Clegg faces grassroots rebellion over his £20bn tax cutting plan

The Liberal Democrat leadership will today face a battle over plans for tax cuts at the heart of the party's new assault on Labour and the Conservatives.

Rebel MPs and grassroots activists will defy Nick Clegg's attempts to reposition the Liberal Democrats as tax cutters. They will use a debate on a statement of the party's values this afternoon to insist that action to tackle poverty, health, education and transport should take priority over reducing tax bills.

Mr Clegg has insisted he aims to be able to fund cuts in the tax burden from a £20bn programme of public spending savings.

Earlier this year a statement of party values said planned savings would be ploughed into meeting the party's policy commitments. However, it made clear that "if there's money to spare, we won't simply spend it. We're looking for ways to cut Britain's overall tax burden so ordinary families have more of their money to spend themselves."

But rebels, led by a frontbencher, Evan Harris, and former party chairman, Paul Holmes, warned that cutting tax bills should be a "lower priority" than tackling inequality.

Mr Harris said he wanted the party's conference in Bournemouth to send a clear message that services like health and education were more important. He said: "Others are saying something different. The leadership to a certain extent are not saying if, but that they will cut taxes."

He added: "We think that if the priority is tackling poverty, most poor people do not pay tax. There are better ways of tackling poverty than cutting the overall tax burden."

He said he was not opposed to the principle of tax cuts, but said the party needed to make a clear statement that tackling social injustice was more important.

The party leadership faced a tough battle two years ago to drop their totemic commitment to a 50p top rate of tax.

Yesterday Mr Clegg insisted he was not attempting to move his party closer to the Conservatives, arguing the Liberal Democrats were "the only party in British politics with a plan, a clear plan to restore fairness in the tax system and fairness to the vast majority of British families. That is what we are about this week".

He said he wanted to raise £12bn from the highest-paid individuals by cutting tax relief on capital gains and pension payments. He told delegates the tax proposals were aimed at helping the neediest in society, arguing he wanted to help those who were "really struggling" to pay their fuel and food bills. Mr Clegg added: "It is so obvious that we should be on the side of those people, not simply on the side of the system in Whitehall.

"We are redirecting £20bn of current government spending to our spending priorities, and then to tax breaks for the most vulnerable families.

Yesterday Vince Cable, the party's Treasury spokesman, vowed to make £5bn by closing tax loopholes used by the super-rich such as taxing "golden goodbyes", increasing tax on "non-dom" entrepreneurs, making big business pay more stamp duty and ending tax savings loopholes. He said: "The Liberal Democrats are committed to ensuring that families on low and middle incomes pay less tax. However, for this to be affordable we must ensure that those at the top are paying their fair share."