The Liberal Democrats have claimed to be only party that can challenge Labour at the next general election.

Launching their election campaign and spending plans, leader Charles Kennedy said the Lib Dems are the "only genuine opposition party" in both the north and south of the country.

But the party chief has again promised not to "bail out" Tony Blair if heavy Labour losses result in a hung parliament.

"The Liberal Democrats are the significant challengers to Labour, not least in the north of England where cities like Newcastle have come our way in terms of local campaigning and the credibility that comes with it," he said.

"At the same time, we are the principle opponents of the Conservatives in the south of England as well.

"We are the common factor in this general election."

If that resulted in a hung parliament where Labour was the largest party, Tony Blair would "have, quite properly, constitutionally the right to form a government".

But "they need not look to us for bailing them out".

He said that "there is no limit to our ambition in this election" and that "whenever it comes the Liberal Democrats relish the opportunity".

Spending

Kennedy highlighted Lib Dem policies on Iraq, ID cards and taxes as distinct from both Labour and the Tories.

But emphasising the "tough choices" his team has made, he said his party has provided disciplined plans for the public finances that are honest with the electorate.

"We will spend taxpayers' money effectively, not waste it," he said, promising a "quality local health service" and smaller class sizes.

Paul Boateng, chief secretary to the Treasury, criticised the campaign launch.

"The Liberal Democrats' figures simply don't add up", he said.

"The Lib Dems have made over 100 spending commitments that no responsible government could deliver. Today, we have yet another menu without prices.

"How can anyone take the Lib Dems seriously when they say they can cut £25 billion – in addition to the £21.5 billion savings identified by the Gershon review - from the budgets of the NHS, schools, police, transport, business support, regional development and the arts, but give absolutely no details of where these cuts would fall?"

Help the Aged responded positively to the speech, praising Kennedy's "strong focus" on older people.