In our first leader of 2010 we argued that, at the coming general election, it may fall to Nick Clegg and the Liberal Democrats to resolve the historic "progressive dilemma" in British politics. This was to say that a hung parliament - the likelihood of which has increased, not receded, since the Conservatives' lead in the opinion polls began to narrow shortly before Christmas - offers the prospect of a realignment of progressive politics in this country and the establishment of a left-liberal coalition on a common programme of wide-ranging constitutional and economic reform.

That prospect remains tantalising for those of us who recognise that a new politics is required to deal with the convulsions of the past 18 months. Anthony Barnett, launching a series of essays on the future of progressive politics on page 22, argues that progressives need to "help Britain vote out New Labour". But, in truth, the New Labour "project" is already dead, fatal blows having been administered to it by the financial meltdown and the disgrace of MPs' expenses.

Gordon Brown seems to understand this - as is evidenced by his reconversion to something like Keynesianism following the crash of autumn 2008 (seemingly vindicated by new figures showing a drop in unemployment), and his belated recognition of the merits of electoral reform (albeit in the watered-down guise of the Alternative Vote system). Moreover, as David Marquand points out in his response to Mr Barnett on page 28, David Cameron, by contrast, grasps neither the role played by deficit finance in a recession nor the pressing need to overhaul Westminster institutions that are both discredited and dysfunctional. To suggest, as Mr Barnett comes close to doing, that Labour would benefit from the purgative effects of defeat - not something we endorse - is to underestimate the damage that would be wrought by an anti-Keynesian and Europhobic Conservative government.

What of Mr Clegg and the Lib Dems? When the Prime Minister committed Labour to holding a referendum on voting reform, he invited progressive politicians from all parties to join him in fixing our broken political system. Mr Clegg, however, appears determined to resist the entreaties of other parties, preferring instead to sustain the elaborate ballet of "equidistance" - at least, until after the election.

A degree of reticence on the Lib Dems' part is understandable. We have been here before - in 1997, for example, when Tony Blair's blandishments to the then Lib Dem leader, Paddy Ashdown, stopped abruptly once an unfair voting system had delivered a grossly inflated parliamentary majority to Labour. That was a missed opportunity for progressive politics, as Mr Ashdown and the Lib Dems would no doubt have functioned in government as New Labour's good conscience, ensuring that constitutional reform would have been thoroughgoing rather than half-baked.

What the experience of the past 13 years shows is that progressive realignment in one party, like socialism in one country, doesn't work. There has always been a reactionary and tribal strain inside Labour that is hostile to pluralism and co-operation with other parties. It is embodied today by the Prime Minister's most unswerving supporters and henchmen: bruisers such as Charlie Whelan, now back in the spotlight as the political director of Unite, the powerful union co-ordinating the strike of British Airways cabin crew.

This is the ugly side of Labour. But, at its best and boldest, when least insular and fearful, Labour has been a genuine party of ideas, open to outside influences and prepared to enter into transformative alliances. If it remembers this, its future need not be bleak.