'Liberals ditch promise to join the euro' [Observer, Sep 14]

1.53.02pm GMT Sun 14th Sep 2008

[Sep 14]: . . IN an interview with The Observer, Vince Cable abandoned the party's historic commitment to 'ever closer' European integration and its decade-long push for rapid British entry into the euro system.

Prompting a furious response from the party's pro-European wing, Cable steered them on to a more Eurosceptic course in the hope of preventing a haemorrhage of votes at the next election to the traditionally anti-Brussels Conservative party.

With Clegg's full blessing, Cable dropped a commitment that was at the heart of successive Lib Dem election manifestos, saying it would be pointless to hold a referendum on entry into the euro as it is 'perfectly obvious' one 'could not be won. We would not give it (a campaign to adopt the euro) priority. We are not pushing for early entry'. He said: 'I sometimes use the visual image that it is a ship that has sailed out of the harbour. There is no point in jumping into the sea and swimming after it.'

Implying that he and his party were wrong to have pushed for entry into the euro for the past decade, Cable suggested that handing control of interest rates to the European Central Bank may have contributed to property price 'bubbles' in some eurozone countries, including Spain. 'There are various things that we have learnt about euroland, and about the eurozone, which are clearly problems that need to be resolved,' he said.

He denied that the party had abandoned its core pro-EU beliefs. But in an extraordinary shift he said it would campaign for a more decentralised, less bureaucratic EU in next year's European elections. 'There are things wrong with it [the EU]. The CAP [common agricultural policy] is a complete disgrace. We think there is a lot of institutional reform that is necessary. I think when we get to the European elections next year this will be a key message.'

The change of tack will delight those Lib Dems who argue that their efforts to defeat the Tories, particularly in the south west of England, will be severely hampered by the party's pro-euro policies.

. . Cable said he also expects a row in Bournemouth over plans to slash public spending by up to £20bn and cut the overall tax burden over an economic cycle. The economic plan - again designed to outflank the Tories - reverses the party's traditional commitment to higher spending and increases in taxation for the well-off.

Under the Clegg-Cable plans, public spending would be cut overall from the levels under Labour by identifying projects that can be scrapped, including the Eurofighter and ID cards, improving others such as the tax credit system and identifying waste.

Green taxes and new measures to stop tax avoidance would also help to fund tax cuts aimed at lower earners. The reductions would be introduced either by raising thresholds or by cutting the basic rate of tax - or by a combination of the two.

Cable said: 'A decade ago, the public mood as we read it was that people wanted to pay a bit more in tax ... because they could see that schools and hospitals had been badly neglected by the Tories, and we were at the front of the argument that more money should go in.

'But far more public spending has gone in in real terms than we argued for, and much of it has been well used - and we are proud to defend it,' he added. 'But now we have got to a point where there are seriously diminishing returns. Now people want to keep more of their own money and see it used productively.' [www.guardian.co.uk]