Sir Menzies Campbell: Cut taxes for the low paid and hit polluters instead

When Labour was elected in 1997, the Liberal Democrats shared much with the new government: a desire for democratic reform, a commitment to social justice and a belief in the United Nations. We welcomed the Government's spending increases in health and education. It was necessary to correct the underinvestment of the Tory years.

So where did it all go wrong? Labour has failed the public services. They have not spent the money well. They have failed to allow the professionals to get on with their jobs. And all the time inequality continues to grow. Under Labour taxation is complex, stealthy and unfair. Government is wasteful, inefficient and authoritarian. Labour tramples on our freedom at home and ignores international law abroad. New Labour has pandered to the right and ignored the liberal centre of politics.

As for the Conservatives, David Cameron's rhetoric - and that so far is about all we have had - does not change the nature of his party. Who honestly believes that 198 Tory MPs, elected on one of the most right-wing manifestos seen in this country, have changed their values?

The Liberal Democrats will retain our place at the progressive, liberal centre of British politics - the party of ideas, close to the heartbeat of the British people.

What does that liberal centre stand for? Britain needs a new approach to tax that reflects the growing sense in many low-income and middle-class households that taxes are unfair, over-complicated and penalise hard work. It is possible to be innovative and redistributive at the same time. We should be cutting the burden of direct taxes on the low paid and Middle Britain, and raising taxes on those who pollute the environment and on the very wealthy.

The Liberal Democrats are the one major party which takes the environment seriously. And yes, that does mean environmental taxes will rise. Climate change is the biggest challenge facing the world. The next 10 years are the point of no return - what we do now affects our children and grandchildren.

That is why we need to provide incentives to encourage the right behaviour and to penalise the polluters. A new generation of nuclear power stations is not the answer to climate change. They would come too late, be too expensive and too risky.

Britain aches for a democratic revolution - we need to restore accountability and legitimacy to government. Whitehall and Westminster must regulate less, legislate less and tax less. Fewer ministers, fewer MPs, fewer special advisers, fewer civil servants, fewer departments, fewer quangos - electoral reform for the House of Commons and local government and, at long last, an elected second chamber.

We need to bring an end to the monolithic centralised state that allows the Chancellor to dictate education and health policy to local communities. We need to empower local government and place greater influence in the hands of the electorate. Education and learning provides a route out of poverty. We should be ashamed that, in Britain, 40,000 children go to secondary school each year unable to read. These children are invariably the poorest and most disadvantaged. We should investigate the possibility of targeted funding by pupil, so schools have an incentive to accept and improve the education of the poorest in society.

Those of us who care about social justice must also care about criminal justice. The rule of law must be protected. People should not have to live in an atmosphere of fear or tolerate violence. I will never waver in my determination to uphold civil liberties and fundamental freedoms; nor will I waver in my view that breaking the law has consequences and, in appropriate cases, should carry punishment.

Deterrence and detection are much more likely to work with locally based, neighbourhood policing with strong ties to the local community. That is why we oppose the creation of super-regional police forces - yet another example where people feel they have no control over the decisions that affect their lives.

This is the liberal centre of politics. The Liberal Democrats have a great opportunity. Unlike the Tories, we don't have to reinvent ourselves. Unlike Labour, we don't have to shore up a crumbling edifice. We are closest to the values of the British people, who want a government that promotes freedom and choice, challenges unfairness, attacks injustice and confronts prejudice.

But the Liberal Democrats have to be able to meet the challenge - to become more credible, more disciplined and more professional. Since being elected leader 100 days ago, I have begun that process - implementing programmes to increase diversity in candidate selection, to streamline policymaking and to sharpen our campaigning.

The sky is the limit.

The writer is the leader of the Liberal Democrats