Ashdown sets out policies as fear of Blair grows

PADDY ASHDOWN'S efforts to stem speculation that Liberal Democrat supporters will haemorrhage away to a Labour Party under Tony Blair reached a new pitch last night.

In a key speech to business leaders, the Liberal Democrat leader emphasised eight economic policy distinctions. He said that the Liberal Democrats were marked out by:

Support for an independent Bank of England;

A savings target at the heart of macro- economic policy;

A pledge to earmark 1p in the pound of income tax revenue to improve education and training;

A long-standing commitment to late debt legislation to help small businesses;

Opposition to a national minimum wage and support for decentralised pay bargaining;

Support for the beefing up of the Monopolies and Mergers Commission and the Office of Fair Trading;

A clear commitment to the eventual goal of a European single currency;

A shift in taxation away from employment and on to pollution and the use of finite resources.

The address to the Confederation of British Industry Parliamentary Dinner in London comes in the wake of the clear social democratic - or 'ethical socialism' - message forcefully set out by Mr Blair, front-runner in the Labour leadership contest, in a speech at the weekend.

While that speech is provoking unrest on Labour's hard left, it could equally presage the Liberal Democrat nightmare of heavyweight former SDP figures peeling away to Mr Blair's cause. Mr Blair is to amplify his vision of Labour's future in a detailed leadership campaign statement, expected tomorrow.

Mr Ashdown plans to spell out philosophical, or 'directional', distinctions between his party and Labour in a morale-boosting address on Saturday to the Association of Liberal Democrat Councillors - the sphere where the party can claim significant strength.

Mr Ashdown insisted last night that his party had a distinctive approach and distinctive policies. 'However much it pains those who like to see everything in Britain in two-party terms, we are a powerful political force in this country, and we are not going to go away.'

The Liberal Democrats have denied strongly that they are in a state of panic and that Mr Ashdown has been seriously rattled by the emergence of Mr Blair. But Mr Ashdown's attempt to up the ante in the stakes with Mr Blair comes amid a hardening of belief at Conservative Central Office that the next election will be a straight Tory-Labour fight which the two main parties are equally poised to win with an overall majority.

Despite the third party's good showing in the European elections in South- west England, it achieved an average national share of the vote of only 17 per cent, much to the relief of Tory MPs in a number of seats where the Liberal Democrats are currently second.

Tory Central Office thinks Mr Blair's annointment as Labour leader will cause a fall-off in tactical voting at the next election, enabling some Tory candidates whose seats are at risk to benefit from a split vote for the other two parties.

Mr Ashdown emphasised that the Liberal Democrats were free from the 'purse-strings of vested interests . . . the shackles of past ideologies and from the spectre of financial irresponsibility. We offer honesty about the choices we face and the costs of what we propose for Britain's success tomorrow.'