the party who are more in tune with Old Labour than liberal democracy."
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