'There is no law which says the Liberal Democrats must remain in third place'

Charles Kennedy predicted yesterday that he could be in government in seven years' time because of Tory disarray and voter disillusionment with Labour.

The Liberal Democrat leader, in an interview with The Independent, predicted a slump in Labour support at the next election and said Tory ineptitude gave the Liberal Democrats a historic opportunity to grasp power at Westminster for the first time since David Lloyd George.

Mr Kennedy, on the eve of his key-note conference speech, said publicly for the first time that he would like to be Prime Minister, and claimed that his party had now proved itself mature and experienced enough to govern, while Labour was "fraying at the edges".

But he did not rule out a coalition with Labour and said Tony Blair was a man he could work with, although he expressed frustration at his failure to introduce a referendum on either proportional representation or the euro.

On the euro, he said he had "pressed every conceivable button over the past two years" to convince the Prime Minister to hold a referendum, and frequently told him to "get on with it" in private meetings.

"[In private meetings] he invariably smiles sweetly in that delphic way of his which says nothing," Mr Kennedy said.

"At the beginning of this calendar year I was 60-40 optimistic there would be a referendum. Now at the very best, it's 60-40 pessimistic and probably a bit worse than that."

Meanwhile, confusion among Conservatives gave the Liberal Democrats the best chance in decades to increase its standing, he said.

When his MPs returned to the Commons they would be "sharpening their focus" to attack the Tories and replace them in the public mind as the most credible party of opposition.

"We can overtake them in terms of credibility and resonance and we see a lot of that coming through," he said.

"We don't want to lose the fun, but it does require a degree of discipline. I am not trying to turn people into po-faced beings – least of all myself – but we are having to work harder."

He said the Liberal Democrats were "closer to the heartbeat" of the country over international affairs and the domestic agenda than the Conservatives. "We are far more persuasive and more professional than they are at the moment," he said.

In his conference speech, the Liberal Democrat leader will attack the Tories as "faded", "jaded" and "the party of yesteryear". He will say British politics is "up for grabs in a way it has not been for 100 years" and portray the Liberal Democrats as the "party of tomorrow", adding: "There is no law which says that the Liberal Democrats need remain third amongst Britain's parties."

Yesterday Mr Kennedy predicted the party would make a "sizeable step forward" at the next election.

"There is clearly fraying at the edges of Labour [over Iraq] and the question of delivery of public services, so I would have thought that the omens in terms of the next election are opportunities are even greater than the last one," he said. "We will be starting from a stronger more credible base."

He said the conference had left the Liberal Democrats "in a much sharpened and coherent position as a party" as a result of what has taken place this week.

Mr Kennedy scotched rumours that he did not have the will to form a government and said his goal was to enter Downing Street.

"I would love to be Prime Minister – there's no doubt about that. It carries a better salary," he said.

"The Liberal Democrats carries no salary whatsoever. So even when the going gets tough, you always have that to console yourself with."

He said it was pleasing to see high-quality debates take place in the conference hall. "But it would be infinitely more satisfying to leave Brighton and go back to London and start putting those policies into practice."

Mr Kennedy said his goal was to form a Government outright in seven years time, an aim he said was "achievable".

But he did not rule out a deal with Labour if his party did not have enough MPs to form a majority government.

"You can't but keep options open," he said. "Whether you would form a government outright or whether you would be part of government is very difficult to predict in a first-past-the-post system."

He said he and Tony Blair had respect for each other "from a principled point of view", but added that he was not prepared to turn off the heat over issues such as public services and the euro.

He disagreed with Simon Hughes, the Liberal Democrat home affairs spokesman, who said earlier this week that Gordon Brown would make a more formidable opponent as Prime Minister.

But Mr Kennedy said it was impossible to judge how well a politician would cope with the pressures of Downing Street before they arrived.

"You never know how formidable somebody is going to be as a Prime Minister until they are Prime Minister. I don't think you can make an advance judgement," he said.

"Senior civil servants I know say that even when someone comes to office as Prime Minister, you only get the measure of them when they hit a crisis – a serious crisis. That's when you find out what they are like."