Paddy prepares to do business: The Liberal Democrat leader has given Tories plenty to worry about, says Donald Macintyre

WHEN Paddy Ashdown attended the late John Smith's Westminster memorial service in July it 'struck him with the force of a sledgehammer' that the people were there 'not just to mourn the passing of John Smith, but also the passing of the old Labour Party. There was something deeper about the sense of sadness.' He muses: 'Is that true? Perhaps the election of Tony Blair is an indication that it is. These are huge questions for the months ahead and it's going to be fascinating to see.'

Last night, at a rally in Brighton, Mr Ashdown gave the first sign that his famous 'equidistance' from the other two parties need not be for ever; and his weekend remark that he cannot envisage co- operation with the Tories as they are at present implies he may eventually be able to do business with the Blair-led Labour Party.

Mr Ashdown seems a good deal more settled at the end of what he calls an 'extraordinary summer' than he did at the beginning of it. Then, his reaction to Tony Blair's accession to the Labour leadership seemed uncertain, even testy. Now he professes to be excited about the political future. He talks glowingly of the election of Mr Blair - 'a person of rare ability and talent' - as good for British politics and good for the Liberal Democrats. 'If we have more people on our agenda we have more chance of getting it through . . . I have always taken the view that what we need is an electable Labour Party, and if Tony Blair can deliver that, it's a very good thing.'

There is a tension, though not an unresolvable one, between the two tasks Mr Ashdown has this week. One is subtly to prepare his party for the possibility of a different relationship with the emerging Labour Party. The other is to redefine the Liberal Democrats' independence and distinctive share of an ideas market in which Labour is suddenly a formidable competitor.

Mr Ashdown is understandably more voluble about the second task than the first. He is optimistic about his own party. His talk is not of breakthroughs but, more soberly, of the solid territory - including geographical territory - that the party, with its first two Euro-seats and a further 1,000 council seats in the May election, has established. He sees it as a base from which its task is to act as the 'front marker' in 'mapping out ideas for the agenda for change'.

Those ideas - the ones that make the Liberal Democrats different - still, he insists, defy the old labels of right and left. 'Our view that taxation has to be shifted away from wealth and jobs and on to pollution and the use of finite raw materials - left or right? Our view that people should have more control over how their money is spent - left or right? Our view that you have to have a devolved system of government in which the community plays a larger part - left or right? As he points out, both David Willetts - one of the bright young Tory thinkers 'whom I read sometimes with tremendous excitement' - and Tony Blair are talking about community.

As usual, Mr Ashdown has been doing a good deal of thinking this summer - for example, about democracy and how to reconnect the electorate to the politicians it appears so much to despise. He has been reading the work of the independent think-tank Demos with enthusiasm. He likes the idea of a charter which measures the service an MP provides to his constituents.

He now sees the referendum as gradually becoming 'part of our political life at every level'. Nationally, it would be confined in the foreseeable future to the big constitutional issues such as Europe. Locally it should be much more a part of everyday life - on whether a regional tier of government is desirable; how much council tax voters are prepared to pay for improved services; big planning decisions. 'If,' says Mr Ashdown, 'you are going to tack on the end of town a huge bungaloid outcrop, shouldn't that town have a chance to have its say?'

He has been thinking, too, about the balance of social rights and responsibilities. A council tenant, for example, is entitled to a clear contract embodying the council's obligations. 'But there should also be much tougher controls on what the tenant's duties are: peace with their neighbours, upkeep of their gardens and so on. I see no reason why you shouldn't have an induction course for a council tenant. It's what they do in Holland.'

And he has been thinking about 'breaking down the walls' between the private and public sectors, for example in education. 'Let's say a kid wanted to learn Latin, then if the local private school provides that, why shouldn't you buy it in at unit cost? Let's say that a kid was a particularly good illustrator - why shouldn't he or she join the local apprentices at a firm like Westlands, who are learning technical drawing?'

He is unrepentant about the detailed taxation proposals his party laid out in the summer. He shows a flash of annoyance when you suggest that Labour might be criticised for stifling enterprise if it proposed a 60 per cent rate for those earning pounds 100,000 or more.

'What a lot of crap. Thatcher in 1986, 1987 and 1988 had a 60 per cent (including national insurance) rate at pounds 41,000, and 50 per cent in the last election. It's nonsense to say 60 per cent on double that is stifling enterprise.' And in tune with his belief in 'no taxation without explanation', in which hypothecation plays a limited but important part, there will be a permanent rolling 'menu with prices', a fully costed tax and spen-

ding programme updated to take account of changing circumstances between now and the election.

All this and much more, Mr Ashdown evidently believes, demonstrates the independence of his party. And he has certainly not made the clean break with equidistance that many in his party would like. When you press him further - on whether, for example, the Liberal Democrats would sit on the government side of the Commons if Labour won an overall majority - he repeats the familiar mantra: 'I don't know the circumstances of the next election and neither do you.'

But then listen to the language he uses about each party and its leader. Mr Blair, he says, shows every sign of abandoning the 'exclusivity' that was a Labour trademark under previous leaders. From what he can see from his leadership campaign speeches, 'he was saying over and over again 'we're inclusive not exclusive' and I think that's extremely important. The question is whether he can win that case in the Labour Party.'

And John Major? 'I feel sorry for him because I admire many of his qualities. I admire his decency, I admire his capacity. He's an extraordinarily tenacious man, he's put up with a terrific amount. But I don't think he has a project in his head. I don't think he knows where he wants to take the country and his party . . . He lives at a time of profound turbulence and his gifts are out of kilter. He would be a fine Baldwin, but we're not in Baldwin's times.'

It is impossible, therefore, to avoid concluding that there is now only one party which Mr Ashdown can see leading the kind of government that will enact the 'agenda for change' which he will this week dedicate his party to stimulate. Forget about an electoral pact - it is not on the cards. Nevertheless, there was quite a lot for the Tory leadership to worry about in what Mr Ashdown said last night.

(Photograph omitted)