Steve Richards: Labour and the Tories have one thing in common - they both now fear the Lib Dems

Tony Blair has told his MPs that he regretted his flirtation with the Lib Dems in his early days

When speculating about the future, more far-sighted ministers leap beyond the timing of Tony Blair's departure. They pose a different and more agonising question. It is the same question that the more perceptive candidates in the overcrowded Conservative leadership contest are also asking from a different perspective: What the heck do we do about the Liberal Democrats? The answer will determine the tone and substance of British politics for the next ten years.

When speculating about the future, more far-sighted ministers leap beyond the timing of Tony Blair's departure. They pose a different and more agonising question. It is the same question that the more perceptive candidates in the overcrowded Conservative leadership contest are also asking from a different perspective: What the heck do we do about the Liberal Democrats? The answer will determine the tone and substance of British politics for the next ten years.

Last month's election result was much more interesting than it seemed, for a single reason. The Liberal Democrats reaffirmed their position as a significant third force in British politics. The fact they did not do as well as some had predicted, obscures a more significant development. They have 62 seats, their largest intake since the 1920s.

More importantly, at the next election they will be in second place in a greater number of marginal seats than at the last election, breathing down Labour's neck as well as the Conservatives'. Here is the key figure from the last election: the Liberal Democrats are now in second place in 189 constituencies. They are chasing Labour in 104 of those seats.

For the Government in particular, this raises a series of highly charged questions. Why is a third force flourishing now - more so than in the 1980s, when the divide between Labour and the Conservatives was much greater? As an anguished minister put it to me recently, in the 1950s and 1960s there was also a fair amount of consensus between the two main parties, and the Liberals were nowhere to be seen. Why is it so different now?

Anxious ministers are not hanging around for answers. Already, they are inviting pollsters to pop over for a cup of tea to give their views on the pattern of voting last month. The simplistic answer to these questions is that the last election was all about Iraq - and when Tony Blair departs, the disillusioned Labour supporters will return to the fold.

Mr Blair and Iraq were part of the reason why Labour support fell, but the current political situation is more complicated than that. New Labour, with its authoritarian streak and its efforts to soothe so-called Middle England votersand the newspapers they read, had already alienated some former supporters.

In addition, the Liberal Democrats took a calculated decision to attack Labour at the last election. In 1997 and 2001, Labour and the Liberal Democrats hardly laid a finger on each other. They were working in unofficial alliance against the Conservatives. This time the unofficial alliance broke and Labour suffered.

Since then, Mr Blair has turned on the Liberal Democrats in a way he's never done since becoming leader. I am told that at the heated post-election meeting of the Parliamentary Labour Party, Mr Blair went as far as telling Labour MPs he regretted his intense flirtation with the Liberal Democrats in his early days as leader. Almost spontaneously, Mr Blair has taken a major strategic decision. He will attempt to smother the Liberal Democrats, exposing their weaknesses and highlighting opportunistic positioning.

But Mr Blair will not be Labour's leader at the next election. Almost certainly this particular challenge will fall to Gordon Brown. Mr Brown must decide whether to continue smothering the Liberal Democrats or to allow them some breathing space. When Mr Blair was spending considerable time wooing Paddy Ashdown (the diaries of the former Liberal Democrats' leader make clear that Mr Ashdown had greater access to Mr Blair than most of the cabinet) Mr Brown was disdainful.

There was one occasion, soon after the 1997 election, when a fuming Mr Brown rushed off from a tense meeting with Mr Blair to seek the comfort of his entourage in the Treasury. "You'll never guess what he's done now", Mr Brown told his friends, "he's setting up a cabinet committee with Ashdown". Mr Brown had no time for Mr Blair's relationship with the Liberal Democrats, a factor that brought him closer to the equally hostile John Prescott.

But Mr Brown has become a little less tribal recently, partly as a result of the many non-party meetings he has held over the past year or so on Africa and global poverty. He was quite explicit about this in an interview with me in The Independent last December. These meetings have changed the way he views politics. So if he becomes prime minister, does he treat the Liberal Democrats as potential allies or as obstacles in what he calls his search for a progressive consensus?

Immediately after Mr Brown raised the prospect of such a consensus, in his speech at Labour's conference last year, I chaired the CBI's fringe meeting. Everyone in the room, including the CBI's director general, Sir Digby Jones, said they would very much like to be part of Mr Brown's progressive consensus. I have no doubt Sir Digby would be a welcome member of the ill-defined consensus. I am less sure about the Liberal Democrats.

Some of Labour's new MPs tell me they do not detect a great divide in political outlook with most Liberal Democrat MPs. They raise a neglected question: What is the fundamental gulf between the two parties? It used to be based on the domination of trade unions in the Labour Party, and Labour's support for extensive state ownership. In the 1980s, there were other issues also. It is not clear now what they are.

As I write I can hear some readers scream "Iraq! House Arrests! ID Cards!". But, in many cases, Labour MPs and ministers have their own doubts about those issues. They do not represent a decisive ideological split. Yet there they are, the Liberal Democrats, battling it out with Labour in so many seats.

The Conservatives are largely agreed on the answer to the strategic question. They will take on the Liberal Democrats as they did, with some success, at the last election. How they do so in the future, however, is a source of contention. When Alan Duncan made his leadership bid last week he was quite explicit in arguing that his agenda, with its heavy emphasis on social liberalism and tolerance, would kill off the threat posed by the Liberal Democrats.

David Davis, who saw off a challenge by the Liberal Democrats in his seat, defies caricature by highlighting the importance of tackling poverty and addressing more extensively the causes of crime. From both wings of the Conservative Party - as far as there are two wings in this contest - they recognise that the threat posed by the Liberal Democrats must be addressed urgently, and well before the next election moves into view.

None of this means the Liberal Democrats are in a position to crow. Both the main parties see them as part of the problem. They will only matter at a national level when they are seen as part of a solution.

s.richards@independent.co.uk