Honed, serious, tough. Is this a leader of HM's Opposition?

Although Charles Kennedy didn't much milk the applause, it must have been a moment to savour. A mightily enthused - if not quite ecstatic-ovation, a kiss on the cheek of Sarah Teather, the triumphant victor of Brent East, even the muted bars of cheesy campaign muzak as he left the stage at the end of his keynote speech, all marked a new high point in the fortunes of a party and a leader now willing themselves to make electoral history by taking the role of an alternative government.

Certainly, he had looked the part. Instead of the gentle, shirtsleeved, anti-politician's fireside chat of previous years, Kennedy, soberly dressed in a navy blue suit and gleaming black shoes, delivered a rousing speech with a new, aggressive, self-confidence we hadn't seen before. And, of course, he had something to be confident about. The man who only a few months ago had to put up with whispers from within his party that he was too laid back, enjoyed a drink, and didn't have a higher profile, could hardly have had a more perfect answer this week. To go into an annual conference two days after a stunning by-election victory and then be blessed halfway through the week with the highest poll ratings your party has had for 14 years is the stuff of politicians' dreams.

No wonder in the Brighton Centre they lapped up his message - a shamelessly premature hyperbole, if a pardonable one, that "we are overtaking the Conservatives. Be in no doubt. We are the only credible challenge to the government."

So did he rise to the occasion of this hugely ambitious claim? As an exercise in positioning the party, the speech was an undoubted success. In two ways, he helped expunge any lingering notion the Lib-Dems might be "Labour lite". The first was his decision consciously to invoke the Liberal in Liberal Democrat with an enthusiasm which made you forget he had ever been in the SDP, let alone the Labour Party.

It was not just that he kept using the word liberal, underpinning it with a robust defence of party policies which do live up to the term: on asylum, gay rights, the extrajudicial detentions at Guantanomo Bay. Or that in an extempore peroration he lavished praise on those who had kept the anti-statist Liberal Party alive in the dark days -for Britain's third party-of the 1940s and early 1950s. It was also that, almost in an echo of Jo Grimond, who led the party more than a generation ago, he chose to emphasise the party's new found pursuit of the smaller state and a slimmed down ministeriat, less "interference in people's lives", ways of spending public money more efficiently rather than raising more of it. This did not sound like a leader who thought his party could advance only by parroting the nostrums of the old Labour left.

And the second way was by underlining his claim to Opposition leadership by combining his mockery of a Tory party led by "charlatans and chancers" with his most unbridled attack yet on a Labour government for wielding the kind of a "absolute power" which "can corrupt absolutely", under a leader who with an optimism bordering on the fanciful he implied would soon be consigned to history by a "post-Blair age." Nowhere, of course, was this more evident than on the war in Iraq, the party's opposition to which he is now promoting as a unique selling point.

But as a honed and though-out manifesto of a would-be leader of Her Majesty's Opposition, the speech was rather less impressive. He pushed the right buttons, of course: the environment; localism, proportional representation, public transport. But even as he promised a "rigorous" approach to the party's general election programme he displayed very little of that quality in a largely predictable and sometimes arbitrarily connected rehearsal of what amounted to a series of policy headlines.

Even on Iraq -where the Lib-Dems have a good claim to be at the centre of national debate - he had virtually nothing to say about the state of the country post-Saddam, or the negotiations within the UN on the struggle for reconstruction. It's reasonable that a mid-term speech shouldn't be replete with details of the party's programme. But this was a speech also short on challenging argument -including challenges which it have might have been timely to direct at his own party.

This was true in detail. Mentioning discrimination against women, he might have gone on to lament that the party has only six women among its 54 MPs. But it was also true in terms of grand strategy. There was a curious moment in his speech when he quoted Tony Blair's 1997 warning to Labour: "We are the people's servants. Forget that and the people will soon show that what the electorate give, the electorate can give away." Not realising that Mr Kennedy was going on to point out how these fine ideals had been "tarnished for good" by the Blair regime, the audience started to clap - suggesting they may be ready to be challenged rather more toughly than he was prepared to do yesterday. For Brent East - and it was unsurprising that Ms Teather on Monday got the most excited reception of the whole conference -has a double edge for the party. On the one hand, it is a triumphant vindication of Mr Kennedy's strategy of switching from a tacit alliance with Labour to outright opposition. On the other it propels the Liberal Democrats into a level of scrutiny and exposure for which the party may not quite be fully be prepared.

It's easy to fire cheap shots at a party whose rhetoric blasts the idea of a nanny state but who votes in favour of compulsory sex education for 7 to 11 year olds, along with bans on smacking, circus animals and goldfish prizes at fairs. But it illustrates a problem the party has in marrying its liberalism to its political correctness.

The potential prize is very great, the stakes very high. But as the euphoric applause of Brighton dies away, the hard work now begins.