Lib Dem contenders set out stalls on tax policy

Tax has been thrust to the centre of the Liberal Democrat leadership battle as rival candidates try to carve out a distinctive appeal to party activists.

Simon Hughes, installed by the bookmakers as favourite to succeed Charles Kennedy, will today call for fairer taxes, warning that some of the most vulnerable in society suffer under the present system.

Chris Huhne, launching his campaign yesterday, demanded big increases in petrol duties to ease the tax burden of the worst-off and to tackle global warming.

Sir Menzies Campbell, the party's deputy leader and initial front-runner, is backing moves to lose its high tax image by ditching its support for a 50p top rate of income tax. Mark Oaten, its home affairs spokesman, is floating the idea of increasing, from £100,000 to £150,000, the level at which the top tax rate kicks in.

Mr Huhne became the fourth, and probably final, candidate to enter the contest, with a campaign launch at the National Liberal Club in Whitehall. Speak- ing without notes, Mr Huhne, who has been an MP for only eight months, drew inspiration from the new Tory leader as he acknowledged he had to make up ground on the other contenders. He said: "Looking at what happened to David Cameron during his election, this is the year of the outsider."

Mr Huhne called for a switch in the burden of taxation with higher environmental taxes. He said: "That will, of course, hurt. It is actually going to be painful for some people, for example through their fuel bills, on people who are heavy users of petrol and other fuels.

"But it is essential, if we are going to make the planet sustainable, that we curb the use of fuels which create greenhouse gases."

Mr Huhne's supporters, understood to include at least nine MPs, say he is the candidate most likely to set out a clear direction over the next decade. The candidates will use a meeting of Liberal Democrat activists in London today to set out their stalls.

Sir Menzies, 64, will rebut suggestions he will be a stop-gap leader who would pass the baton to a younger successor after the next election. He will promise to inspire a new generation of supporters, declaring: "Liberalism is a cause that has inspired my whole life, a cause based on liberty, on freedom, on justice, a cause that empowers people and liberates communities."

Mr Hughes will attack the present system of tax benefits for penalising lower-income families, and will open the door to an overhaul of taxation policy under his leadership. He will also make an appeal for rejuvenation of local communities.

He will say: "When we talk about taxes, we are talking about liberty and freedom, and you can't be free in an unequal society."

Mr Oaten will say the party has to raise its sights so that it plans for political power. He will say: "The Liberal Democrats mustn't be a think-tank for other parties."

* William Hill quotes Simon Hughes as 4/5, with Sir Menzies Campbell at 7/4, Chris Huhne 7/1 and Mark Oaten 8/1.