Nick Clegg shows me the photograph of Lucian Freud painting the Queen's portrait that he chose from the Government Art Collection for Peter Mandelson's old office, which he now occupies as deputy prime minister. He is intrigued by the encounter between two great survivors of modern British life, one of whom he now sees on a regular basis as lord president of the council. He mentions that he is struck by her sense of humour.

Given the pounding the Liberal Democrats have received in the last few months, Clegg is ebullient and wreathed in smiles. I marvel at the resilience of politicians, though of course the Protection of Freedoms Bill, published last Friday, is a genuine Liberal Democrat triumph and Clegg can claim that his own firm belief in individual liberty has been placed at the heart of the coalition's programme: he has cause to be grinning, even if events in Egypt look like putting his baby to bed early.

The page on liberty and rights has been turned, he says. Although the bill doesn't achieve everything that he, or indeed campaigners, wanted, it is a good start and alters the tone of government by asserting – by implication – respect for the public's privacy and rights. Early in our interview, he says disarmingly, "I need to say this – you shouldn't trust any government, actually including this one. You should not trust government – full stop. The natural inclination of government is to hoard power and information; to accrue power to itself in the name of the public good."

He hasn't changed his views since we met five years ago when he was home affairs spokesman for his party and I was beginning to get to grips with the attack on liberty and privacy by the Blair government. We were both astonished then at the range, depth and stealth of the campaign and the surprising truth that few people seemed to notice or care about Blair's authoritarian project, which did so much to reduce the citizen's standing in relation to the state. Clegg is passionate on this: "It was the outright derision towards the criminal justice system… and extreme disdain for due process. For Blair the criminal justice system was an impediment to keeping people safe."

Five years after that meeting it seems extraordinary that he now occupies such a pivotal role in government and is in a position to lead the restoration of civil liberties. Were it not for his performance in the TV debates during the election campaign, which put the Lib Dems in the game, and the need for the coalition partners to find areas in which they could bond, it is certain that this Protection of Freedoms Bill would not exist. Although I have some concerns about what has not been included in the bill, it is true that the conditions that brought it into existence are near miraculous.

Negotiation over the bill has been long and intense, especially with the Home Office and police over the deletion of innocent people's DNA from the national database, which accounted for the three-month delay in publication. "I am amazed how far we pushed the whole security establishment and the Home Office in a liberal direction," he says. "They are in such a different place to where they were a few months ago." Last Tuesday, he presented the bill to the cabinet, where he has quite a few Tory supporters (Ken Clarke, Oliver Letwin and Dominic Grieve), and sold it to the rest by saying, "Let's remember how this government is different to the previous government. This is something that distinguishes our government. Bit by bit, in quite imperceptible ways, these measures tell you profound things about the country we are trying to create." He compares the bill to the efforts to reduce the deficit. "In terms of a lasting adjustment, or what it is to be British, this may be more significant in the long run."

All true maybe, yet reading the bill after our interview, I find it hard to ignore the imprint of Labour's boot on the statute book. The formalised mistrust of every adult who has anything to do with children in the vetting and barring scheme has not been abolished, merely reduced to affect half the estimated nine million to be vetted under the original scheme. And there is no mention of the interception modernisation programme – the proposals, backed by GCHQ and the Home Office, to allow email, internet usage, mobile calls and text messages to be monitored.

Clegg concedes that the new version of the control order is not what he hoped for – it is still at base a breach of the rule of law. There is no action to be taken on CCTV in schools – a development that allows Stoke Park School and Community Technology College in Coventry to install 112 cameras on its premises, at a cost of £10,000 – and little attempt to address the databases of legitimate protesters kept by police.

But there can be no doubt that scrapping the ID card and the children's contact database, removing the stop and search powers granted under Section 44, controlling the use of surveillance by councils, reducing the maximum period of pre-charge detention for terrorism suspects to 14 days – especially given that it was just a few years ago that police officers and Blair were campaigning for 90 days – are welcome moves. Particularly good signs are the protection of jury trial, the extension of the Freedom of Information Act so that the public have better access to data, and the proposals to curb the spread of public CCTV systems, on which Labour spent £600m between 1997-2007, a figure that the deputy prime minister has not heard before and which causes him to exhale and wonder what the money could be spent on today.

The bill is a creditable start and it tells us that the Blair attack on liberty is spent. How much the deep state in the Home Office and intelligence services go along with it all is another matter, and we must never forget the threat from data collection in Europe or the menace of the European arrest warrant, which means British citizens can be locked up without charge and in breach of the right of Habeas corpus enshrined in the Magna Carta.

Clegg says the restoration of liberty is ongoing, and urges campaigners to "hold the government's feet to the fire". He is working well with Clarke, the justice secretary, and they are launching a system to examine every proposal to create a new criminal offence. "There was this incontinence where criminal offences were being spawned by many departments," he says. There may even be a great repeal act down the road that would look at some of the laws not addressed in this bill. I mention the measures in Labour's Civil Contingencies Act, which in theory allows civil society to be suspended during an emergency simply on the word of the chief whip.

The freedom bill can be properly seen as a product of optimistic liberalism, moulded in the singular circumstances of a hybrid government. I wondered how Clegg was getting on with his partners. Did he like David Cameron more than this time last year? "Of course! People assume similarities about us, but we are more different than they expect. We are not seeking to be great mates: that's not what we are in this for. As a working partnership it is a very respectful, efficient and open one: quite un-fussy, not very territorial and we don't get wildly emotional about things."

He then draws an interesting contrast with the cabal-like operation of Labour administrations. "The coalition cannot function unless both sides are open with each other and that means you have to have a more connected discussion – you have two parties that don't agree but have to seek agreement, so you thrash things out. There is a flow of information within the government, and of course you are getting a much more assertive parliament. Checks and balances have improved."

In good times, the weirdly phlegmatic British public took little notice of the loss of liberty and, I suspect, in rougher times, when people are pressed, they will be equally unresponsive about this bill. It's worth remembering, however, that the people out on the streets in Cairo last week, in Tunisia last month and in Iran 18 months ago, would be astonished by our complacency. For them liberty is everything.