I want the tax burden on those on lowest incomes to be significantly reduced.

I want to start by paying tribute to the work of the Liberty Network and thanking you for all that you do.

The Liberal Democrats exist to make big changes in British politics. We appreciate that we can only make a difference if the party is able to run effective campaigns. So we are immensely grateful to all of you for your support. And we value your work in providing a forum for discussion about some of the issues in British and world politics.

Despite all the dramas of recent weeks, I am very optimistic about the future of the Liberal Democrats.

We can make a difference to politics in this country. We can make a difference in the economic debate. We can play a part in making the economic policy of this country.

One of the reasons is the quality of our team. We have in Dr Vince Cable one of the most authoritative speakers on economic matters that any party has ever been able to offer. He is backed up David Laws on the frontbench at Work and Pensions and Norman Lamb at Trade and Industry. And in our House of Lords team, we have the practical business experience and acumen of Iain Vallance, David Alliance and Colin Sharman. I want that team to come strongly together as a business and economics team.

There is another reason the Liberal Democrats will have some tremendous opportunities over the next few years. I am sure that barring a major mishap, Gordon Brown will lead the Labour Party into the next General Election. I do not know when he will take over from Tony Blair. But I am quite certain than when he finally becomes Prime Minister, Gordon Brown’s reputation will be tarnished.

At the last General Election, he kept on telling us that the economy was stronger than it has been for 300 years. We can all agree that we have seen good rates of growth in the last few years. But that growth has been kept up by high levels of consumer spending – fuelled by over-inflated house prices – and, more recently, by growth in public spending. It is not the result of new business investment or productivity increases.

Now, consumer spending is slowing down and the share of this country’s national income that is used to service private debt has now reached 20 per cent. We are already seeing where this could lead, as mortgage repossessions and personal bankruptcies are already rising.

At the same time, the growth in public spending is due to level off; indeed, despite the fact that Gordon Brown has told us for years that he is a prudent manager of the public finances, they are now under immense pressure. One of his specific pledges was that net public debt would stay below 40% of GDP over the economic cycle. But that promise is likely to be broken over the life of this Parliament.

For years, Gordon Brown has talked about the need to address this country’s long term economic weaknesses. But productivity growth – has now slumped and investment in commercial research and development has also fallen.

Labour has run out of steam. But the Conservatives offer no alternative. We can never forget the ignominious night of Wednesday, 16 September 1992 – “Black Wednesday” when a battered and exhausted Norman Lamont announced Britain’s forced withdrawal from the ERM. And who was skulking in the shadows but the chancellor’s apprentice, none other than David Cameron. It is little wonder that he says that the Conservatives will not necessarily speak up for business and enterprise! Otherwise, he just says that we will be like Tony Blair and Gordon Brown.

After the abject failures of Gordon Brown and the empty words of David Cameron, I am sure that the people of this country will soon be crying out for a fresh alternative.

I give you my word that if I am elected as leader of this great party, I will do everything I can to make sure that we offer them that choice.

I am convinced that we will be able to do so if we stand by the principles of modern economic liberalism.

  • Supporting open markets that liberate people’s talents and energies as the best way to create wealth.
  • Recognising that the government must act where people’s freedoms are endangered.
  • Building and investing for the long term
  • Ensuring that our prosperity is environmentally sustainable.

With those in mind, I want to set out three priorities tonight.

First, we must to go into the next General Election with a programme of major tax reforms. Taxes must never be punitive, and should be kept as low as possible within the bounds of what we have agreed needs to be funded from general taxation. At the same time, I want the tax burden on those on lowest incomes to be significantly reduced. I want to explore ways in which the tax system can be actively used to discourage activity that is bad and reward behaviour that is good for the environment. And after years of Gordon Brown’s tinkering and meddling, the tax system needs for the business sector to be simplified and less subject to change. In addition we need certainty for business not the sort of nonsense that led to the abolition of the Operating and Financial Review after business has spent years planning for it! Not least because business recognizes the obligations it has to society – even if the government misses the point.

Second, we must make more tough choices in government spending. Whenever a decision is taken to fund new demands from the public purse, I want to see as much of the money as possible to come from cutting back on non essential spending. Vince is currently carrying out a major review of government spending and I will fully support him in that endeavour.

This is a matter of economic reality. Gordon Brown promised to follow the ‘golden rule’, which states that over the economic cycle, the Government will borrow only to invest and not to fund current spending. He has stretched that rule to breaking point. We have always supported the golden rule; in fact, we were the first party to follow it when assembling our own manifesto. We cannot back away from it now. In any case, there is now no great public mood to increase the overall level of spending or taxation.

Third, we need a skills and education revolution. I want a new emphasis on skills. We need individuals equipped for a world of fierce global competition and the rise of China and India in a world economy which may not be dominated by America. I will ensure that basic skills are given priority. It cannot be acceptable that 40,000 children go to secondary school every year unable to read. We need to invest in schemes like reading recovery to give children the individual attention they need. We also need a major change in lifelong learning and skills development – there are too many bodies, spending billions of pounds to too little effect. I want business leaders more closely involved in how the money is spent in the towns and cities – working with local councils and local colleges and universities.

So let us Liberal Democrats be bold. I want us to promote a team across Britain which exudes competence, professionalism and practical experience. I want Liberty Network and the Business Forum involved daily with that – advising and shaping our agenda. The prize is one I am determined to achieve for the first time in a generation that the Liberal Democrats grasp the mantle of economic competence and individual enterprise.