Tension within the party surfaced in a letter circulated by the Liberal's Parliamentary Candidates Association which argues that there is a 'whiff of panic in the air', and says the party has pressed 'the self-destruct button' over its taxation policy.
Alarm among some activists is likely to increase when Mr Ashdown makes it clear in a speech to his annual conference in Brighton today that he cannot envisage any deal with the Conservative Party at present.
At a pre-conference briefing he said that, while he could not predict the circumstances after the next election, 'it is very difficult to conceive of the possibility of working with the Conservative Party of the sort that we have at present. We are dedicated to the removal of that party'.
The Liberal Democrat leader refrained from offering a full endorsement of Mr Blair since he believes that the opposition's policies remain too vague. His party's stance after the next election will be decided closer to the time, he said. In the meantime the Liberal Democrats will remain an independent political force, Mr Ashdown will argue.
But his comments mark a big shift from the position before the last election. During the 1992 campaign Mr Ashdown maintained a policy of 'equidistance' between the two main parties, insisting he could work with either after polling day. But advisers say that the term 'equidistance' has been quietly buried in a significant change in Mr Ashdown's language.
Neither party believes that pacts are feasible but Labour's new leader, Tony Blair, is likely to welcome a move which paves the way to greater cooperation between members of the Labour Party and the Liberal Democrats. At a local level greater contact between politicans, many of whom work together on councils, might develop into understandings which could encourage people to vote tactically anti-Tory.
Mr Ashdown's new olive branch to Labour marks a return to the language he adopted in the aftermath of the 1992 election when, in a speech in Chard, he called for Labour to help create a 'non-socialist alternative to the Conservatives'. That initiative faded because of hostility within the Liberal Democrats and a lack of enthusiasm from Labour's last leader, the late John Smith.
However the extent of alarm caused by the election of Mr Blair, and the Liberal Democrats' reaction to it, is revealed in an official newsletter circulated to around 1,000 potential parliamentary candidates.
It argues: 'There is a whiff of panic abroad in the the party at the moment'. The letter, edited by the chair of the committee, Jane Smithard, goes on to attack the party's proposed new 60 per cent tax band for those earning more than pounds 100,000 per annum.
The party has, it argues, pressed ''the self-destruct button over tax rates' adding: 'we must play to our strengths, not panic ourselves into announcing policies that gain little and are electorally unpopular, just because they make us distinct'.
The complaints support the expectation that the party's tax proposals will either be amended or referred back at this weeks' conference.
In his speech today Mr Ashdown will also tackle the thorny issue of his party's policy towards a minimum wage. The Liberal Democrat leader will make it clear that he favours the return of the wages councils, abolished by the Government, rather than the imposition of a less discriminating minimum wage.
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