An olive branch or a deadly embrace?

Tony Blair is a seducer, a very poet of entrapment. With the self- confidence of the moment's man, he has leaned across the Liberal Democrats' conference and offered them a sweet taste of power. By talking of pluralism and increased co-operation, he has done more than any previous Labour leader. He has reopened that dangerous, romantic dream, the remaking of our politics.

Liberal Democracy, gathered here in Glasgow, is unsure how to respond. Neither would you be: at the Littleborough and Saddleworth by-election this summer, new Labour was slapping the smaller party about, showering its pretensions with spittle and abuse. Now, with the leaves still green on the trees, Blair is back, murmuring of how much they have in common, dangling the prospect of intimate little conversations both before and after the next election.

Yet, so far as Blair's thinking is concerned, there is no great mystery. Nothing he has suggested commits him or his party to anything. It winds the Liberal Democrats in - particularly the social democrats among them, who already are half-convinced that Blair is their natural leader. It helps Blair to assemble a group of new parliamentary supporters - should he need them - after the next election. Yet it keeps all his options open.

It may also be the case that Blair is coming as a genuine pluralist, a great reformer in the making. But for the time being, it is safer to say only that this was a clever move by a very clever politician.

The Liberal Democrats are not united in their response. Some of them, the smoother, ex-Labourites in particular, are almost moaning with pleasure. But most people here are watchful, cautious and cynical. They are the sensible ones. The danger for the Liberal Democrats can be summed up as - incorporation, then obliteration.

Small parties working closely with big parties under Britain's voting system have never prospered. First comes broad agreement on policy. Then the smaller party loses its distinctiveness. Then, as the mood turns against the governing party, its smaller ally receives a disproportionate amount of the blame, enduring responsibility without power. Finally, the junior partner has an unpalatable choice. It is simply absorbed, as happened to the National Liberals and the Independent Labour Party. Or it stays outside and is savagely punished by the voters, as happened to the Scottish Nationalists in 1979.

All or some of the above is what beckons for Liberal Democracy if it goes wide-eyed into a political alliance with Labour. Other miseries, including splits and defections, may also follow, particularly in the North of England. If the party isn't utterly sure of what it wants, then it will simply be used and abused by new Labour.

This doesn't mean it ought to reject Blair's advances. But it does require great tough-mindedness. I'd go so far as to say that, if it isn't prepared to go through a Labour administration in opposition to Blair if necessary, then it barely exists as an independent national party. Without that hard core of self-belief, crystallised into policy demands, it wouldn't be strong enough to work with Labour and survive.

The Lib-Dems' irreducible core demand is, of course, voting reform. Only by changing the system can it eventually survive its relationship with Labour and escape the deadly logic described above. But this poses special problems. First, proportional representation does not move the nation. If the Lib Dems determined to oppose a Labour administration solely on the question of PR it would look sectarian and out of touch. Second, Labour's position on voting reform must make all but the most naive of Ashdown's army suspicious. Blair's words are alluring but vague. He is committed to a referendum on the subject. But what kind of referendum, on what, and when? It could be a so-called "preferendum", offering voters a range of options and then hoping that Parliament would agree to implement the result. That would presumably enable anti-change Labour MPs to campaign with Conservatives against a reformed voting system.

Or it could be a post-legislative referendum, one called to validate a reform which had already been passed by Parliament. Getting that Act through would be tough, since Labour first-past-the-posters would realise that it was easier to stop reform in the Commons lobbies than in the country at large. Yet if the Labour government depended upon Lib-Dem votes, it might be possible.

Once the act was through, though, Blair's own view would be important to the referendum. Would he allow the party to split and campaign on different sides? Would he be openly and passionately pro-reform himself? It might rather suit Labour to give the Lib Dems their referendum and see it lost, but such an outcome would be catastrophic for the smaller party.

Finally, there is an unavoidable timing problem. If you want voting reform, you have to go for a referendum early in the new Parliament, when a defeated Tory opposition might still look weak and divided. As time goes on, the Government is likely to be less popular and the referendum, as a government measure, is thus more likely to be lost. Yet with another try at a Scottish Parliament already on his early agenda, and a Bill of Rights, and Lords reform, Tony Blair has every reason to insist on that possibly lethal delay.

All of which may seem a long way off and a little abstract, but sets the conditions for the difficult and dangerous game the Liberal Democrats hope to be able to play after the next election. These are the politics of sleeping with the enemy. To survive them, the Liberal Democrats must above all be sure of who they are.

They still need to define and communicate a hard-edged identity on bread- and-butter issues, not only PR, which distinguishes them from Labour. Philosophically, that difference is pretty obvious. It was summed up vividly, if not with propaganda, by Sarah Ludford, a London councillor, who told one meeting yesterday: "Labour's main preoccupation is the acquisition and exercise of power; ours is its distribution." I suspect Peter Mandelson would agree with her.

Policy differences are a little harder, but obviously include a harder- line environmentalism, something Labour has neglected. The most intriguing possibility, though, is that the smaller party will sound markedly more radical on public spending, particularly for education, and on those civil libertarian issues of which new Labour seems a tad disdainful.

Certainly, here in Glasgow, new Labour is being furiously attacked for what is seen as its conservatism, its cowardice and its creeping illiberalism. This is hardly, you may think, a generous response to Tony Blair's open hand and nice words. True enough. But behind the abuse lurks a real anxiety about that Labour embrace which cannot ultimately be evaded yet which, unless negotiated carefully, might crush the life out of Liberal Democracy. And for all this party's shrill self-righteousness and eccentricity, I think that death would be a political disaster for Britain. After all, it's the very negation of pluralism, and of common sense, to suggest that the British party system today offers us too much choice.