Sir Menzies Campbell is facing a growing revolt among his own frontbenchers against his plans to drop the Liberal Democrats' commitment to a 50p top rate of income tax.
His critics fear the proposed strategy will send out a signal that the Liberal Democrats are no longer in favour of taxing the rich, even though it is designed to raise more money than the party's previous pledge to impose a 50p rate on earnings of more than £100,000 a year.
Opponents of the new plans will table an amendment at the Liberal Democrats' conference in Brighton in three weeks. They want the party to signal it remains committed to a progressive policy by proposing a 50p rate on earnings of more than £150,000 a year.
Some insiders believe that grassroots activists, who decide Liberal Democrat policy, may back the amendment as a way of registering their concern at the way Charles Kennedy was forced out by his MPs in January without them being consulted.
"Tax will be the main battle at the conference and it could be a vehicle for giving the leadership a bloody nose over what happened," one party source said.
Allies of Sir Menzies admit the vote could be close but believe the conference will rally behind the proposals drawn up by Vince Cable, the party's Treasury spokesman. They insist a switch to green and other taxes would be more radical and raise more money than a 50p rate.
Evan Harris, the party's science spokesman, admitted that the proposed package would be more progressive but said he was worried that ditching the 50p rate was a "symbolic" move that would send the wrong signal to voters.
He said he would vote for an amendment that added a 50p rate on earnings over £150,000 because, "that would not only be fair and progressive but would be seen to be so". He added: "The [50p] policy is not an unpopular one. It affects a relatively small number of people."
Steve Webb, the party's health spokesman, declined to say how he would vote but said: "The package is more progressive than the previous one. My reservation and concern is whether the electorate will appreciate that. The changes on capital gains tax and pensions are quite technical and precious few people will understand them."
He added: "The question for me is not the substance but whether we can communicate the progressive nature of the package. If we get rid of a 50p top rate, the danger is that people will say we have given up on taxing the rich."
Senior figures within the Liberal Democrats do not believe Sir Menzies will suffer a backlash over the ousting of Mr Kennedy. They insisted that a new book about his fall had produced no evidence that Sir Menzies plotted against him.
However, the book claims that Sir Menzies threatened to reveal details of Mr Kennedy's drinking binges when he was accused of leading a revolt against his leadership.
Author Greg Hurst said Sir Menzies was "incandescent with rage" after being portrayed as an instigator of the plot against Mr Kennedy.
"If I am being put up as a scapegoat then I will tell everything I know, because I will not have my integrity called into question," Sir Menzies is said to have warned.
The book goes on to claim: "Ming was incredibly upset. He felt he had covered for and protected Charles Kennedy on a number of occasions and never spilt the beans."Reuse content