The third force is still with you: A Blair-led Labour Party need not be such a threat to Liberal Democrats, argues Charles Kennedy

'I find myself in complete agreement with somebody like Tony Blair and his stress on social cohesion and community values.' No, not the words of Paddy Ashdown, David Owen, or even the rather hapless Alec Kellaway, lately of the Newham North East by-election. They were in fact the considered reflections from afar of Chris Patten, currently Governor of Hong Kong, in a recent newspaper interview.

Yet, unlike those of us in the Liberal Democrats, Christian Democrat Mr Patten is not having his political beliefs or raison d'etre called into question as a result of the forthcoming Blair accession to the Labour leadership. At least not yet. However, since Labour's strong showing in the Euro and parliamentary by-elections, obituarists for the Lib Dems have been out in force.

It is time for the Lib Dems to keep our collective nerve here and take one pace back. Ours, after all, is a party which survived the self-inflicted trauma of merger and fifth place way behind the Greens at the last Euro elections. The show was not over then and so it is rather less likely that the game is up now, when we have won our first couple of Euro seats and 16 per cent share of the vote in elections which have always been the most unfavourable third party territory.

Equally, we would all do well to treat with caution newspaper reports which only a few weeks ago were saying that John Smith's demise left Labour high and dry - but which now anticipate the Blair coronation as securing a Labour government. British politics does not move that fast, as those of us with a pedigree stretching back to the SDP can testify with particular feeling. It is dangerous, possibly self-deluding, to extrapolate Euro results in which most people did not even bother to vote into an breakdown of seats in the next House of Commons.

But this is not to say that Lib Dems can or should be at all blase about changes in Labour's leadership or Labour's revised electoral prospects. Events within one party can have a crucial influence upon developments within the others. The key is in anticipation - not over-reaction.

The Blair leadership has two possible consequences for the Lib Dems. Either, by further enhancing Labour's acceptability to southern England, he makes it easier for waverers to move across to us - or, by heightening the prospect of a Labour victory, he solidifies their residual vote in areas where we have the only realistic prospect of ousting Conservatives. The dangers of the latter were self-evident in the Euro results.

But just how uniformally attractive is the Labour Party now? Its Euro results were a clear-cut triumph. Much has also been made of the party's second place in the Eastleigh by-election. Less attention has been paid to the Lib Dems' second places in Bradford and Barking. The reality of Labour in long- lived municipal power can have a similar effect on voters as the reality of national Tory longevity. In Scotland Labour surrendered one Euro seat to the SNP, again suggesting a certain flakiness in support. The local results last month in England point to Lib Dem parliamentary gains over Labour in Sheffield and Birmingham.

Only two specific economic controversies arose during the Euro campaign. The first, the minimum wage in the context of the OECD report, left Labour looking certainly less than clear and probably less than candid. John Prescott, who is on record from 1992 in conceding that jobs would be lost, now talks vaguely of the level and rate of introduction. The second, benefits for young people, became a beggars' opera, leaving Labour looking shambolic. On both issues the Lib Dems were clear cut and consistent.

Labour's new leader, on this showing, will have his work cut out to make the party look more coherent on economic policy. There is an opportunity here for the Lib Dems, providing we sharpen our economic focus, go further down the road of offering a carefully-costed menu, with prices and service charge included and detailed, and put such a package centre stage between now and the autumn conference.

That policy emphasis should be linked to the constitutional reform agenda - and its relationship both to the nature of pluralistic politics and the delivery of publicly popular policies. Labour again remain vague in this field, not least because of their caution over voting reform. On this issue Blair says he is 'not persuaded'.

Liberal Democrats also have to re-emphasise our freedom from producer interests and our overriding commitment to consumer priorities. The environment, a litmus test policy area for younger voters in particular, remains far more fertile ground for us than for Labour. We should return to it again and again. (Again, the Greens' Euro showing is not to be underestimated - their presence could have a crucial effect on key marginals at the next general election.)

But our greatest freedom remains more fundamentally institutional - we are not constitutionally shackled to one side of industry. The institutional setting is bound to help to determine the acceptability or otherwise of the ideas propounded within it. For the Liberal Democrats that remains a key advantage which we must exploit in a more demographically mixed society.

Chris Patten's remarks are a good example of the greater mutual respect and tolerance which might become a feature of Nineties politics. As issues and problems become more international, solutions less straightforward, it makes sense for parties to recognise the merits in others. But that should not disguise those areas where genuine differences do exist, nor be allowed to undermine the successful prosecution of a distinctive agenda.

Tuesday's Downing Street press conference carried an important electoral truth. John Major was anxious to stress that Britain had returned to two-party politics. The Conservatives would settle for that, as they prefer to fight one opponent they reckon they can beat on one battlefront. Two opponents on two fronts is an altogether tricker calculation.

A new Labour leader does pose fresh challenges for the Liberal Democrats. This year's election results set us higher hurdles - the problems of success. We are going to have to raise our game again. But on the evidence of the past five years that is a task well within the capability of the party and its leadership.

The writer is President of the Liberal Democrats.

(Photograph omitted)