The dust of last week has settled, and the direction of the new government is clearer. A certain smugness has descended on the right-wing press, busy recording the felicitous union of Tory and Lib Dem. It’s a perfect story for broadsheets, after all: natural party of government discovers unlikely affection for favourite electoral pick of the socially conscious middle classes. To their friends’ delight, the two parties find they have much more in common than they ever could have imagined.

This mix intoxicates those sections of British Conservatism who profess to reject the divisiveness of the Thatcher years, seeking a renaissance of the dearly held post-war consensus. Other voices have begun pointing not to history but to Europe as a likely guide for our politics. Matthew Taylor, former head of policy for Tony Blair, suggested on the Today programme last week that we might have just witnessed not a union, but a birth: that of a continental political model where power alternates between a social democratic bloc and a conservative grouping. Some leftwingers in the Labour party want to use the leadership race to elect one of their own, to set a clear ideological contrast between Red and Blue-Yellow.

Fine. As we’re all sick of hearing, our unbalanced voting system produces hung parliaments far less often than it does landslide majorities, and coalitions even more rarely. A return to pre-Blairite certainties would bring clarity, and offer succour to voters whose favourite cry is ‘they’re all the same’.

But there are two problems with this. One, it’s exactly what the Tories want. Sympathetic columnists were falling over each other to praise the ‘new politics’, Matthew Parris later even apologising for excessive soppiness. Daniel Finkelstein’s elucidation of the Cameronian genius was less gushing, but more chilling. In calm detail he set out how the prime minister’s aim is nothing less than the occupation of British liberalism for a generation. By this reckoning, the ‘common purpose’ with the Lib Dems that Cameron announced in the Rose Garden of Number 10 is nothing of the sort, merely the next stage in his detoxification of Conservative government.

Why should Labour care if the third party is swamped? Much government opposition to the potential Lib-Lab pact focused on the Liberals’ long-held desire to claim the centre-left for their own. The stillborn hope of Ashdown and Kennedy for a progressive coalition was viewed by sceptics as an attempt to usurp British social democracy.

But Labour needs to care. The reason why is the second reason that we should fear the polarisation envisaged by Carter. Our liberalism has been softened by the likes of Mill, TH Green and Beveridge in Britain; and Americans such as Dewey, Rawls and Schlesinger. We have developed an understanding of liberalism that encourages government to act on behalf of the political, social and economic liberties of its citizens. A large number of European liberal parties, partners of the Liberal Democrats in Brussels, retain a negative, non-progressive – indeed neoliberal – outlook.

The future battle between Labour and the Conservatives will determine who claims the liberal ground. This is not so Labour can abandon its dedication to solidarity, community and social justice in favour of individualism. Nor will it signal another resigned embrace of the market – that didn’t work out too well the last time. Key figures from British liberalism loom large in Labour’s own history. We need to take on board the language and practice of liberalism and mould them to Labour values anew; we need to stress how Labour can best deliver a framework to enhance people’s capabilities as well as maximise their potential.

This will require a candid assessment of where the Labour government went wrong. It will necessitate a move away from the centralising tendency in policy making; a reform of party institutions to encourage internal democracy and involvement by non-members; and full-blooded support for political reform to replace thirteen years of prevarication and obfuscation on the issue.

Labour needs to do this because the Lib Dems certainly can’t. In less than a week they’ve managed to abandon political, economic and social liberalism. They’ve forgotten about true proportional representation, welcomed a cap on immigration, promised the abolition of the child trust fund and a rollback of child tax credits, and damaged the constitution with their support for the 55 per cent clause. Nick Clegg talks about Lords reform while packing the upper house with dozens more of his unelected peers. His ‘Great Reform Act’ speech this morning had the cheek to reference support for the ‘many not the few’: this from a deputy prime minister whose colleague at the department for work and pensions is Iain Duncan Smith. Like the end of Animal Farm, the more time Lib Dems spend with the Tories the more they will come to resemble them, their liberalism denuded of any of the positive advances it made in the twentieth century.

Within the Labour movement, British liberalism can only grow stronger. It will be enhanced through exposure to mutualism, trade unionism, pluralism and social democracy; through a philosophy that balances markets, society and the state. Behind all the smiles and back-slapping last week, the flame of liberty was lowered. Labour must now find the strength to raise it once more.

Photo: designshard 2008