Tories and Lib Dems to fight next election on pledge for a 'flat tax'

However, the two opposition parties admitted yesterday that it might be difficult to bring in a single tax rate in Britain because its tax structure was much more complicated than in Eastern Europe, where there is a flat tax revolution. Instead, they may promise to simplify the tax system.

George Osborne, the shadow Chancellor, who is setting up a commission on flat taxes, suggested that a future Tory government would reduce the demands on the state by giving the private sector a much bigger role in running public services, which would still be government-funded. "There is no reason why every teacher, nurse and doctor should be employed by the state," he said.

He hinted that the Tories would bring in road tolls and road pricing, while scrapping the generous system of index-linked public-sector pensions and tax credits for people earning more than £50,000 a year.

In a scathing analysis of the Tories' performance, Mr Osborne said: "We have offered tax cuts at the last three elections and lost each one of them. More striking, our tax-cutting manifestoes have not helped us gain a reputation for economic competence or even won us the trust of the public on tax issues." He accepted his share of the blame for the May election defeat.

Calling for a "wholly different approach", he told the Social Market Foundation think-tank: "We need to show that lower taxes are not an ideological obsession but a necessary part of a wider economic policy."

Mr Osborne denied that a flat tax would hit the poorest families hardest, saying that it could be "very progressive" if combined with a larger personal tax allowance, which would take people on low incomes out of the tax net.

At their party conference this month, the Liberal Democrats will discuss the merits of a flat tax. Vince Cable, their Treasury spokesman, said a "full monty" flat tax was not suitable but he wanted a "flatter" system. The party may promise to abolish the 10p starting rate of tax but keep a basic and higher rate. Their policy of a 50p top rate on earnings over £100,000 would be ditched.

The Treasury said: "The imposition of a flat tax in the UK would be both unfair and regressive, because it would either mean massive cuts in public services, or would leave the vast majority of working families worse off than they are at present in order to pay for a tax cut for the richest households."

Cameron U-turn on university tuition fees

The Conservative leadership contender David Cameron says his party should scrap its opposition to student fees.

In an interview in The Independent's education supplement today, he makes it clear that he believes a future Conservative government will have to live with the fees. He argues that to scrap them after three years of the new maximum top-up fee of £3,000 a year would leave universities with too much of a financial "black hole". The scrapping of tuition fees was one of the key pledges made by the Conservatives during the last election campaign.

The policy was devised by the party's former leader Iain Duncan Smith, who saw it as a vote winner because of unease on the Labour back benches over top-up fees.