The Lib Dems yesterday backed plans to drop an across the board policy of higher income tax in favour of locally-determined hypothecated taxes.

The party's high command successfully saw off a minor rebellion from left-leaning members of the party's rank-and-file.

Charles Kennedy will today make his keynote speech in which he will accuse the Tories of being "the party of yesteryear".

He will tell delegates on the closing day of the conference that British politics is "up for grabs" in a way it has not been for hundreds of years.

The speech signals that the Lib Dems are to embark on a concerted campaign to win over Tory defectors.

A memo written by party chairman Mark Oaten argues that the party should "urgently look" at ways to woo Conservative modernisers.

The party is also set to turn its fire on Iain Duncan Smith in a concerted campaign to damage the Tories.