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Sir Vince Cable today revealed plans for a graduate tax in an attempt to draw a line under the Liberal Democrats’ disastrous U-turn over tuition fees.

The new Lib Dem leader moved to ditch the party’s backing for student fee loans, which have risen to up to £9,250 a year.

The Lib Dems have been dogged by the decision in Coalition to support a hike in fees, having signed a pledge to oppose the move during the 2010 election campaign.

“It is a graduate tax — but people think of it as debt,” Sir Vince said.

“People don’t normally think of their future income tax obligations as debt. It’s that psychological thing that is quite problematic, and I would quite like to convert it into something that is not just a graduate tax in practice but a graduate tax in name and form.”

He insisted he still backed the principle that “highly paid” graduates should pay the hefty contribution towards their university education rather than “ordinary taxpayers”, many of whom have not been to university.

But he also argued that the £21,000 threshold at which graduates start making repayments for their university education has to be raised and a better maintenance grant system restored.

Former Lib Dem MP David Howarth, a professor of law and public policy at Cambridge University, has been asked to draw up some practical proposals for a graduate tax. In a wide-ranging interview, Twickenham MP Sir Vince also:

Championed a shake-up of council tax with new bands so people in high-value homes could pay more while those in cheaper houses and flats may see their bills fall.

Supported town halls being able to raise more revenue, while admitting some of them would “misuse” this new freedom while others would use it “creatively” to benefit local residents.

Branded European Commission president Jean-Claude Juncker “a very bad choice” for the job as he represented an “extreme federalist position”.

Argued that Tony Blair is hampering efforts to sway the debate against Brexit as some Labour supporters do not want to be associated with him.

Backed a second Brexit referendum, possibly next year, with the choice to stay in the EU or leave it under the proposed deal the Government strikes.

Accused some university bosses on high salaries of “fouling your own nests by being greedy”.

Called for more focus on improving higher education for people who do not go to university.

Sir Vince backed giving local authorities more freedom over council tax, business rates and borrowing.

On council tax, his aim is to make levels “roughly proportional” to property values, which they are not for dearer homes.

“You should be free to create more bands to cut it at the bottom and raise it at the top,” he said.