Has Gordon Brown found the holy grail of low inflation and unsustainable growth?

That's what his spin-doctors want you to believe.

He was right to argue that inflation is a dragon we must slay. He was right to adopt Liberal Democrat policy and give the Bank of England independence. He was also right to give the Bank a clear and unequivocal target.

But does that mean we've never had it so good?

The macro economy is performing well. We have had a soft landing.

Gordon Brown has got the economy half right. The trouble is he has got the other half wholly wrong.

The trouble with statistics is that they mask real problems for vitally important sectors of the economy.

I have been your Treasury spokesman for five years.

How different would things have been if the Liberal Democrat had been in charge of the Treasury?

We would, of course, have had an independent central bank sooner.

It would certainly have raised interest rates before the election when inflationary pressures were building and Kenneth Clarke over-ruled the Bank. Sorry, Ken, holding down interest rates before the election just meant they had to go higher after. Your fault, I'm afraid.

As soon as the Bank had its independence, interest rates started to rise sharply.

Then came Gordon Brown's first Budget. Did he assist the Bank by tackling consumer led inflation? No. He just slapped hefty taxes on hard-pressed businesses.

Gordon Brown must have been delighted when Eddie George attracted the flack for the Bank's policy. Not me, gov, would have presumably been his answer, if challenged.

But, of course, in its remit to hit the inflation target and with its only instrument interest rates, the Bank has to take the chancellor's fiscal stance as given. A more fiscally balanced budget could have helped bear down on inflation at lower rates of interest. Sorry, Gordon, you are to blame, after all.

Higher interest rates increased business costs and forced up the free-floating pound to the detriment of exports and agriculture. Farmers suffer the double whammy of having subsidies denominated in the weaker Euro and their home market under attack from cheap imports. Sorry, Gordon, you had a hand in their misery, too.

Of course, although it does nothing for our balance of payments, the strong pound is great for those who take their holidays in Tuscany, assuming they are ordinary mortals who need lira to pay for their holiday expenses. So thank you, Tony, for easing the drain on our foreign exchange reserves at Italian taxpayers' expense. Pity you couldn't take some of our hard-pressed hill farmers with you.

I wonder if Tony reflected during his Italian hols that Italy is a member of the euro.

Here is an odd contradiction the louder the complaints about the strength of the pound the less public support for membership of the euro. Sceptics are fighting to "Save the Pound". Yes, it has a ring about it, hasn't it? But somehow, it is a little hollow.

What are we trying to save? Sterling, subject of many crises, object of successive devaluations. Sterling, which exporters and manufacturers say cannot live at 3 deutschmarks yet was worth 12 DMs when we entered the common market. Sterling that was worth $5 in 1947 and $2.80 30 years ago.

And what of the euro zone? What untold horrors are they suffering? Try very low inflation, interest rates at half our level and a competitive exchange rate, all of which are beginning to stimulate recovery and growth.

Would it be such a disaster to be managing the UK economy to achieve convergence to these levels? The sheer fact of committing ourselves to membership within a clear time frame would do half the work.

Gordon Brown's claim to joining in principle, when his five pretty meaningless conditions have been met is no substitute for a policy.

Without a clear strategy he has simply replaced John Major's maxim of "wait and see" to "wait and wait and wait".

Liberal Democrats remain consistent and clear. Joining the euro can only be achieved in the open and by pursuing a clear objective of convergence. By opting out of responsibility for balancing the economy and hiding behind the Bank, the chancellor can crow all he likes about the fair weather indicators. He has no idea where we are going.

As I have shown, Gordon hasn't eliminated boom and bust from all sectors of the economy.

And he certainly hasn't done that for our public services. On the contrary, he has made things far worse.

He not only stuck to Tory spending plans that Ken Clarke told me were for the birds, he made things worse by revising his inflation forecasts upwards and creating a £5bn black hole that he never filled.

No wonder NHS waiting lists rose and education spending as a percentage of GDP fell.

I identified the fact that the effect of his extra business taxes and Tory inspired public spending squeeze would enable Gordon Brown to build up a massive war chest. And so he has.

Having put the bite on public spending he then announced his comprehensive spending review as some kind of a bonanza, when he was doing little more than take the average increase in expenditure to the sort of levels achieved by the now reviled Tories.

And now he promises to cut the headline rate of income tax and sits on a growing war chest as the economy recovers.

Liberal Democrats are clear. We are not in favour of high taxes. We are not against tax cuts. But we will expose sleights of hand. We cannot sustain overall cuts in tax and real increases in public spending.

When you receive your 1p income tax reduction count the cost of the 6% a litre petrol tax escalator, not a green tax as the chancellor claims, just another tax.

If the chancellor has a windfall of extra funds his priority must be to get the public services to a level of funding that will meet the standards we expect. More money isn't always the answer but we cannot reduce class sizes and NHS waiting times without recruiting more teachers, doctors and nurses.

More than anything these services need an end to boom and bust funding.

It was Liberals who laid the foundations for free education, the health service and the welfare state. And it is Liberal Democrats who will lead the fight for first class modern public services providing flexibility, choice, value for money and high standards.

If you are in need of treatment by the NHS, do you care how many other people are waiting - of course not? What you care about is how long you will have to wait. That's why it is Liberal Democrats in Scotland who have moved the priority away from NHS waiting lists to waiting times.

Can you reduce class sizes without recruiting more teachers - of course not? That's why it is Liberal Democrats in Scotland who have secured the recruitment of more teachers.

Can you improve access to higher education by raising barriers to entry - of course not? That's why it is Liberal Democrats in Scotland who are determined to secure the abolition of tuition fees.

While, thanks to the Liberal Democrats, Scotland is starting to face up to tough decisions, the rest of the country must wait.

Gordon Brown has promised to cut income tax in next year.

Is cutting income tax more important that cutting NHS waiting times?

Is cutting income tax more important than cutting class sizes for all school pupils?

Is cutting income tax more important than funding quality further and higher education?

Liberal Democrats don't think so.

So, I can announce today, that, if Gordon Brown puts income tax cuts ahead of cutting NHS waiting times, class sizes and the needs of colleges and universities, Liberal Democrats will vote against the next Budget.

So you see, fellow Liberal Democrats, Liberal Democrats would make a difference. We would create a stronger, better-balanced economy and lay the foundations for real and lasting improvements in the quality of our public services.

Our new leader, Charles Kennedy, has rightly put the promotion of social justice at the top of his priority list.

Gordon Brown will tell you this is all being achieved through the New Deal and the Working Families Tax Credit. Our guru on this, Steve Webb, has rightly blasted the government's claims.

The Working Families Tax Credits is flawed in a host of ways. It will actually take benefits away from thousands of women. It will impose massive costs on business. It is open to fraud. Staying at home to look after the kids will be penalised. Unemployed people with mortgages who have no choice but to accept low paid work will be worse off.

Liberal Democrats would target this benefit more effectively.

We would also start a radical reform of the tax system to benefit all the working poor.

At the end of the war a working man with a family could earn 50% of the average industrial wage before paying any tax. That proportion is now 25%. Tax cuts have been targeted at the higher income groups.

The time for a reform of the tax system to make it progressive and fair is long overdue. Liberal Democrats would start raising the level at which people start paying tax - the 0% band. Where Gordon Brown has made the tax system more complicated than ever we would simplify it.

We could reduce the number of allowances by raising the starting level of tax towards £10,000. Is it asking too much to expect high earners to pay a 50% tax on their earnings above £10,000? Simply introducing that and concentrating on raising the threshold would take millions of people out of tax at no net cost to the Treasury.

Liberal Democrats favour green taxes. Of course, if people are to change their life style to be more environmentally friendly, they need a choice - something the government has failed to provide. But new taxes should not just be a wheeze to fill the war chest. That can and should be used as a means to lower other taxes in a way that are fair and progressive.

Liberal Democrats' carbon tax, applied in this way, could, along with other measures, take up to 10 million current tax payers out of tax altogether - allowing a two income family to earn nearly £400 a week free of tax.

This is real, practical, radical social justice - and that is what the Liberal Democrats are all about.

One of the things the government is very keen on is performance tables. School children face constant testing. Schools and teachers are constantly reviewed by league tables. Hospitals, GPs and others in the health service face increasing assessment.

Let us accept that, although there is a lively debate about the value of these, they are, albeit crudely, an attempt to monitor and raise standards.

Isn't it funny though that when the government come to be assessed on their performance they do it themselves. I bet our school kids would love to mark their own exams - and schools publish their own league tables.

Picture the scene in the headmaster's study. Papers for marking from T Blair, form number 10. Let's have a look. Yes; good, not bad, excellent, spot on, up to the expected standard. 9 out of 10, alpha double plus. Oh name of marker hmmm T Blair!

In time the people will have a chance to give their verdict.

When that happens, Liberal Democrats will give the government credit where it is due. But we will hit Labour hard where they have failed, on balancing the economy, on tax reform, on the euro and on the delivery of quality public services.

Let no one be in any doubt. We are a party ready to challenge for government on equal terms with Labour and the Conservatives. Indeed with the gloss wearing off New Labour and with the Tories simply not credible as an opposition let alone a party of government we have a responsibility to take the Liberal Democrat challenge to every corner of the land.