<TABLE cellSpacing=0 cellPadding=0 width=629 border=0><TBODY><TR><TD colSpan=3>Lib Dems pledge to cut income tax

</TD></TR><TR><TD vAlign=top width=416><!-- S BO --><!-- S IIMA --><TABLE cellSpacing=0 cellPadding=0 width=203 align=right border=0><TBODY><TR><TD> Sir Menzies wants to hit polluters and the "very wealthy"

</TD></TR></TBODY></TABLE><!-- E IIMA --><!-- S SF -->Sir Menzies Campbell is unveiling a radical shift in the Lib Dem's approach to tax with a 2p cut in the basic rate.
The £20bn cost of the cut would be partially met by a £7bn increase in "green" taxes on cars and flights.
The other £13bn would come from the "very wealthy" via capital gains tax changes on second homes and shares.
Sir Menzies will drop the long-standing policy of higher overall taxes, with the Lib Dems instead championing "fairer, simpler and greener taxes". <!-- E SF -->
Plans to raise taxes to 50p in the pound for high earners have also gone, Sir Menzies will confirm in his speech which comes as he prepares this weekend to mark 100 days as leader.
'Wealthy' to suffer
The party will promise income tax cuts for everybody - 2p off the basic rate, and two million of the lowest paid will be lifted out of income tax altogether.
The new environmental taxes would mean hitting airlines and people who drive "gas guzzlers" - with road tax likely to rise to over £2,000 for the most polluting new cars.
<!-- S IBOX --><TABLE cellSpacing=0 cellPadding=0 width=208 align=right border=0><TBODY><TR><TD width=5></TD><TD class=sibtbg> My aim is to cut the burden of direct taxes on the low paid and Middle Britain and pay for it by raising taxes on those who pollute the environment and on the very wealthy


Sir Menzies Campbell



<!-- S ILIN -->Analysis: Ming's 100 days
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Sir Menzies will say: "My aim is to cut the burden of direct taxes on the low paid and Middle Britain and pay for it by raising taxes on those who pollute the environment and on the very wealthy."
But he is unlikely to say what he means by "very wealthy", or name a figure of just how many people would be affected by his plans, although it is understood to be "hundreds of thousands rather than millions".
In part that would involve ending capital gains tax breaks for people who have second homes or large share portfolios.
Hard to predict?
Robert Chote, of the Institute of Fiscal Studies, warned that environmental taxes were difficult to manage.
"One dilemma they face here is that the more successful environmental taxes are in getting people to pollute less and getting people to drive less, obviously the less revenue you get in," he told BBC News.
"That means higher tax rates for everybody who still ends up paying them," he said adding that revenues would be hard to predict.
<!-- S IBOX --><TABLE cellSpacing=0 cellPadding=0 width=208 align=right border=0><TBODY><TR><TD width=5></TD><TD class=sibtbg> They are based on such flimsy costings - they could only be produced by a party that knows it is never going to have to introduce a real budget. It is not a serious piece of work


George Osborne
Tory shadow chancellor

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Conservative shadow chancellor George Osborne said the proposals looked like they had been "worked out on the back of an envelope".
Vincent Cable, the Lib Dems treasury spokesman, said the emphasis nowadays had to be on "value for money" after a "huge splurge of spending".
"We are passionate about fairness in taxation and this, in our view, is what fairness means," he told reporters at a briefing in Westminster.
Around one million people would be taken out of the higher rate of tax, Mr Cable explained.
He added that the plan not to increase taxes would potentially leave them competing on the same political ground as the Tories who have ruled out tax cuts ahead of the next election.
"I think it does put the Tories on the spot. Since they have made a very clear commitment not to cut taxes, they will presumably be fighting the next election on the same ground," he said.
Ethnic candidates
Sir Menzies meanwhile use a speech to say that if the Lib Dems are serious about power they must reform.
"Our party has remained largely unchanged since we came together in 1988. Change is overdue, necessary and urgent," he will say.
But he insisted under his leadership the Lib Dems would "retain our place at the progressive liberal centre".
"The Liberal Democrats have a great opportunity," he wrote in Thursday's Independent.
"Unlike the Tories we don't have to reinvent ourselves. Unlike Labour we don't have to shore up a crumbling edifice ... the sky is the limit."
He will announce Lib Dem Ed Davey is to replace Charles Kennedy's ally Tim Razzall as chairman of the party's campaigns committee.
And he will reveal he has written to the chairmen of all local Lib Dem branches saying parties choosing ethnic minority candidates to run for the next election will be a "significant factor in determining how much central support" they get. Sir Menzies will also call for a slimmer Whitehall and a less bloated Westminster.<!-- E BO -->

</TD></TR></TBODY></TABLE>http://news.bbc.co.uk/1/hi/uk_politics/5056200.stm