Liberal Democracy is founded on the belief that individual freedom can only be truly expressed if the shackles of poverty and ignorance are removed first. This was recognised by our predecessors a century ago and their thinking underpinned much of the progress that has been made in the last hundred years. Today, Britain is a rich society, but it is disfigured by unacceptable levels of poverty, and by a lack of opportunity and social mobility.

It should be a source of shame to the New Labour Government that inequality in this country is now greater, and social mobility no better, than it was when it came to power in 1997.

Progress in tackling child and pensioner poverty has been slow. The emergence of ghettos of deprivation, within metres of some of the most affluent residential areas in Europe, entrenches the poverty trap for those families who live in the poorest wards.

Anyone who doubts the dangers of such social polarisation, need only visit some of the largest cities in the United States – cities divided across stark social and ethnic lines – to see how fractured society can become. It is in no one’s interest, not least those who enjoy high standards of living, to allow such differences between the rich and poor to become embedded in society. Society as a whole, from top to bottom, will become less secure, less at ease with itself.

New research evidence now suggests that the most unequal societies are also the least contented ones.

I want to reassert the Liberal Democrats’ role in speaking out for social justice. New Labour is failing to deliver, and the Conservatives have nothing more than a skin deep interest in social emancipation.

I want to develop new thinking to revitalise social mobility in this country. Upward mobility in Britain is now less than it was under previous Conservative Governments. Where you live, what your parents do, which school you go to, all now count even more than before in determining what your life chances are. I believe passionately in the value of aspiration. I believe passionately in the vitality of a society in which the desire for self improvement is recognised and rewarded. A society which thwarts aspiration is not a liberal society.

I want to see the tax burden reduced for those on those on lowest incomes. I want to see public services made more accountable to the local communities they serve. And I want new thinking to overcome the ghettos of poverty in this country. We cannot sit idly by while our great cities and communities are pulled apart by extremes of wealth and poverty.

Affordable Housing:

Unlike other countries, we have a poor record at using planning for progressive social ends. Without a new approach to the design of our social environment, the shameful lack of adequate, affordable, housing in this country will continue to blight the lives of so many families. We are in the grip of an affordability crisis. Homelessness has doubled under Labour, and there are now 1.5m families on the waiting list for a council house. This is partly because of the Right to Buy – for every new social home built, five are sold off. House prices are now so high that there are fewer first time buyers than at any time since records began and 90% of towns are classified as ‘unaffordable’ for first time buyers. We need more homes and quickly – deliverable in part by tackling the scandal of 700,000 empty homes by cutting VAT on housing repairs.

One of my first acts as leader of the Liberal Democrats will be to establish a policy commission to look again at the role of planning and social housing, in advancing the cause of social mobility and opportunity in this country.

Education:

And I want the Liberal Democrats to lead the way once again on education – the surest way out of poverty and deprivation for those in our most disadvantaged communities. We have traditionally been the party which puts education first, I want us to reclaim this ground and renew our policy agenda.

We know that children are already set on a trajectory either to educational success or educational failure by the time they enter primary school. Yet access to early years education is still restricted by ability to pay. I want the Liberal Democrats to lead a campaign to provide affordable quality pre-school education to all those whose parents want it. This is particularly important for working mothers who invariably find themselves simply working to pay off childcare and early years education costs, without either the money or the time to develop their own professional potential further.

We should recognise that the present Government has made important progress in this area. But we should be prepared to go further, faster, campaigning for targeted interventions in primary and secondary schools, putting extra resources where they are most needed – in the most challenging schools in the most deprived neighbourhoods. 40,000 children still go to secondary school every year not able to read. This means setting the right financial priorities. In 2002/3 public spending per pupil in the UK was roughly £1600 for the under 5s, a comparatively modest sum when the importance of pre school education is compared to other public priorities. Only then will we be able to attract the best heads and best staff, and drive up standards.

In secondary schools, especially post-14, we need to give pupils more choice, to motivate them to go to school or college and to stay in education beyond16. That is why I strongly support our party’s policy to give schools more flexibility in the way the curriculum is taught. Whilst the basics should be subject to a core curriculum, pupils and teachers should be able to tailor teaching to the individual needs of students. All the evidence shows that this significantly increases pupil motivation, and improves results. High levels of truancy and large numbers of school drop outs, especially after 16, underline the disaffection many young people feel about our education system. It is a tragic waste that 25% of all 17 year olds are not in full-time education or training. Unless we motivate such young people to go to school, and to stay on in education – at school, college or in apprenticeships – we will fail them, and they won’t get the skills our country needs.

Women in Poverty:

I also want to develop policies to meet the problems faced by women, who so often bear the brunt of low pay, insufficient pensions, inadequate childcare, and family breakdown. No anti-poverty strategy can be complete without recognising the needs of women struggling on a day-to-day basis in difficult and demoralising conditions. The fact that the gender pay gap in Britain is still as great as it is, and in some sectors growing rather than narrowing, is a stark reminder of the distance we still need to travel to create genuine gender equality in modern Britain.

Ethnic Communities:

Equally, the concentration of poverty amongst some of our ethnic communities must be tackled. Despite much Government rhetoric about social integration, there is a trend towards greater ethnic separation, particularly in our larger cities. This is a complex challenge which has social, ethnic, religious and economic causes. As a party, we must do much more to represent ethnic communities by promoting candidates from ethnic backgrounds. As leader, I will ask Liberal Democrats active in our ethnic communities to develop a long term strategy aimed at fostering inter ethnic integration, and using our education and economic policies to boost the standing of ethnic communities in Britain.

Tax Reform:

Any discussion about poverty cannot be divorced from a discussion about taxation, not least because the poorest of this country still pay a higher proportion of their income in tax than the richest.

Our party is already conducting a review of our tax policies, under the experienced and wise leadership of Vince Cable. I will be applying a number of core principles to any discussion within our party about our tax policies:

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

Second, I want to explore ways in which the tax system can be actively deployed to discourage environmentally damaging activity, and reward environmentally beneficial behaviour and sustainable technologies.

Third, the tax system must remain redistributive. But I don’t want to tax for the sake of it. 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.

Under Gordon Brown the tax and benefits system has become unnecessarily complex as he has sought to use it as an instrument of central control in pursuit of his own policy objectives.

Fourth, we must build upon our proposal for a Local Income Tax and devolve the ability to raise resources for the provision of local services to local communities. Political devolution cannot operate successfully without fiscal devolution. 96% of our taxes are raised by national government. That means local government is in thrall to Whitehall, financially dependent on handouts, all of which come with strings attached. Councils only raise 25% of their expenditure locally – we would increase this over time, making local government free to serve the needs of local people as they see fit.

Fifth, I am clear that there is now no great public mood to increase the overall burden of taxation. In the eight years since Labour came to power, public expenditure has increased from just over £300bn to just over £500bn. This level of increase is without precedent, and must now level off.

Finally, whenever a decision is taken to fund new demands from the public purse, I want to see as much of the revenue raised from cutting back on non essential expenditure as possible. That is why the current spending review, led by Vince Cable and Chris Huhne, is so important.

In the coming years, as pressure grows to slow the growth of public spending, the debate will no longer be about the overall levels of funding of public services – a debate which has dominated British politics for the last decade – but about how public money can most effectively and accountably be spent. That is an essential intellectual shift which the party as a whole has to understand and embrace.

If the Liberal Democrats are to be credible on public finances and on social policy, we will need to demonstrate that we are capable not only of suggesting extra spending, but also identifying savings. Only in this way will the party be able to free up resources for its key spending priorities.

We need as a matter of urgency to devise a system that is both simpler and fairer and that maximises opportunity, not penalises achievement.