The Liberal Democrats can cash in on the Government's in-fighting and capture a string of seats in Labour strongholds, Vince Cable, the party's deputy leader, predicted last night.
He forecast that the Liberal Democrats could confound low poll ratings at the next general election by taking advantage of the "implosion" in Labour ranks.
Mr Cable told a fringe meeting organised by The Independent at the party's annual conference in Bournemouth: "We are going to make very big inroads in Labour's urban heartlands in the North and the Midlands. There is a very strong possibility we could do extremely well."
Speaking after the Liberal Democrat leadership won overwhelming support from delegates for their proposals to cut taxes, Mr Cable insisted the party would rebuff efforts by the Tories to win back a series of former Conservative seats in the south of England. Urging the party faithful not to be deterred by current poll ratings, he added: "It's a long war of attrition, it's a long guerrilla war."
Both Mr Cable and Richard Lambert, leader of the Confederation of British Industry, agreed the global credit crunch would mark a turning point for international money markets. Mr Lambert said the world was at "an era-changing moment" and warned: "The path back to normality is bumpy and painful."
Mr Cable said the "freewheeling view of the world financial markets is going to change" and added that the public would no longer tolerate the lavish pay and bonuses given to company executives. He told the meeting, entitled "Tax cuts, progressive or a swing to the right", that his party's tax-cutting plans represented a progressive reform to help for lower income families
Mr Lambert said: "The great majority of your key seats are in the North and this package would be aimed directly at that demography. They are not going to be ringing bells in Guildford and the Home Counties about this."
Mr Cable insisted that the Liberal Democrat proposal to save £20bn in public spending would provide a "substantial amount" for tax cuts, although most of the money would be recycled into other spending priorities.
On the conference floor yesterday, delegates rejected a rebel attack on the plans by three to one. But senior party figures warned that the move would allow Labour to attack the party for planning public service cuts.
Paul Holmes, a former chairman of the parliamentary party, led calls to back a rebel amendment forcing the party to give priority to public services and tackle inequality over tax cuts. He said: "Don't give a dying Labour government the opening to distort our policy at the next election and attack us as Tory twins." Duncan Brack, the chairman of the party's federal conference committee, added: "It leaves us wide open to the charge that we can only fund this by cutting essential services."
Lord Roberts of Aberconwy said the rebel amendment "reflects the radical visions we have stood for for such a long time". But Danny Alexander, Mr Clegg's chief of staff, said the party aimed to deliver "big tax cuts for those on low and medium incomes", adding: "I say that fair tax cuts, our tax cuts, are crucial to tackling inequality."
Mr Cable appealed to delegates to back him, warning that the rebels would "drive a coach and horses" through his policy. He said: "I'm asking you to give us the freedom of scope, don't bind our hands, to set out an agenda that is generally progressive, committed to public services but involves significant tax cuts."
He added: "We are presenting to you a concept, a philosophy, an attractive, progressive and radical one which I hope you will support." Lord McNally, the party's leader in the Lords, added: "It is no good giving Vince a standing ovation before lunch and cutting away a plank of his policy afterwards."
*Smokers who quit or obese people who lost weight would receive financial rewards under Liberal Democrat plans to improve health. District health boards would be given powers to offer tax discounts to those who joined a gym, gave up cigarettes or had regular medical check-ups. Parents who enrolled children in sports clubs or keep-fit schemes could also receive tax breaks.
Norman Lamb, the party's health spokesman, told delegates: "Using locally raised resources, why shouldn't health boards create direct incentives – tax-back payments – particularly focusing on disadvantaged communities?"
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