Sir Menzies Campbell would cut the basic rate of income tax from 20p to 16p in tax changes that the Liberal Democrats say will leave households earning up to about £68,000 better off.

Pollution taxes on cars and flights would fund the cuts, along with the closure of a tax loophole for high earners. The party also reaffirmed its commitment to replacing council tax with a local income tax.

Vince Cable, the party’s Treasury spokesman, insisted that this meant about 90 per cent of households would be better off under the tax-neutral package. But he confirmed that approximately two million households would be worse off.

To pay for the £19.2 billion cut in income tax, the party would raise £6.7 billion from higher green levies and £7.5 billion from scrapping tax breaks on pension contributions for high earners. A further £6 billion would be brought in by closing the capital gains “loopholes” exploited by the private equity industry.

The proposals replace a similar package put forward by the Lib Dems before Mr Brown’s surprise 2p income tax cut in his final Budget as Chancellor.

Sir Menzies accused Gordon Brown yesterday of introducing capital gains rules that meant that some of Britain’s wealthiest people paid “little or no tax at all”. “The unacceptable reality in Britain today is that the poorest pay a bigger proportion of their income in tax than the super-rich,” he said.

The proposals will be presented to activists for approval at the autumn conference. The Liberal Democrats’ attack on private equity comes amid growing controversy about the industry’s apparently low tax bills and the Government’s seeming reluctance to make it pay more.

Alistair Darling, the Chancellor, has ruled out a “knee-jerk” clampdown on the sector, while hinting that he will act to stop abuses.

The Liberal Democrats also hope to reduce the stamp duty bill for all home sales under £500,000 and raise the threshold for paying inheritance tax to the same sum. The green taxes would focus on aircraft and the most polluting vehicles, costing the average household £289 a year.

The party said that its plans had been checked over by the independent Institute for Fiscal Studies.

Dr Cable said that there was now an appetite for higher taxes on the very rich. “There is a public mood that suggests that what we call the super-rich should pay significantly more,” he said.

“We don’t want to drive people away, but there is a case for rebalancing which is what we plan to do.” He admitted that about two million households — about 10 per cent of the total — could pay more tax under the Lib Dems’ plans. But 90 per cent would be better off, he said.

“The vast majority of people on low and middle-incomes would be significantly better off because most of the increased taxation would come from the very wealthy,” he added.

The Tories accused the Liberal Democrats of hurting millions of families with the proposed taxes.

Philip Hammond, Shadow Chief Secretary to the Treasury, said: “As ever, Lib Dem policy falls apart on close inspection. They say they are helping families, but when you look at the small-print of the Lib Dem proposals, you find that millions of families will be hit by their proposals for a new local income tax.”

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