Penhaligon's decision to join the Liberal Party was inspired in 1963 when, aged 19, he was an important witness to a murder case. His evidence, which supported the case of the defendant Dennis Whitty, was not enough to prevent him from being convicted and hanged. Penhaligon was appalled by the practice of capital punishment. He led the Truro Young Liberals and built up the local party (which had been the weakest in Cornwall) into one of the strongest; he was the chair of the Cornish Young Liberals from 1966 to 1968. However he was not selected as Liberal candidate for Truro in the 1966 general election (nor for any other seat), and he was also rejected for Falmouth and Camborne in 1968 apparently because his strong Cornish accent was thought unattractive.