Paddy Ashdown: Our party is in danger of being stranded on the left of Labour

'We must not allow ourselves to be pushed into reoccupying the ground New Labour has vacated'

In the heyday of the 1950s "Butskellite consensus", the French used to have a saying, "En Angleterre, tout va à gauche, sauf le Labour Party."

The most significant fact of the recent election is that it marks the final achievement of Tony Blair's "project" to assemble his own one-party (or more precisely, one-man), Butskellite consensus.

Tony Blair is not (I would like to add "yet", but cannot yet bring myself to) a great prime minister. He is certainly not a great political thinker or philosopher ­ unlike Gordon Brown, he is far less interested in ideas and creeds than in pragmatics. But he is a great strategist and positioner.

Now he has repositioned himself as he always intended, four-square on the ground of the centre-left. With three key exceptions ­ a continued enthusiasm for centralisation; a lack of clarity on Europe; and illiberalism on home affairs ­ his party now stands, in tone, style and content, exactly where the old SDP/Liberal Alliance stood in the 1980s. The crucial ground, from centre-right of Kenneth Clarke through to the centre-left of Menzies Campbell, is now dominated by a vast encampment of Labour tents.

This is a shift of genuinely historic importance. And a potentially deadly one for us Lib Dems.

It is not in anyway to diminish Charles Kennedy's success to recognise that our victories last Thursday were as much a product of the weakness of the other two, as of our own originality and appeal. It was Charles's judgement which spotted this opening and it was his personal skill which capitalised on it.

But we Lib Dems will not always be able to rely on the extremely unusual combination of a growingly unpopular Labour government and a remainingly unpopular Tory opposition. Sooner or later (and my guess is sooner), the Tory Party will return from their journey to nowhere to find the crumpled and familiar figure of Kenneth Clarke, or the rather smoother one of Michael Portillo, patiently waiting for them to return. Then they will reoccupy the only place from which they can win elections again ­ the centre-right. And then, all those decent moderate Tories who voted Lib Dem as a refuge from the awfulness of their own party will go home again.

And our policies are, in perception at least, hardly designed to diminish this threat. To be seen, whether justly or not, as the chief proponents of simple tax and spend and the chief defenders of the producer interest in the public sector, will not be a good way to retain the growing number of seats we hold from the Tories. Mr Kennedy has initiated a full-scale policy review, starting with public services.

He is absolutely right to do so. We were fortunate that Labour made the mistake of sticking with the Tory spending cuts for too long in the early years of the previous parliament, leaving us to argue that the problem of our public services was underfunding. But we need to be rather better at guarding against the increasingly widely held perception that our only answer to the problems in health and education, is more money. We must not allow ourselves to be pushed by New Labour's occupation of our ground into reoccupying the ground Mr Blair's army has just vacated.

For liberals, there are only three things that should matter in public services. Are they high quality? Are they accessible to all? And are they free at the point of delivery and paid for from taxation? If they are all three, then whether they are delivered from the private or the public sector should be of interest only to ideologues. Liberals ought not to be defending monopolies in the public sector any more than we would in the private.

It is a deadly threat to us that New Labour is making these kind of arguments, which we should have been making. And even more so, if, as self proclaimed radicals, our response is to retreat into becoming the defenders against change in the public sector. Our territory (literal and ideological) is best defended by outthinking New Labour; by being ahead of them, not to the left of them.

There are two possible roles for the Lib Dems. To be part of a progressive partnership government with Labour, exercising a liberal influence from within. Or to be Labour's unremitting liberal critic from without.

If the former had happened then the long awaited realignment of the left would now be underway and this government would have been more liberal, more European, more green and far less frightened of income tax.

But it hasn't happened. And in my view won't now until either Labour needs us, or they have suffered another defeat. In the first case, we will be asked to prop up a failing government ­ which I suspect Lib Dems will decline to do. The latter means waiting for another generation.

One event could change this ­ fighting and winning a European referendum together could open a new era of wider co-operation.

But until that happens, we have to accept that the Lib/Lab "project" to realign the left around a broadly liberal agenda has decayed away to little more than a convenient structure for the encouragement of tactical voting (not in itself unuseful, as 7 June showed). The Joint Cabinet Committee has, with the notable exception of PR, ended its constitutional work and been diminished down to an occasional charade. It can be reenlivened only if the Lib Dems are prepared to widen the agenda for discussion and Mr Blair recognises that, despite his large majority, the sidelining of the Jenkins proposals on PR and an appallingly low turnout has meant he has a mandate for his second term which amounts to only one in four of all voters.

Preparations for an early euro referendum could provide the first. And a willingness by Mr Blair to reconsider PR, starting with local government and a clear statement that Jenkins remains firmly on the burner, could provide the second. If either is absent, Mr Kennedy might conclude that the JCC will have reached the end of its useful purpose.

The dilemma for liberals during a Labour government is always the same; how best to liberalise them. Doing that from the inside may have offered the best opportunities in the early years of the previous parliament. But we will have to find a new balance between partner and critic in the early years of this ­ especially given Labour's increasingly casual attitude to liberal values.

Mr Kennedy's remarkable successes last week showed that the Lib Dems' "high-water mark" was not reached in 1997. But that should not obscure the challenges ahead for us. Labour is occupying our traditional ground ­ and the Tories must sometime return to sense. Our ability to continue to grow will depend on being clear about our role in these changed circumstances, adventurous about new thinking and, above all, on resisting the temptation to strike the easy attitudes of the old left.

The author was leader of the Liberal Democrats, 1988-1999