Hughes fails to back Campbell on 50p tax

Sir Menzies Campbell today suffered a setback to his proposed tax shake-up when Liberal Democrat president Simon Hughes refused to give him his full backing.

Left-winger Mr Hughes made clear in an interview with the Evening Standard that he would not be championing moves to ditch the Lib-Dem's "totemic" 50p top rate of income tax for the rich. As a member of the Lib-Dem shadow cabinet Mr Hughes cannot publicly oppose axing the 50p rate.

Making clear he was stopping short of giving Sir Menzies his complete support on this issue, he said: "The proposal has gone to conference with the support of the shadow cabinet. I have not dissented from that."

The North Southwark and Bermondsey MP, who was defeated by Sir Menzies in the battle to succeed Charles Kennedy, added: "My colleagues know that I'm not going to participate in the debate. I explained to them and it was accepted that as president that was the right thing to do.

I'm bound by the result. If the tax proposals go down, they go down. It is absolutely not the end of the world. My message to the party is listen to the debate and, if you are persuaded, vote for the new proposals."

However, his stance is likely to fuel the revolt against the tax reforms at the Lib-Dem annual rally in Brighton.

If Sir Menzies loses the vote on tax tomorrow it would be a big blow to his leadership. He and the party's Treasury spokesman Vince Cable are proposing tax cuts of £18billion with the axing of the 10p income tax rate, a 2p cut in the standard rate and higher starting and upper thresholds.

These would be paid for by £8billion in green taxes, including far higher vehicle excise duty for most new cars, of up to £2,000 for gas guzzlers, and higher aircraft fuel duty which would almost certainly lead to more costly tickets. Billions extra would also be raised from targeting the rich with changes to capital gains tax and pension tax relief.

Mr Hughes believes delegates will back the shake-up including dumping the 50p rate. He said: "It's more radical than the present policy in terms of redistribution of wealth and assets. The one thing it obviously loses is the totemic symbolism of the 50p rate. I have up to now supported that."

Sir Menzies sought to play down the significance of a defeat in the vote on tax, saying: "This is not High Noon."

However, Lib-Dem environment spokesman Chris Huhne warned that it would be "extremely damaging" if delegates reject the tax reforms.

Front-bench MP Dr Evan Harris is leading the rebellion which is being backed by five other MPs, Norman Baker, Phil Willis, Mike Hancock, Sandra Gidley and John Leech. He has tabled an amendment to keep the 50p rate.

A second amendment aims to ditch the condition that the tax shake-up is revenue neutral which, if approved, could lead to even higher taxes.