Kennedy puts veto on Lib Dem proposal to privatise Royal Mail

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Charles Kennedy has vetoed a proposal to privatise the Royal Mail before the launch of a Liberal Democrat manifesto today, renewing talk of a left-right split in the party.

Senior MPs in the party believed that the proposal, prepared by Malcolm Bruce, the Liberal Democrat trade and industry spokesman, was "too right-wing".

In a dramatic vote, most of the front bench, led by Mr Kennedy, voted to scrap the sale, which was expected to be part of the manifesto. The move is said to have followed a heated debate among many MPs that the party was becoming too wedded to the idea of privatisation and the free market.

One senior MP said after the vote: "We were pretty unhappy about this sell-off idea and thought it would send the wrong message about the party. We voted it down. I don't think Charles liked the proposal at all."

The proposals, which could have meant an end to the guaranteed next-day delivery for first-class post, were also supported by Vince Cable, the Treasury spokesman who has framed the party's current policy of selling the Royal Mint.

They follow the publication last week of a series of essays by Liberal Democrat modernisers which included suggestions to break up the NHS and pursue more sell-offs.

The split between right-wing modernisers and left-wing mainstream is expected to dominate next week's conference.

Today the party will launch its election blueprint in a "pre-manifesto", including policies on abolishing the council tax, a new 50 per cent tax rate for people earning more than £100,000 a year, and abolishing tuition fees.

Matthew Taylor, chairman of the parliamentary party, said that the pre-manifesto showed how far ahead of the Conservatives and Labour the party was in policy formulation for the next general election.

"The Conservative Party is miles away from being able to publish anything like this," he said. "And it appears that within Labour Alan Milburn has been brought in to tear up the Brownite agenda and draw up a Blairite one."