Keeping the 1990 proposal was not realistic, Sir William Goodhart, chairman of the tax and benefits working group, told the conference to shouts of 'rubbish'. He added: 'It is a Utopian idea which should be sent packing back to Utopia.'
The clear show-of-hands majority to drop it gave some relief to a leadership showing signs of confusion over tax plans.
Members went on to approve a raft of changes intended to introduce fairness to the tax system and improved benefits.
Under a citizen's income - a basic allowance for all adults - tax credits which were unused because a person's income was too small would be paid out in cash. The partial scheme proposed by the party in 1990 would have put 10p in the pound on income tax though the net impact would be less for most people.
Sir William said a full scheme implied a basic rate of tax of 70p in the pound. Successfully opposing an attempt to have the whole package reconsidered, he added that anyone who wanted the Liberal Democrats to discuss a 70p basic rate 'should have their head examined'.
Opening the debate, Earl Russell, the party's social security spokesman in the House of Lords, said it would be a struggle to preserve the basic structure of means- tested benefits against the 'scorched earth policy' of a retreating Tory government.
'If we could afford to have citizen's income instead of means- tested benefits, I would welcome it very warmly. But we can't. Even its supporters admit we can't'
But in a stout defence, Baroness Seear, deputy leader of the Liberal Democrat peers, said it was 'backward looking' to say means-tested benefits had to be relied upon forever. Studies by the London School of Economics and others had shown that a partial scheme would be revenue-neutral.
It would also end the 'ridiculous position' that when a man became unemployed and he had children, it paid his wife to stop work and go on benefit, she said. 'Don't go back. We need to make a step in this direction.'
John Dickie of Hampstead and Highgate said the scheme was a 'Utopian fantasy'. Scarce resources should be aimed at real need. 'Why should the ordinary taxpayer subsidise the rich businesswoman's husband or the pop star's wife who does not have an income of their own but has a pretty good life?'
Mr Dickie said the scheme would 'hugely complicate' the party's tax proposals for the next election. But Adrian Sanders of Devon East and Plymouth said only a party with a commitment to at least a partial citizen's income could truly stand up and say they represented the poorest in society.
Hilary Leighter of Ruislip- Northwood said that she could not go to anyone as a parliamentary candidate and say: 'Vote Liberal Democrat and we will make some small and confusing changes to the existing unfair system.'Reuse content