The prime minister is in command of a "shop-soiled" government, Charles Kennedy has told his party's conference.

Launching a scathing attack on both Labour and the Conservatives, the Liberal Democrat leader insisted his party was on the up.

"Our kind of politics is people focussed - first and foremost. It's no longer a question of people being disappointed with this government," he said.

"After six years of failure, they despair of this government.

"It's our job as Liberal Democrats to be an effective opposition - and an increasingly tough one as well."

Kennedy insisted that the Lib Dems had taken a "principled and consistent" stand over Iraq.

The fall-out from the war was a "a devastating indictment of Labour in power".

The prime minister's government was "tarnished for good", the conference heard.

"No more glad, confident morning for this shop-soiled Labour government," he said.

"They seek to manage not lead; to manipulate, not tell it as it is.

"I don't actually subscribe to the view that all power corrupts.

"But absolute power - when secured on the back of massive parliamentary majorities, which don't reflect the balance of political opinion in the country - can corrupt absolutely."

And he insisted that MPs would have taken a different stance if the government had been honest with them.

"If the British House of Commons had known then what it knows now - about the events leading up to that fateful parliamentary debate and vote on committing our forces into war in Iraq - then the outcome could and should have been fundamentally different," he said.

Under Tony Blair the government's instinct is to "shroud itself in secrecy" he claimed.

"To act like the office of a president instead of as a collective Cabinet government held to account by the elected House of Commons," said Kennedy.

"This is supposed to be a parliamentary democracy. What we've seen is a small clique driving us into a war, disregarding widespread public doubts. That is not acceptable."

But he had harsh words for Iain Duncan Smith's Conservative Party of "charlatans and chancers".

"Do you share with me a certain distaste at the sight now of the Conservative leadership criticising the consequences of a war for which they were the principal cheerleaders," he said.

"They're a party of defeat - and in retreat," added Kennedy.

"In fact, they're increasingly not a truly national political party anymore."

And he insisted that under Duncan Smith the Tories were set to become the "third party" of British politics.

The woes of both government and opposition presented a unique chance for the Lib Dems, he said.

"The other parties between them are offering us an unprecedented opportunity," said Kennedy.

"The Tories remain paralysed - as they have been for the past 10 years - by feuds and rifts."

"This year, be in no doubt - we are overtaking the Conservatives."

And he insisted that the Brent East by-election was no blip in his party's fortunes.

"With the others in disarray, people want us to be more ambitious. And I don't lack ambition for us, I want to see our ambitions realised for them," said Kennedy.

And he signalled that he had high profile Tories in his sights as the next election nears.

"We've panicked Michael Howard in Folkestone. It'll be something of a goodnight for him, come the general election," said Kennedy.

"And as for Theresa May - I wouldn't want to be in her shoes in Maidenhead.

But he also wanted to extend his party's grip on previously safe Labour territory.

"We've shown the Labour Party that the days are over when they could take strongholds like Durham and York for granted," said Kennedy.

"Next June, we're set to advance deeper still into Tory and Labour territory.

"Labour had better watch out in places like Newcastle, Huddersfield and Sheffield.

"And the Tories had better watch out everywhere.

"We're coming after you both - and the voters are coming with us."