Menzies Campbell has passed his first test as Liberal Democrat leader when party members today voted overwhelmingly to back his new tax proposals.
Delegates at the Lib Dem conference in Brighton agreed to scrap the top 50p rate of tax that was the party's flagship policy at the last general election.
Instead they backed a new package of proposals that would scrap the existing ten pence starting rate of income tax, taking more than two million people out of the tax system, and raise the starting rate for the 40 per cent top bracket to £50,000.
A new range of environmental taxes would be introduced, including higher car tax for the most polluting cars, a new aviation tax based on the emissions of each aircraft and reform of the climate change levy into a simpler carbon tax.
'All of our customers are international and we need those transport links to be as efficient and effective as possible'
Speaking to reporters afterwards, Sir Menzies denied it had been a test of his position, saying: "Leadership is about saying where the party should go - I made it very clear that the proposals in the tax commission should be supported and I am pleased at the outcome."
Trade and industry spokesman Ed Davey said: "You have just witnessed a mature debate by a serious party over a very important matter."
He added: "This has thrown down the gauntlet to the other parties. We are leading the way on environmental taxes and on income taxes."
During the debate, Treasury spokesman Vince Cable argued there was no need for the Lib Dems to be seen as a high-taxing party any longer, given the huge investment Labour had made into public services.
"The debate has changed. It is now no longer about how high taxes are, but what kind of taxes. Some people should pay more - but it should be people who pollute the environment and those who have the capacity to pay," he told delegates.
Environment spokesman Chris Huhne added: "It is time to tax pollution not people. We are leading that change in the Liberal Democrats, and that is something to be proud of."
An amendment backed by Evan Harris MP had proposed to accept all the new proposals - which were drawn up by the party's tax commission - but maintain the previous commitment to the 50p top rate.
Arnie Gibbons of the Islington Liberal Democrats, and a member of the tax commission, said this plan could only add to the Lib Dems' appeal.
"It would be a small boost in financial terms but a giant boost in what voters think we are about.We don't have many popular policies, and let's not abandon the one we have," he urged delegates.
Former Lib Dem education spokesman Phil Willis also spoke passionately in favour of the 50p top rate of tax, insisting it was "popular, principled and practical" and vital to prove the party's commitment to social justice.
However, Mr Huhne argued that the new proposal - to remove tax relief for the highest earners on pensions and to tax capital gains - would raise more money than the old top 50p tax rate would have, and be more redistributive.
"If you accept the 50p amendment then the simplicity of that message would be seriously undermined," Mr Huhne said.
He added that calling for additional taxes without explaining how they would be spent would open up the party to accusations of "being a 'taxes for the hell of it' party, and that is what this amendment would do".