Campbell backs calls for tougher green taxes

The Liberal Democrats must embrace stringent green taxes, Sir Menzies Campbell said yesterday in his first major speech as new leader of the party.

He urged the Lib Dems to "think afresh" and signalled his support for higher taxes on air travel, with allies suggesting petrol and even domestic fuel use might also be affected. "We've got to be honest enough to say to people - look, cheap flights come at a cost far greater than what you actually pay for them," he told BBC1's Sunday AM programme.

Sir Menzies also paved the way for abandoning Lib Dem plans to raise the top rate of income tax to 50p as he addressed the spring conference in Harrogate. "We should avoid being fixated on one tax rate," he told members in a speech which received a four-minute standing ovation.

Economically liberal MPs fear the 50p rate makes the party look anti-aspirational. Persuading activists to drop it would be easier if the changes came as part of a package including taxes on environmentally damaging behaviour when the party's tax commission reports back to the autumn conference.

The Lib Dems' starting point - that the poorest should not pay a higher proportion of their income in tax than the richest, as they do at present - is unchanged. Other taxes, such as that on capital gains, could be tweaked to ensure that the rich pay more. "First, the tax burden must be lighter for those on lowest incomes," said Sir Menzies. "Second, the tax system must provide incentives to companies and individuals to behave in a way that sustains our environment. Third, the system must be simple - it must support enterprise and must not stifle it."

Privately, senior Lib Dems say that measures could include raising the tax on petrol and household fuel, with the latter offset by targeted support for the poor. But an increase in petrol duty would be hugely unpopular in the many rural constituencies held by the party.

Sir Menzies yesterday sought to reassure Lib Dems alarmed by the rightwing dominance of his campaign, stressing that he is a centre-left politician. He will also be keen to play down the Northern Ireland secretary Peter Hain's warning that Lib Dems could form an "unholy alliance" with the Tories to prevent Labour winning the next general election. But he praised activists for backing North Norfolk MP Norman Lamb's controversial proposals to part-privatise the Royal Mail, adding: "Liberal democracy cannot be a struggle between those who wish to modernise and those who do not. To be a Liberal Democrat is to be a moderniser."

He has promoted the widely respected trade and industry spokesman to become his chief of staff. Mr Lamb will liaise with colleagues and coordinate the Lib Dems' overall message. Sir Menzies will today announce his new home and foreign affairs teams and is expected to confirm that Vincent Cable will remain as treasury spokesman. He is tipped to make Chris Huhne environment spokesman, and yesterday's speech echoed his defeated rival's stress on green issues. Mr Huhne pointed out that revenue raised by green taxes had fallen as a share of GDP since 1999.