John Rentoul: We know far too much about Ken and see far too little of Charlie

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The Independent Online

Those polls were in effect asking people, "Have you heard of Kenneth Clarke?" We asked a rather tougher question, pitting Clarke directly against the Conservatives' likely opponent at the next election, Gordon Brown. Clarke fared less well than Michael Howard did against Tony Blair when an identical question was asked on the eve of the election in May. Whether that is because Clarke is less popular than his supporters think or because Brown is more popular than is often assumed hardly matters. Clarke's supporters might protest that David Davis would poll even worse against Brown, but Davis is unknown to many voters and has the chance to shape his image, whereas Clarke is familiar, and losing by a two-to-one margin might be the best he could do against Brown. It ought to be obvious now that simply choosing Clarke rather than Davis would not be sufficient to end the Tory crisis.

As with personnel, so with policy. Some Tories have seized on the flat tax - a single tax rate above a higher starting point that would apply to all personal and corporate income. The idea has been around for a while. It was popularised in America by the presidential hopeful Steve Forbes in 1996. Forbes's net worth: $435m (£237m). Amount he stood to gain by his proposal: $5m a year. Number of primaries won: 0. In his 2000 campaign, Forbes promised to exempt himself from the benefits of the flat tax. Number of primaries won: 0. That should have been the end of the matter, but recently a few east European countries have sought to make it easier for former communists to become capitalists by simplifying their tax systems. This has emboldened the rigorous free-market think-tanks over here to push the flat-tax idea into the Tory policy vacuum. Last week, George Osborne, the temporary Shadow Chancellor, set up a commission to look at a flat tax in Britain, which is a politician's way of saying he likes the idea.

It is a clever ploy, because it dramatises a common criticism of Gordon Brown: that he seems to pursue complication and obfuscation as an objective of tax policy. But it is too clever, because the idea is a non-starter. This is not simply a matter of the obvious criticism of unfairness, in that a flat tax is by definition a tax cut for the rich - as the Parable of Forbes taught so vividly. It is a matter of workability. The Economist (as rigorously free-market a journal as there is) last week calculated that, in Britain, low earners and high earners would gain but that, in the middle, a third of all income tax payers would lose out from a flat tax. Not since the poll tax has there been a policy better designed to hurt the floating voter.

Yet it is not only the Conservative party that has been led from the path of electoral reality by the flat-earthers of tax policy. The Liberal Democrats are at it, too. As it happens, I had my doubts about their policy of a higher tax rate on incomes over £100,000 a year. But what does it say about the party that it should jump from a policy of higher taxes on the better-off to one of lower taxes on the better-off on the Monday after an election in which it won more votes and seats?

Already some Liberal Democrats are protesting that there is little enthusiasm for a flat tax in the party. Gareth Epps, a member of the party's Tax Commission, wrote to The Independent last week saying precisely that, and claiming that the commission was really looking at doing something about "the over-complication inflicted by HM Treasury under Gordon Brown". Yes, Gareth, but, as with Osborne, setting up a commission to look at a flat tax was Charles Kennedy's way of saying he liked the idea. (All right, to be precise, the phrase "flat tax" is not in the commission's formal remit, but on the day it was announced Vince Cable, the Liberal Democrat Treasury spokesman, said it was "certainly" a policy at which they would be looking.)

The problem for the Liberal Democrats, who begin their annual conference next weekend, is that, like the Tories only more so, there are so few big reasons for voting for them. Iraq will not be an issue at the next election. Nor tuition fees. Nor Europe. Civil liberties? They are not enough. Party insiders insist that the local income tax will survive the Tax Commission's scrutiny as an alternative to council tax, but I wonder. And, although I predict that a pure flat tax will not emerge from its deliberations next year, the policy of a higher income tax on the rich is dead. So more progressive income tax will not be an issue next time either.

What, then, are the Liberal Democrats for? If the next election produces a hung parliament, as the spread betting market suggests it might, what would Kennedy be demanding as the price of his support? A reformed voting system, of course, but in order to put the Liberal Democrats into permanent coalition government to achieve - what, exactly?

It seems that the party's strategic difficulties in responding to Blairism, like those of the Tories, just go on getting worse. The best that can be said of the Liberal Democrats is that at least they have avoided the easy but wrong route of thinking that a change of leader is all they need. Yes, there has been plenty of grumbling about Charles Kennedy's low profile since the election, which compounded the sense of anti-climax when the party won 23 per cent of the vote and yet advanced only to 62 seats, at the lower end of its ambitions. At least Liberal Democrats in Blackpool next week are spared the gruesome prospect of a "beauty contest" of candidates with specious claims to be better able to take on Gordon Brown at the next election.

The problem with Kennedy's flirtation with the flat tax is that it looks like a time-wasting diversion. It is not the right answer to Britain's problems, but simply rejecting it - as Liberal Democrat activists next week might be tempted to do - would take the party no further forward. It is a distraction from the harder task of working out what is wrong with Labour Britain and how to put it right.

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