Steve Richards: Are the Lib Dems and Labour testing out their own Coalition?

The sequence of events since the euro veto highlights the battering the Coalition has taken

(James Benn)

The year ends with David Cameron, Nick Clegg and their respective parties acquiring sharper definition. Sharp definition is often dangerous in politics not least in an era of coalition government. Even in more stable political circumstances leaders tend to opt for evasiveness and flexibility beneath a veneer of unswerving conviction. More recently in the Coalition, there have been displays of unswerving conviction with less of the flexible approach lurking just below the surface.

As I have argued before in forming a judgement about Cameron, and indeed any Prime Minister, take a look at the policies and what he or she says rather than how he or she speaks or looks. The use of the veto at the EU summit, his determinedly narrow interpretation of the riots, the NHS reforms, the stealthy re-introduction of selection in schools and the deep spending cuts place him much more in the tradition of Margaret Thatcher than of Harold Macmillan.

Cameron has the genial personality of a Tony Blair, the background of Macmillan, an acute awareness that his party must appear different to the one that lost three elections in a row, and he attracts thoughtful liberals to work with him in No 10. But the policies are the clue. Never allow your eyes to be distracted from the policies.

Clegg seeks more distinctiveness in the formation of those policies. He could have made the clear and well-argued speech he delivered to Demos earlier this week at any point in his career, as the purest liberal to lead his party since its formation. At times, Clegg's form of liberalism coincides with Cameron's modern version of Thatcherism, but his focus on redistribution, social mobility, Europe, and radical constitutional reform shows that, contrary to a widespread perception a year ago, Clegg is not a Conservative.

Meanwhile, Vince Cable and others describe themselves openly as social democrats. If Clegg had made his Demos speech a year ago, few would have remarked on the differences with Cameron. Partly because Cameron has become more sharply defined, and the internal tensions are much higher, the speech was portrayed in some parts of the media as an act of defiance.

Such acts from Clegg tend to follow a trauma. The full sequence of what followed Cameron's veto at the summit highlights the intensity of what has just battered the Coalition. On the Friday morning, Sir Menzies Campbell got a call from one of Clegg's senior advisers with a clear instruction: Get on the Today programme and support Cameron!

The following day, Clegg phoned Campbell to tell him that he was going on the Andrew Marr Show to attack what Cameron had done. In between, Clegg had three phone conversations with Paddy Ashdown; to say that the other former leader attacked Cameron would be a polite way of describing his assessment. There are a lot of former leaders in the Liberal Democrats, not always an easy situation for the current leader. The following Monday, Clegg's party whips urged him to attend Cameron's parliamentary statement. I am told they were in a state when he did not do so.

In this increasingly turbulent context, the shadow Chancellor, Ed Balls, made a mischievous invitation to the Liberal Democrats in his interview with The Independent yesterday. Balls suggested that the Liberal Democrats could form a coalition with Labour before the next election, pointing out that in the new era of fixed-term parliaments it is possible for different parties to form a coalition between elections. I doubt if this is at the top of Balls's challenging agenda, and it is certainly not even at the bottom of Clegg's, but he raises an important and overlooked point. In theory at least, there are fixed-term parliaments but not necessarily fixed-term governments.

The proposal for fixed-term parliaments was introduced by the Coalition in the summer of 2010 with manic speed. Clegg supported it as part of a wider package of constitutional reform. His Tory partners were more multi-layered in their calculations; a familiar pattern. Most of all, they wanted to rule for five years on the assumption that they needed all that time before they could take a bow, promise to cut taxes, and win an overall majority. It has not worked out like that. Their bow will be more tentative at best, but Cameron has, in theory, lost the right to call an election whenever he wants one.

Under the new rules, an election can only be called if the government loses a vote of no confidence and if, after 14 days, no other alternative government is formed from the existing parliament. There are additional rules that would apply in a parliament where one party rules with an overall majority. The proposal took the form of a bill in the summer of 2010. There was no White Paper and virtually no time for consultation. On this change, ministers were in a hurry. So much so that a few weeks after the last election, Clegg announced without qualification that the date of the next election would be 7 May, 2015, seemingly locking him and his party into a relationship with the Conservatives, come what may.

But, as Balls points out, if the Liberal Democrats found their partnership with a right-wing, Eurosceptic Conservative Party too stifling, they could leave the Coalition and allow the Tories to govern as a minority – or, in theory as Balls suggested, they could form a coalition with Labour. All hell would break loose in much of the media and beyond, but such an arrangement would be entirely legitimate if the new government could survive within this parliament.

Of course, for a thousand reasons it will not happen. At their parliamentary party meeting after the EU summit, one senior Lib Dem peer called for the party to withdraw from the Coalition. He was a lone voice. But the fact that Balls makes his invitation, Clegg lets off steam on Marr, and Cable never loses the chance to proclaim his commitment to social democracy, shows how times change.

Following the all-out war between Labour and the Lib Dems in the Coalition's early days, dialogue is constant between Ed Miliband's office and a few, despairing Lib Dems. Balls says he is up for a partnership in a hung parliament, including this one. Such nods and winks can only be a beginning, or should be. If Clegg is right about the date of the next election, both parties need to have established a warm enough relationship to make partnership possible afterwards. After all, nearly all the polls point to another hung parliament to follow this one.

s.richards@independent.co.uk