The concept of a Lib-Lab coalition is not yet dead

EVEN IF it hadn't been confirmed, you would know that the extract leaked from Paddy Ashdown's diary this weekend was authentic. If only because the combination of derring-do, code (Our Mutual Friend for Tony Blair, the Full Monty for a LibDem- Labour coalition), careful observation and nuanced high politics all bear the unmistakable trademark of the MP for Yeovil. There are not many front-rank politicians who also have a background in intelligence and the Special Boat Squadron.

Nor, for all the studiedly dismissive tone adopted towards the disclosure by Downing Street yesterday, was the detail and seriousness with which Ashdown describes his and Lord Jenkins's dinner with Tony Blair at No 10 on 21 October 1997 remotely misplaced. For the discussion, six months after the General Election, about the possibility of putting two Liberal Democrats in the Cabinet - almost certainly in place of the Minister of Transport Gavin Strang and the minister in charge of the Cabinet Office, David Clark - was of genuinely historic importance. This is anything but tittle-tattle.

There had been indications before, of course, that the idea of coalition remained alive and well at least until the turn of 1997. Ashdown himself recently confirmed as much in a BBC interview with Fergal Keane. But, while quite a lot was already known about the carefully fostered relations between the two parties up to and including the immediate aftermath of the General Election, not much was known about the later discussions. What is new, moreover, is the light it sheds on the seriousness with which the Prime Minister himself continued to contemplate his relations with Ashdown's party, his own, and, even more importantly, the wider electoral landscape.

The Government's response yesterday to the mildly embarrassing confirmation that Blair actively discussed coalition, rather than lesser forms of co- operation, with Ashdown so long after the election was to say that it contained "elements of wishful thinking" on the part of Liberal Democrats. If this means that Mr Ashdown was hopelessly naive, or at best muddled, and simply misunderstood the conversation he was having with the Prime Minister over his breaded lamb chops and Macon Villages, it is an interpretation that simply doesn't stand up.

Mr Ashdown is an enthusiastic, and arguably visionary, politician who wanted to see his beloved party in power rather than on the sidelines. But he was, and is, remarkably clear-sighted about the difficulties of bringing the two parties closer together. Even in the extracts quoted in The Sunday Telegraph, he faithfully records Tony Blair's understandable worries about taking his own party with him. This does not point to a Liberal Democrat leader who fondly imagined that he had a done deal.

Indeed, it still seems that Mr Blair's chief of staff Jonathan Powell was right in the judgement attributed to him in the extract, that the optimum time to form a coalition had been immediately after the election. Both leaders backed away from it at that point because of the unexpected size of the majority; both, by all accounts, now regret it. The retreat was understandable. This was not because of outrage on the Labour left, who might almost have expected it in the event of a narrow majority as an insurance policy against their own capacity to hold the balance of power in parliament. After a landslide, it would have been the loyalists, including some in the Cabinet, who would have been most baffled and angry about bringing the Liberal Democrats in.

Nevertheless, 2 May 1997 was a revolutionary moment; Blair could do almost anything he wanted, and the internal opposition would have had no time to regroup. The two leaders' view was that the electorate had chosen Labour so decisively that a coalition was impossible; in fact, they could have used the argument that less than 50 per cent had voted Labour, but more than 60 per cent had voted for both parties.

Perhaps, however, "wishful thinking" means something else - that Blair was skilfully leading the Liberal Democrats on, holding out the promise of coalition (and what remains its necessary precondition, a promise to hold a referendum on electoral reform by a specified date) simply in order to keep them sweet, to tone down their opposition to Labour by making them think - falsely - that they would be suitably rewarded. Such Machiavellian ambiguity is not impossible. Peter Mandelson's characteristically brutal suggestion at the Downing Street dinner that Malcolm Bruce, the LibDems' fiercely anti-Labour Treasury spokesman, be sacked by Mr Ashdown, does point somewhat in that direction.

And yet this is not, in the end, the persuasive account of Mr Blair's thinking that jumps out of the pages of Paddy Ashdown's diary. It is much more that of a leader thinking far into the future. In terms of low politics, how much better to develop a close and co-operative relationship with the Liberal Democrats far in advance of the time when the electoral arithmetic would make it the only means of survival open to a Labour government, and when it could be achieved only by some backstairs trade-off in which Labour might well be at a disadvantage. Many of the criticisms of Mr Blair - the reverence for focus groups, for example - have to do precisely with his unusually lively sense of political mortality, his conviction that elections can be lost as well as won.

And here the Liberal Democrats offer a much stronger means of self-protection for Labour than Labour's triumphalist anti-coalitionists show any signs of realising. And in high politics, his frustration at having more in common with Ashdown than, say, with Ken Livingstone, but being unable to do anything about it, became a potent symbol his genuine desire to reunite the Liberal and Labour traditions. Nor is there any real sign that the Tony Blair of October 1997 has since had a Damascene conversion to tribalism.

The conventional wisdom about all this is that the moment for coalition has now passed. In the short term, certainly, that is so. Exposure of the diaries will actually be helpful to Charles Kennedy in contrasting his own leadership with Ashdown's. The third party's policy of constructive opposition may become, at times, more oppositionist than constructive. Fine. But Liberal Democrats still need to consider where else they go if not to make preparations, however long-term, for coalition - at the very least - with Labour. The logic of abandoning the pretence that they would prop up a Tory government points nowhere else. As Ashdown saw, Blair presents the Liberal Democrats with an opportunity that no other Labour leader has - or perhaps will.

If 1997 showed anything, it was that the Labour Party will not again win 46 seats without its voters being prepared to switch their support where Liberal Democrats are the main challengers to the Tories. The alternative is the delusive fantasy of the long term, over many parliaments, in which the third party finally becomes the second or the first once again. In the long term, as that great Liberal John Maynard Keynes put it, we are all dead.