By Ollie Stone-Lee BBC News Online political staff

The Lib Dems must resist the urge to move to the Left, says David Laws

Modern-day Liberal Democrat frontbencher David Laws might see himself as following in that tradition as he scours the government accounts for ways to save money, including selling off some of Whitehall's buildings.

He believes building a reputation for financial efficiency is what the Lib Dems need to reclaim traditions of economic liberalism hijacked and distorted by the Conservatives.

In an interview with BBC News Online, the Yeovil MP also says that in the past his party has allowed itself to be "boxed" into being seen as uncritically pro-European.

In fact, the Lib Dems realise the need to limit EU powers, a stance especially necessary to help counter public opposition to the euro, he insists.

Despite his junior position in Charles Kennedy's "shadow cabinet" as the number two in the Treasury team, Mr Laws' influence is boosted by his years as Paddy Ashdown's policy director.

Local power

For the past months, he has deluged ministers with questions about everything aspect of government spending.

His review is now complete and will be bounced around the party's Treasury team before going to the "shadow cabinet" ahead of MPs' summer break.

In an end to their tax-and-spend agenda, the Lib Dems now feel Labour is spending enough public money but that the cash can be spent differently.

Some Whitehall buildings could be sold off under the plans

As well as saving money to reinvest, rather than to cut taxes, the review is also aimed at ending "micro-management" from Whitehall on decisions like education funding and put more power in local hands.

Privatisation of some public agencies, such as the Royal Mint, is also being considered.

So how many departments could be scrapped or merged under the proposals?

"Quite a few," says Mr Laws. "I can't tell you what I propose because it hasn't been approved by my boss yet...

"But quite a few (departments) in a decentralised United Kingdom you would not necessarily need or they would be considerably smaller because you would decentralise to a regional and local level."

Reclaiming efficiency

While central departments need a London base, more civil servants could also be moved out of "expensive" central London buildings, he suggests.

Does that mean he is contemplating selling off some of Whitehall's most historic properties, the old War Office perhaps?

Laughing at the attempt to draw him into the details, he replies: "All of those buildings are ones we are looking at."

We often in the past as a party have allowed ourselves to be seen to be uncritically European David Laws

Mr Laws sees the economy drive as part of renewing a tradition of economic liberalism involving competition, value for money and having different providers for public services.

"Maybe a criticism of our party over the last few decades is that we have not emphasised our economic liberalism tradition as strongly as our social liberalism tradition," he says.

"If we can get the two working in tandem then they will each draw strength from the other. "

The idea that there is a clash comes only from the way the Conservatives "appropriated" that economic liberalism - but he argues that the Tories were only concerned with the wealthy few.

'Inoffensive parking space'?

Mr Laws identifies two risks for the Lib Dems at a time when the Tories are seen to be "badly led" and Labour is becoming "increasingly unpopular".

One is "simply becoming an inoffensive parking space for the disaffected by dropping any policy that might frighten off Tory voters or Labour voters" and adopting a kind of "bland middle ground consensus".

School funding should be decided more locally, say Lib Dems

The second, especially when Labour occupies much of the middle ground, would be shifting to the Left.

Despite the Lib Dem opposition to the Iraq war and closer links in recent years with the trade unions, Mr Laws insists the party has resisted those temptations under both Kennedy and Ashdown.

And he argues the public do still "identify us as being a sensible middle ground party".

His determination to stand on firm Liberal ground is echoed by his comments on the party's European policy as the debate hots up on both the euro and the draft EU constitution.

"We often in the past as a party, because we are very pro-European and internationalist, have allowed ourselves to be seen to be uncritically European and to be willing to contemplate the centralisation of a lot of power at European level."

Attitude shift

It is not right for a party that has championed decentralisation of power for more than a century "to be boxed into" being seen as wanting to centralise much power at EU level, he argues.

"We have to get back to a vision of Europe which is truly Liberal, in which we cooperate in some of the big areas where it makes sense to pool sovereignty but limit the powers of the EU in those areas where there's no real good reason for EU involvement."

He argues there has already been a change little noticed by the media.

As the big European debates raged in the 1970s and 1980s, the Liberals had to be unconditionally pro-European to make a strong argument, he says.

In contrast to a decade ago, today's Lib Dem "shadow cabinet" is universally pro-EU but there is a strong wish to keep powers at the right national or regional level, he explains.

The party needs to entrench that position by continuing to press for economic reform in Europe and by using the draft constitution both to clarify the EU's role and limit its powers.

With that European policy the Lib Dems can help win over a sceptical public to the Britain adopting the euro, says Mr Laws.

He believes most of the public are undecided on the economics of the single currency and opposition is based "almost entirely" on fears over sovereignty.

The European debates of coming months will test Mr Laws assertion that the Lib Dems really will marry twin traditions of decentralisation and internationalism.