Kennedy cuts Lib Dem links with Labour Party

Charles Kennedy, the Liberal Democrat leader, will sever his party's links with Labour this week by pulling out of the joint cabinet committee of Labour ministers and senior Liberal Democrats.

The move is a setback to Tony Blair's plans to forge closer links with the Liberal Democrats to form an alliance aimed at keeping the Tories permanently out of power. The formal split between the parties was due to be announced yesterday but was delayed when Downing Street officials had to cope with the aftermath of the terrorist attacks in the United States, which prompted a security alert in Whitehall. The decision is expected to be announced today or tomorrow.

Mr Kennedy wants to clear the air over the Liberal Democrats' future links with Labour before his party's conference in Bournemouth later this month, when he would have come under pressure from activists to withdraw from the joint cabinet committee.

Labour tried to persuade Mr Kennedy not to abandon the formal co-operation between the parties. But the Liberal Democrat leader was cooler about the so-called Blair project than his predecessor, Paddy Ashdown, had been and was frustrated by Mr Blair's decision to shelve plans for electoral reform at general elections. His aides said the Prime Minister had also refused to hold meaningful discussions on proportional representation for local authorities and reform of the House of Lords.

After this week's formal split with Labour, Mr Kennedy will tell his party conference to "get serious" about becoming the "real opposition" to the Blair Government. He believes the disarray in the Conservative Party has provided the Liberal Democrats with an historic opportunity to achieve his eventual aim of replacing the Tories as the main opposition to Labour. He thinks the prospects would be enhanced if the right-winger Iain Duncan Smith becomes Tory leader. The announcement of the election result was due today but has been postponed.

Mr Kennedy was increasingly annoyed that speculation about his party's relationship with Labour was holding it back. "You don't promote Pepsi if you are Coca-Cola; why should we talk about Labour all the time?" he told his aides.

There was also growing scepticism among Mr Kennedy and his advisers that Mr Blair was serious about achieving a realignment of British politics involving the two centre-left parties. There were fears that some Blairites wanted to "swallow up" the Liberal Democrats through a one-sided merger of the parties.

Mr Kennedy, who campaigned strongly on public services at the general election in June, hopes to make further inroads into Labour's heartlands at the next election.