8.13am: Who's going to govern the country? We're into day five of the post-election power vacuum and, as Patrick Wintour reports in the Guardian today, the Lib Dems are saying today is "crunch time". It looks as though we might get a decision before the day is over. But I said almost exactly the same 24 hours ago, at the start of yesterday's live blog, and events didn't turn out quite the way most of us were expecting. Anyone who thinks they know for certain what will happen today is probably deluded.

My colleague Hélène Mulholland was in the Commons until the meeting of Lib Dem MPs broke up, after midnight, and she was there when David Laws delivered a statement about what had been decided. This is what Laws said:

The parliamentary party has had another good and extensive meeting and it received the latest updates from the leader and the negotiating team of the discussions that have been going on early on today. There is going to be a further meeting tomorrow to have discussions about where we are and to see if we can resolve some of the existing issues that are outstanding. There is a strong commitment to ensure we bring this process to conclusion as soon as we can, respecting the fact this depends upon positions taken by other parties not just ourselves. I would repeat the comment I made earlier today there is a very strong commitment by the parliamentary party to ensure that when this comes to conclusion it will leave Britain with a strong government that is able to deliver a deficit reduction and a political reform that the country needs.

Nick Clegg faces a very difficult decision. If he forms a pact with the Tories, there will be howls of protest from his progressive allies on the left. If he goes into coalition with Labour, he will be accused of propping up the party that lost the general election.

There isn't an easy solution and Clegg's leadership skills are about to be tested to the hilt. Will he be decisive? Can he hold his party together? Can he explain what he is doing to the public? And can he use this moment to reshape politics, showing himself to be a master of events, rather than someone who has been constrained by them? We'll find out soon.

8.39am: George Osborne, the shadow chancellor, has just been on the Today programme. He dismissed suggestions that the Tories could form a minority government.

I keep reading about this option and I'm afraid it doesn't really exist. We can't just turn up at Buckingham Palace and say we'd like to form a minority government. We would need the consent of the Liberal Democrats to form a minority government.

9.13am: Apologies. We're having some technical problems at the moment but hope to sort them out quickly.

9.31am: Hi, this is Haroon Siddique. Andrew is having some technical problems so I'm taking over in the meantime.

David Cameron and Nick Clegg both made statements as they left their respective homes this morning.

David Cameron at his west London home this morning. Photograph: Lewis Whyld/PA

Cameron said it was "decision time" for the Lib Dems and urged them to make the right one:

I've made a very full, very open, very reasonable offer to the Liberal Democrats to deliver that stable government. My own members of parliament have shown that they are prepared to put aside party interest in the national interest by agreeing a referendum on the alternative vote. It's now, I believe, decision time - decision time for the Liberal Democrats - and I hope they make the right decision to give this country the strong, stable government that it badly needs and it badly needs quickly.

The Liberal Democrat leader Nick Clegg outside his Putney home this morning Photograph: Katie Collins/PA

Speaking a few minutes later, Clegg said: "The discussions between the political parties has now reached a critical and final phase. I'm as impatient as anybody else to get on with this, to resolve matters one way or another."

He added:

My parliamentary party was up into the small hours yet again discussing things. We will act, as ever, responsibly. We will act to try to do our bit to create a stable, good government that the British people deserve. And I really hope that we will be able to make an announcement so we clear up everything and explain to people exactly what our thinking is as quickly as we possibly can.

Interestingly, the Cabinet Office minister, Tessa Jowell, suggested this morning that the Lib Dems had made the first move with respect to opening discussions with Labour.

Saying the Lib Dems initiated the discussions is a way of Labour deflecting criticism that it is seeking to hold onto power by any means possible although, realistically, it is unlikely it would make any difference to the public perception of the discussions. If the Lib Dems did initiate discussions, I would imagine the Conservatives will be less than impressed. Jowell told GMTV:

The country did not vote last week for a majority government and until there is another government we, as members of the cabinet, stay in office. I think that people would accept that it is our obligation to try to provide a stable government for the country and, if the Liberals come to us and say can we discuss with you the possibility of cooperation in circumstances where no party has an overall majority, then I think that people would feel we were pretty irresponsible if we said no.

Quote of the day so far has come from former home secretary David Blunkett, who was on BBC Radio 4's Today programme. He warned that a "coalition of the defeated" between Labour and the Lib Dems would "lose very badly" at the next general election. He added:



Can you trust the Liberal Democrats? They are behaving like every harlot in history.

9.46am: Hi, it's Andrew Sparrow again, taking over from Haroon. I'm afraid my computer crashed this morning, but it seems to be working now.

The BBC is reporting that David Miliband will me be making a statement soon.

9.57am: Earlier this morning Lord Ashdown was on the Today programme. He started by saying that his remarks should not be taken as a sign that he was recommending a deal with Labour or a deal with Tories.

He would offer his advice to his party in private, he said. But then he made it very clear - to my ears, at least - that he is in the Labour camp. He said there was nothing unconstitutional about having a prime minister who has not won an election, as the Labour/Lib Dem coalition would produce. And he rubbished that idea that a Labour/Lib Dem coalition would be unstable. The SNP would never join forces with the Tories to vote against it, he predicted.

If this was a coalition made up of what you might call the panjandrum elements that you suggest, I would not be in favour of it. It is a coalition made up of Liberal Democrat and Labour in which we would dare the other elements if they wished to vote us down and, I can tell you, I can think of no political circumstances where that would happen.

Ashdown took umbrage when Nick Robinson said that he was ignoring Ashdown's opening remarks and that he was concluding Ashdown favoured a deal with Labour. But then Robinson pointed out that Ashdown has published two volumes of diaries and an autobiography in which he has described how he devoted his political career to healing the historic rift between Labour and the Liberals. At that point Ashdown appear to back down.

10.05am: Jon Cruddas, a possible candidate for the Labour leadership, has said that the wider Labour party should be consulted about the possibility of a coalition with the Lib Dems. According to Paul Waugh, Cruddas said this morning:

Like all other Labour MPs, I fully welcome any negotiations that are conducted in the best interests of the country. But the Labour party and wider Labour movement must be fully included in those discussions. Any negotiations must be conducted in full consultation with the PLP, NEC and affiliated trade unions.

10.16am: What's happening this morning? The key event will be the meeting between the Labour negotiating team and the Lib Dem negotiating team which has just started in the House of Commons.

The Lib Dem team is the same as the one that was negotiating with the Tories: David Laws, Chris Huhne, Andrew Stunnell and Danny Alexander.

The Labour team is led by Lord Mandelson. The other members are: Harriet Harman, Lord Adonis, Ed Miliband and Ed Balls.

A Labour/Lib Dem coalition would be dependent on the support of other smaller parties. But Labour is not planning to strike a formal coalition agreement with them. Labour and the Lib Dems would not have a majority, but they would be confident that parties such as the SNP would not vote against the Queen's speech. Instead Labour seems to be planning to negotiate with parties like the SNP on a case-by-case basis.

Gordon Brown, wearing a purple tie yesterday

10.23am: A reader has emailed me to point out something I didn't notice yesterday; as the picture at the top of this blog shows, Gordon Brown was wearing a purple tie when he announced his plan to resign. Brown doesn't often wear purple. But purple is the colour adopted by the various groups campaigning for PR in recent days, including Take Back Parliament.

10.33am: Some of the Labour leadership candidates have already been recruiting leading internet experts to run their campaign websites, according to Benjamin Cohen at Channel 4.

10.36am: I haven't had a chance to take a proper look at the papers yet. But Roy Greenslade has been going through them and he has posted an analysis on his blog. This is how he starts.

I watched Gordon Brown's historic statement outside No 10 yesterday evening and thought that he handled it well enough. But this morning's right-of-centre national papers were determined to rub his nose in the dirt.

For the implication behind his going is that some kind of deal between Labour and the Liberal Democrats is now inevitable, which is anathema to the publishers and editors who want to see David Cameron's Conservatives assume power.

10.47am: Senior Tories have been trying very hard to be polite about the Liberal Democrats. When William Hague briefed journalist in the House of Commons last night, he adopted the tone of someone who was mildly disappointed by the behaviour of his negotiating partners but determined not to let one episode spoil a promising relationship. George Osborne took much the same tack in the broadcast interviews he gave this morning.

But is this what they really think about Nick Clegg? Sir Malcolm Rifkind gave a much more plausible account of the Tory verdict on the Lib Dems when he told the BBC just now that he was "saddened, depressed and very angry" by the behaviour of Clegg and his team. This is what Rifkind said, according to PoliticsHome.

For the last few days I assumed, I think a lot of people assumed, that Mr Clegg was acting in an actually very honorable way. He'd said quite openly after the election that the Conservatives were by far the largest party, 2 million more votes than Labour. We now discover that yesterday, when Liberal Democrat spokesmen were still saying publicly 'talks are going very well, very constructive, just a bit of clarification required,' it now turns out he was having secret meetings with Gordon Brown.

10.52am: My colleague Julia Kollewe is writing a market turmoil live blog. She says the government's auction of gilts went very well this morning. There was speculation that the markets might take fright at the prospect of a Labour/Lib Dem minority government. But it does not seem to stop people wanting to lend money to the government. Julia says the gilt auction was covered 2.47 times, "indicating healthy demand from investors for the government bonds".

Nick Clegg speaking to the media yesterday. Photograph: Andrew Winning/REUTERS

10.59am: More about purple ties (see 10.23am): Nick Clegg was wearing one yesterday too. You can see it in the picture on page 4 of the Guardian. Maybe we should have spotted that something was up.

11.06am: What should the Lib Dems do? Mark Thompson, a prominent Lib Dem blogger, has put up a long post explaining the dilemma. He concludes that the Lib Dems should back the Tories.

Gordon Brown has promised instant legislation to bring in AV for the Commons and a referendum on something more proportional. There are numerous problems with this approach but the most fundamental one is that even with all the nationalists and parties that would support AV and a referendum would get us to about 330 votes with about 315 ranged against it from the Conservatives and their Northern Ireland partners. It would only take a few Labour MPs to vote against this for it to fall. And having conversed with some Labour backbench MPs I am convinced that there would be enough for this to happen.

11.19am: The Lib Dem MP Bob Russell has told BBC that he thought Labour candidates were "jockeying behind the scenes to become leader of the opposition rather than the prime minister of a minority government".

11.20am: Nick Clegg has just left his south-west London home. "I'm certainly hopeful of getting a resolution as quickly as possible," was all he would say.

11.37am: Gary Gibbon on his Channel 4 blog has been speaking to MPs who were at the Lib Dem meeting last night. He thinks a Tory/Lib Dem deal is now looking more probable.

Danny Alexander told MPs that the Labour negotiating team (or more precisely one half of it – the two Eds, Miliband and Balls) were not giving off good vibes. The whole body language of the Labour parliamentary party was bad. Ministers were knackered and most had already disengaged from their jobs. These opening addresses changed the mood music from the afternoon meeting.

A key early speech was from Vince Cable. He has been remarkably silent since the talks began. Last night he began, like most contributors to the debate, with a "heart beats on the left, I never thought I'd be saying this" sort of approach. Then he acknowledged the arguments of the leadership.

Later speakers included David Heath, who pointed out how the overlap with the Conservatives on areas like civil liberties wouldn't have been there in earlier years.

A key mover in the debate was the sense that Labour might talk about voting reform but they would not have the parliamentary strength or the internal discipline in the Labour party to deliver it.

11.43am: Alan Johnson has today given his strong backing to the attempts to form a Labour/Lib Dem pact. He has just issued this statement.

As I have said consistenly, renewning our politics means changing our electoral system. I wholeheartedly support working in partnership with the Liberal Democrats to secure the economic recovery, protect frontline public services and ensure British people's views are reflected in parliament.

11.51am: Caroline Lucas, the new Green party MP, would not enter a formal coalition with Labour and the Lib Dems (or the Tories and the Lib Dems). She will vote in the Commons on a case-by-case basis. The Guardian's environment network has more here.

12.09pm: Lord Kinnock told the BBC's Daily Politics show that a Labour/Lib Dem deal would last, but that there needs to be a decision soon.

It's certainly possible, and a deal would be durable over a limited period of time, 24 - 36 months say, with a clear declaration that an election were held in that time ... Today or at the latest tomorrow an arrangement must be struck by two parties at a minimum.

12.19pm: I've been fielding some interesting questions from readers and colleagues. Here's an attempt to provide some answers.

Labour and Lib Dem signs in a garden in London. Photograph: Paul Owen

Q: How long will this last?



A: David Cameron has said he wants a decision very soon. Waiting five days for a government may seem like a long time. But by international standards it is not long at all. A report for the Institute for Government found that in countries where hung parliaments are the norm forming an adminstration normally take more than 20 days. But in Britain there is a deadline. The Commons is due to meet a week today, on May 18, to elect a new Speaker and start swearing in MPs. At that point they've going to have to decide who sits on the government benches.

Q: Would Labour MPs vote in favour of a referendum on PR?

A: Most would, but not all. Some Labour MPs are strongly committed to first-past-the-post. In the last parliament there were estimates that as many as 40 Labour MPs were opposed to AV or other forms of electoral reform. Labour's manifesto committed the party to a referendum on AV and, in a crunch vote, MPs will tend to side with the leadership. But it would be suprising if some MPs did not rebel on a vote on this issue.

Q: Do Labour and the Lib Dems need to get the smaller parties to join a coalition?



A: No. Gordon Brown is prime minister and he is entitled to remain prime minister until defeated in the House of Commons on the Queen's speech or a motion of confidence. If Labour and the Lib Dems join forces, they will have 315 votes, not a majority but more than the Tories. The small parties will have nothing to gain from voting with the Tories against the Queen's speech. A Labour/Lib Dem government would have to cooperate with the smaller parties on a case-by-case basis, but it would not need a formal agreement.

Q: What happens if the Lib Dems join a Labour government but don't like the new Labour leader?



A: They would have to decide whether to put up with him (and it probably will be a him) or to walk away. But in practice, if a Labour/Lib Dem coalition does get formed, the ability to work with the Lib Dems would become an important factor in a Labour leadership contest.

Q: Do any Labour or Tory MPs actually want to end up in opposition?

A: Some Labour figures seem to think their party would benefit from a spell in opposition. David Blunkett is the most senior to flirt with this thesis, arguing that the party needs to accept that it lost and to start the process of renewal. There are no Tories thinking along these lines, although some of them believe that if Labour and the Lib Dems were to form a coalition, it would collapse in the autumn, leading to an election that a well-funded Conservative party should be able to win decisively.

Q: Is a national government, involving Labour and the Tories, unthinkable?



A: Yes. At one stage Frank Field floated the idea, but there is no support for it at Westminster. And who would provide the opposition? Governments need oppositions. Labour acccepted the invitation to join a national government in world war two. But the global financial crisis does not provide an existential threat to the UK of the kind posed by Hitler.

12.23pm: Douglas Alexander, Labour's general election coordinator, has ruled out a coalition with the SNP. "I can't envisage circumstances in which we enter coalition with the SNP," he said.

12.46pm: It's been a frustrating morning. The talks process has been continuing, and plenty of people have been commenting, but very little firm information has come out about what's going on. But here's a lunchtime summary of what we know.

• Gordon Brown has just arrived in the House of Commons where talks have been taking place between the Labour and the Lib Dem negotiating teams. Ed Balls, a member of Labour's team, said this morning that they had had a good meeting with the Lib Dems last night. Asked how long it would take, Balls said: "It will take the time it takes, but I think everybody wants to do this as soon as we possibly can."

• Nick Clegg has said that that talks between the parties have reached "a critical and final phase". The Lib Dem leader said this morning: "I really hope that we will be able to make an announcement so we clear up everything and explain to people exactly what our thinking is as quickly as we possibly can." His MPs are due to be meeting this afternoon, although a time for the meeting has not been announced. There are some suggestions that the mood in the Lib Dem camp is moving back in favour of a deal with the Tories. The Lib Dem federal executive is expected to meet at 7.30pm. (See 9.31am and 11.37am)

• David Cameron has said that it is "decision time". The Tory leadership has been polite about the Lib Dems in public, but Sir Malcolm Rifkind has said that he is "depressed and very angry" about the behaviour of the Lib Dems. (See 9.31am and 10.47am)

• Labour has ruled out inviting the SNP to join a Labour/Lib Dem coalition. (See 12.23pm)

12.50pm: This is from Julia Kollewe's market turmoil live blog.

This sounds ominous. A Lib-Lab pact would "almost guarantee" a downgrade of the UK's top-notch credit rating because both parties oppose early spending cuts to reduce the government deficit, according to analysts at BNP Paribas. They advised investors to sell the pound against the dollar.

"A Labour/Liberal government is the least-liked option by markets and would almost guarantee a downgrade of the UK sovereign," the analysts said. This is because "both parties agree that early expenditure cuts could harm the economy."

12.53pm: Do read this. My colleague Polly Toynbee has been taking soundings from some Lib Dems and she says they are getting the impression that some on the Labour side are not serious about striking a deal.

Polly Toynbee Photograph: Linda Nylind

Talking to some high-ups on the progressive wing of the Lib Dems, they worry that some the Labour chief negotiators are just going through the motions while putting serious obstacles in the way. They fear many in Labour agree with the neanderthal tendency represented by David Blunkett – no deal is better than giving true proportional representation to the Lib Dems.

This is odd and unexpected: they say Lords Mandelson and Adonis are extraordinarily positive and willing to give most things on the radical Lib Dem agenda. Surprisingly it is those you might think on the left – Harriet Harman, Ed Miliband and Ed Balls who are foot-dragging. This team of negotiators claim Labour can't guarantee to get real PR through the party and none seem keen on it anyway. Their attitude, say my informants, is far from welcoming. The suspicion is they would prefer to sit on the opposition bench and watch the Lib Dems be slaughtered by tying themselves to the Conservatives.

1.01pm: This could be significant. Conservative Way Forward, a Thatcherite ginger group within the Conservative party, has issued a statement saying it has "considerable concern" about the state of the coalition talks with Lib Dems. It wants David Cameron to form a minority Conservative government. The full text of the statement is now on ConservativeHome.

Conservative Way Forward probably isn't as influential as it used to be, but it does represent the views of a section of the Conservative party. (Lady Thatcher is its honorary president, and its honorary vice presidents include William Hague, Liam Fox and David Davis.) It wants Cameron to reject a coalition. But, as William Hague explained to journalists last night, the Lib Dems are now insisting on coalition or nothing.

George Osborne dealt with the "minority govenrment" option on the Today programme this morning. (See 8.39am) "We can't just turn up at Buckingham Palace and say we'd like to form a minority government," he said.

My colleague Patrick Wintour has written a blog saying that many Labour MPs are opposed to a deal with the Lib Dems.

Patrick Wintour. Photograph: Alicia Canter/ Observer

There is a large group in the parliamentary Labour party that does not want to do a deal with the Lib Dems at any price. It is the same tendency that scuppered a Lib-Lab deal back in 1997. Electoral reform has been a red line to many Labour MPs.

There is also resentment in parts of the Labour party at the way in which this has been handled. They feel that in comparison with the Liberal Democrats and Conservatives, there has been no consultation.

The Labour MPs are not due to meet until tomorrow. For some people in the party anything that Lord Mandelson has had a hand in must by definition be tainted.

"The Labour party is not the personal plaything of Lord Mandelson," said one party member claiming to speak on behalf of a potential leadership candidate.

1.27pm: The Unite union (Labour's largest single financial backer) has issued a letter backing a Labour-Lib Dem deal. The letter, from the joint general secretaries Tony Woodley and Derek Simpson, has been sent to the 100-odd MPs who belong to the Unite parliamentary group.

As you know Labour are now in formal talks with the Liberal Democrats to see if we can agree a stable government to secure the economic recovery and change our politics. Together we can form a progressive coalition, a coalition that would reflect that over 60% of the population rejected the Tories last week.

We believe that this represents the best option for the future of the country at this difficult time. It is trade union members that would pay with their jobs for a Tory government that would cut immediately and strangle the economic recovery at birth.

1.31pm: Sir Macolm Rifkind's language is getting more colourful by the hour. This morning he was expressing his anger at the Lib Dems. Now he is saying that Gordon Brown's attempt to cling on to power "comes straight out of the Robert Mugabe school of politics".

1.36pm: The Tory negotiating team is talking to the Lib Dems this afternoon. William Hague has just announced this on Twitter:

Will be returning to the Cabinet Office shortly to resume negotiations with the Liberal Democrats.

1.48pm: David Cameron and Nick Clegg met for an hour this morning, Lib Dem sources have revealed.

1.53pm: My colleague Hélène Mulholland has been taking soundings among Labour MPs. She has sent me comments from a couple of them who are opposed to a deal with the Lib Dems.

This is from a veteran backbencher:

I find it hard to feel positively-minded towards a Lib Dem deal for two reasons. First, the arithmetic doesn't stack up, and it's quite hard to see how you get a stable government. I am sure you could get an agreement but how long that would last is another matter.

The second is I think the Lib Dems are acting in an unseemly manner. Tendering maybe appropriate for a building contract but I am not sure it's appropriate here. This feels like competitive bidding for something and somebody will be punished for this and I don't want it to be the Labour party.

And this is from a senior Labour MP:

I'm not in favour of Lib-Labbery, full stop. I think they are our political enemy. There is a massive problem with their attitude to the trade unions.

I'm in favour of AV but that's it. The government could not deliver anything but AV through the House of Commons. Half the PLP [parliamentary Labour party] will vote against it and the Tories will too. It cannot be done.

1.54pm: Ed Miliband, a member of the Labour negotiating team, told the BBC that there was a "good atmosphere" in his talks with the Lib Dem team this morning. He said there were "many points of agreement", but certain points had to be "worked through".

2.00pm: The Lib Dem negotiating team has gone into the Cabinet Office for their talks with the Tories. They did not say anything on the way in. The Conservatives are coming now.

Oliver Letwin, William Hague and George Osborne arrive at the Cabinet Office to speak to the Lib Dems today. Photograph: Suzanne Plunkett/Reuters

2.06pm: This is what William Hague said as he led the Tory negotiating team into the Cabinet Office:

As you know, we believe believe very strongly that there should be a government with a strong and secure majority in the House of Commons and of course with an elected prime minister. We remain very very firmly of that view. We set out our proposals to achieve that yesterday and we have come here to hear the Liberal Democrat response.

2.25pm: According to Sky's Miranda Richardson, Labour's Kate Hoey has said that she and many of her colleagues are not in favour of PR. Labour should be "magnanimous in defeat", she said.

The BBC's Iain Watson said that Labour MPs opposed to a deal with the Lib Dems were planning to meet to discuss how to thwart a deal.

2.52pm: Andy Burnham has said that Labour should "respect the results of the general election". He has clearly indicated that he is opposed to a Labour-Lib Dem deal.

Paul Waugh has got the key quote on his blog. Burnham, the health secretary, used an argument similar to the one being deployed by David Blunkett and John Reid:

I think we have got to respect the results of the general election and we can't get away from the fact that Labour didn't win.

Burnham also said that David Blunkett – who set out his views in a Guardian article today – has spoken with "real authority" on this matter.

Burnham is a member of the cabinet. If a Labour-Lib Dem coalition does happen, will he resign? Or is he only speaking out because he has concluded that the Labour-Lib Dem talks are heading for the buffers?

3.01pm: At Left Foot Forward, Will Straw is now arguing that the best outcome for progressives would be a Conservative minority government. He explains his reasoning here, but to understand his argument in full you also need to read this post he wrote this morning. Straw proposes a five-point way ahead for progressives which concludes with this:

Labour announces that it will stand aside in 60 Tory-Lib Dem marginal seats. In return, the Liberal Democrats announce that they will give Labour a free run in 30 seats where they are in third place or below.

3.06pm: I've found another good account of the Lib Dem meeting last night (see 11.37am). It's by Alex Barker, who has posted it at the FT's Westminster blog. He has identified various developments, including Vincent Cable coming out in favour of a deal with the Tories.

So far Cable has kept his powder dry. He's a former Labour man. But last night he acknowledged that those arguing for a Tory deal were probably right. (There was a wise crack about feeling he was being "set up" to wield the public spending axe.) As a senior figures representing the old-SDP wing, this is a significant development.

On the BBC just now the Tory blogger Iain Dale said that he thought Nick Clegg and Cable were both firmly in favour of deal with Cameron, but that they were being opposed by Lord Ashdown (see 9.57am) and Sir Menzies Campbell.

Photograph: Peter Macdiarmid/Getty Images

3.11pm: Here's a contender for quote of the day (because I'm disqualifying Sir Malcolm Rifkind for hyperbole - see 1.31pm). It's from a senior Liberal Democrat, quoted in a Press Association story.

We are on an island with the Tories, but some people hope a lifeboat driven by Ed Balls is going to come along. What they don't realise is that lifeboat is going in the wrong direction and it's sinking.

3.17pm: John Prescott is practically allergic to Liberal Democrats. But he is backing the plan for a coalition with Labour.

The reality is about jobs – not proportional representation, not jobs in the cabinet, not who is going to be the next prime leader – but how do we keep our economy stable ... and Gordon Brown actually produced that in the last 12 months. Can we just let's see if Gordon Brown can get an agreement with the Liberals? If that's the case, let's get on with government and keep the economy on a stable footing. That to me is the issue.

3.19pm: Sam Coates from the Times has put this on Twitter:

Against lab-lib coalition at cabinet yesterday - burnham straw byrne khan ainsworth

3.32pm: Diana Johnson, the schools minister and Labour MP for Hull North, has come out against a Labour-Lib Dem deal.

I just don't think that, with us at 258 MPs, the numbers stack up. It's just on arithmetic – if you look at the figures and what the Liberal Democrats would bring and various other parties would bring, I just don't think the numbers stack up. There might be ways round it, but I don't think the numbers are there.

Nick Clegg returns to his home in London today. Photograph: Ben Stansall/AFP/Getty Images

3.48pm: Here's a mid-afternoon summary.

• A deal between the Tories and the Lib Dems is now looking likely. The Lib Dem negotiating team is now talking again to the Tories Last night the Conservatives did not have any plans to talk to the Lib Dems again. But the talks started again at 2pm, at the Cabinet Office. William Hague announced on Twitter that they were taking place. As Hague went in, he said that he was there to hear what the Lib Dems had to say about the offer made by David Cameron last night. The Lib Dems are holding a joint meeting of their MPs and their federal executive at 7.30pm tonight. (See 2.06pm.)

• David Cameron and Nick Clegg met for an hour at lunchtime, according to the BBC.

• William Hill have stopped taking bets on who the Lib Dems will form a pact with after a flood of money came in from punters betting on a Tory-Lib Dem deal.

• New evidence has emerged about the extent of Labour opposition to a deal with the Lib Dems. Yesterday John Reid – the former home secretary, but no longer an MP – was about the only senior figure to speak out against a Labour-Lib Dem pact. Today David Blunkett has said that a deal of that kind would be a mistake. Diana Johnson, a schools minister, has said she does not think a coalition would have the votes to survive. Andy Burnham, the health secretary, has hinted strongly that he agrees, saying: "I think we have got to respect the results of the general election and we can't get away from the fact that Labour didn't win." (See 2.52pm and 3.32pm.)

• Gordon Brown has been meeting colleagues in Downing Street. Ed Miliband, a member of the Labour negotiating team, said there was a "good atmosphere" when Labour's team met the Lib Dem team this morning. But there are some reports that the talks did not go well. (See 12.53pm and 1.53pm.)

• Conservative Way Forward, a Thatcherite ginger group in the Tory party, has urged Cameron not to go into coalition with the Lib Dems. This is potentially quite serious because Conservative Way Forward represents one important strand of thought in the party. But Tory MPs have not openly criticised Cameron's negotiating tactics. By contrast, some Labour figures are openly attacking Brown's stance. (See 1.01pm.)

3.55pm: Labour has given up talking to the Lib Dems, according to the BBC. This is what Laura Kuenssberg has put out on Twitter.

No 10 sources recognise talks with the libs and labour are over and working out how to declare their side of the negotiation is at an end

4.00pm: Laura Kuenssberg has just said on BBC News that she has seen bags being loaded into cars at the back of Downing Street. "Large hold-alls", she said. She is implying that the Browns are getting ready to leave.

4.08pm: The London Evening Standard is going to splash on Gordon Brown being gone "tonight", according to Sky's Niall Patterson.

4.15pm: My colleague Allegra Stratton has been taking soundings in the Lib Dem camp. She says that frontbenchers started selling the idea of a pact with the Tories to MPs this morning. MPs – even those thought to be in favour of a deal with Labour – were found to be surprisingly receptive to the proposal.

4.19pm: Sky News has is running a news strap saying: "Evening Standard newspaper reports Gordon Brown has quit as prime minister."

I've just called Downing Street. Brown is still prime minister. He has not resigned – yet.

But, to be fair to the Standard, Sky has not got it quite right. Here's the Standard story. It says Brown is about to quit.

Gordon Brown is set to resign tonight and allow David Cameron to be Britain's new prime minister.

The Labour leader's final desperate attempt to cling on to power with a Lib-Lab deal crumbled amid a rebellion on his own side and policy disagreements with Liberal Democrat leader Nick Clegg.

This afternoon he retreated to No 10 to discuss his situation with senior ministers, friends and wife Sarah.

4.26pm: Here are some extracts from Julia Kollewe on her market turmoil live blog.

First she posted this:

Gilt futures rally to a session high on reports that the talks between Labour and the Lib Dems are "temporarily" over, and the pound is climbing again, to $1.4880.

Then a few minutes later she posted this:

The Evening Standard reports that Gordon Brown is set to resign tonight and allow David Cameron to become prime minister. The paper quotes a friend of Brown as saying: "The deal with Clegg was just not doable."

The pound is now trading around $1.4906. The FTSE is recovering and is now only down 52 points at 5335.43, a drop of 0.97%.

4.46pm: Apparently the Liberal Democrats have booked a venue for a special conference on Saturday. And they have also started to prepare ballot papers for a ballot of the entire membership.

Under the so-called "triple lock" in the party rulebook, there are provisions to consult the entire membership about any proposal that would "affect the party's independence of political action". This is what the triple lock says in full.

Conference agrees that:

(i) in the event of any substantial proposal which could affect the Party's independence of political action, the consent will be required of a majority of members of the Parliamentary Party in the House of Commons and the Federal Executive; and,

(ii) unless there is a three-quarters majority of each group in favour of the proposals, the consent of the majority of those present and voting at a Special Conference convened under clause 6.6 of the Constitution; and,

(iii) unless there is a two-thirds majority of those present and voting at that Conference in favour of the proposals, the consent of a majority of all members of the Party voting in the ballot called pursuant to clause 6.11 or 8.6 of the Constitution.

The triple lock was approved by the Lib Dem in conference in 1998 because activists were worried that Paddy Ashdown wanted to take the Lib Dems into a coalition with Labour (see 9.57am).

As the Lib Dems interpret this clause, Nick Clegg would not need a special conference if three-quarters of the parliamentary party and three-quarters of the federal executive approve a coalition. But I'm told that Clegg is preparing for a special conference and a membership ballot anyway to give the move extra legitimacy.

4.47pm: Adrian Sanders, the Lib Dem MP for Torbay, has put a post on Facebook saying his party will do a deal with the Tories.

I thought Labour would want to form a reform coalition even though the arithmetic was tight. It would only take a couple of Labour MPs to rule out an agreement and it would be dead in the water. Today several Labour MPs have been ruling out the chance of such a coalition and forcing us to produce a stable government in the best interests of the country with the Conservatives.

4.48pm: Kevan Jones, a Labour MP and a defence minister, has said Labour should admit defeat and go into opposition. William Green has got the quote on his blog.

We should listen to the electorate. We lost the election. It is now time to go into opposition and make sure we can defend the north east against what is going to be quite a nasty Tory government.

4.50pm: Lord Mandelson has just left Downing Street. He was wearing his impassive, non-responsive face as he got into his car. He did not respond to questions.

4.56pm: Isn't 24-hour news mad? Earlier I mentioned Laura Kuenssberg's observation that hold-alls were being loaded into a car at the back of Downing Street (4pm). She suggested that it might be a sign the Browns were leaving. A few minutes late the BBC reported that they did not belong to the Browns. Then someone suggested they might belong to the Darlings. Now Jon Sopel has said that they weren't the Darlings' either. It turns out they contained police kit.

5.00pm: This is good. We've got a picture of the notes on which Nick Clegg set out his negotiating demands. You can read Graeme Robertson and Allegra Stratton's story about it, and read the note itself, alongside the Guardian's crib as to what it means.

5.15pm: George Pascoe-Watson, the former Sun political editor, thinks the Lib Dems will get six cabinet posts in a Tory-Lib Dem coalition, and that Nick Clegg will become deputy prime minister.

David Cameron today. Photograph: Peter Macdiarmid/Getty Images

5.47pm: Events have moved very quickly in the last two hours. Westminster is now on standby for a change of government soon, perhaps tonight. Nothing has been announced formally, and journalists have been making what has now become a collective assessment on the basis of unattributable briefings and nods and winks. But the London Evening Standard has said that Gordon Brown is set to resign and no one has made any attempt to persuade the media that that's wrong.

Here's an early-evening summary.

• Gordon Brown is expected to resign as prime minister at some point soon. Brown's hopes of staying in office depended upon getting the Lib Dems to go into coalition with Labour. The Lib Dem team met the Labour team this morning. But today it became clear that there was widespread opposition to a deal within the Labour party. Lib Dem MPs are being told that a deal with Labour seemed unworkable and Labour has now abandoned its talks with the Lib Dems. David Cameron and Nick Clegg have arranged to meet their MPs later tonight. The Lib Dem meeting is at 7.30pm, and the Tory meeting is due at 8pm, although there are reports that it could be brought forward.

• The Tories and the Lib Dems are still negotiating the terms of a coalition. The two teams have been in the Cabinet Office talking to each other for more than three and a half hours. It's not clear how long the talks will take. But it is thought that they are finalising a deal that would govern the conduct of a coalition government perhaps for the next two years, and so they have every incentive to get it right. The length of the talks may well determine whether Brown resigns tonight or tomorrow.

6.05pm: Gordon Brown is not going to resign straight away as an MP, in the way that Tony Blair did when he left No 10. My colleague Severin Carrell has sent me this.

Severin Carrell. Photograph: Frank Baron/The Guardian

Alex Rowley, Brown's close friend and Labour leader in Fife, has denied suggestions that Brown will stand down as an MP after resigning as prime minister. Adam Boulton on Sky reported there was speculation inside the Labour cabinet that the prime minister could stand down as MP for Kirkcaldy and Cowdenbeath in the same way that Tony Blair stood down as MP for Sedgefield after he resigned as PM in 2007. Asked if that was accurate, Rowley said: "Definitely not; he's still the MP and that's not going to change."

6.07pm: My colleague Hélène Mulholland has been talking to Labour figures. She says there are discussions under way about having a leadership contest in July, but they might have to hold it later because leadership elections are expensive and it might take longer to raise the money.

6.10pm: Sky's Jon Craig is suggesting the Tory-Lib Dem deal will cover three years.

6.18pm: #thankyougordon is now trending on Twitter. Left Foot Forward has got a selection.

6.21pm: Labour's national executive committee met this afternoon. Members agreed to meet "in the days and weeks ahead" to determine the timetable and the procedures for electing a new leader.

6.27pm: Labour has put a post on Twitter saying that 1,000 people have joined the party since yesterday. Is that because people are glad that Gordon Brown is going? Or are they joining so they can vote for the new leader?

6.35pm: According to Nick Robinson, Gordon Brown and his colleagues are putting a brave face on things in No 10. Robinson has just said that he's been told they've been telling jokes. Brown is with his closest allies: Ed Balls, Lord Mandelson, Sue Nye, and Douglas Alexander. Tony Blair has spoken to Brown by phone. New Labour started with Brown, Blair and Mandelson. As the government comes to an end, they're still yoked together.

6.42pm: Benedict Brogan on his blog says Vincent Cable has been seen in the Treasury this afternoon.

It seems the impossibility of a deal with Labour became increasingly apparent as the day progressed. Its internal divisions on PR and the future are too great. It also appears that Mr Clegg told his MPs last night that he remained committed to a deal with the Tories because it was the logical thing to do. Senior figures endorsed the view, telling him their heart was with Labour but their heads said go with the Tories, chief among them apparently Vince Cable. Saint Vince must see an opportunity. Which may be why he was seen this afternoon in the Treasury holding meetings with private office people. Is the Chief Secretary job on offer?

6.46pm: The BBC are saying there will be an announcement outside the Cabinet Office in 20 minutes.

7.04pm: Some more news about the Tory/Lib Dem negotiations. My colleague Hélène Mulholland says the Tories were surprised that the Lib Dems decided not to make an issue of immigration in the talks. In their manifesto the Lib Dems proposed an amnesty for long-term illegal immigrants (although Nick Clegg did not like the term – he preferred to talk about earned citizenship). Clegg had difficulty selling the policy during the campaign and it seems that he has now agreed to drop it, or at least not insist on it as coalition policy.

7.09pm: On his blog, Newsnight's Michael Crick quotes an unnamed Liberal Democrat MP who told him he was amazed how much the Tories were willing to compromise. The MP told Crick:

I can't believe how much they've offered us. The Tories have basically rubbed out their manifesto and inserted ours. We'll have to cope for four or five years with our flesh creeping, but still.

7.10pm: Outside Downing Street they've set up the podium. Brown will be coming out soon to resign. It's going to look like the second resignation speech in the course of just over 24 hours, although of course yesterday he didn't actually resign.

7.17pm: We still know very little about the nature of the coalition deal. But if the Lib Dems are happy with it, it's safe to assume that many of the Tory manifesto promises favoured by the right will have been ditched. The inheritance tax increase is likely to be a goner. The marriage tax break may not survive in any meaningful form. The Cameroons may be quite happy about this. The inheritance tax cut proposal became a liability during the election campaign. But there are already suggestions that the right, and the rightwing press, are unhappy.

There is also speculation around tonight about Ken Clarke going to the Treasury instead of George Osborne. That would go down well with the Lib Dems too.

Gordon Brown resigns, accompanied by his wife, Sarah, today. Photograph: Anthony Devlin/PA

7.18pm: Gordon and Sarah Brown have come out of No 10.

7.19pm: Brown says he is going to go to the Queen and resign.

7.19pm: He will advise the Queen to invite the leader of the opposition to become prime minister. He wishes the new PM well.

7.20pm: He says that he promised to do all he could to make sure a strong government was formed. He has done all he could to ensure that.

As prime minister, he has learned a lot about the best of human nature and also about its frailties, including his own.

He says he loved the job, but not for its trappings.

7.21pm: He pays particular tribute to the armed forces. He mentions looking in their eyes and seeing their courage. He will never forget that.

7.21pm: His resignation as Labour leader will take effect immediately. (Harriet Harman must be acting Labour leader.)

7.22pm: He thanks his wife. And as he leaves the second most important he could ever hold, he cherishes even more the first – his job as a husband and father.

7.22pm: Holding hands with Sarah, he goes back into Downing Street and comes out again with his children, John and Fraser.

Gordon and Sarah Brown and their two sons leave Downing Street after Mr Brown's resignation today. Photograph: Anthony Devlin/PA

7.25pm: As a family, they walk hand in hand down to the car, which is not parked immediately outside the front door. Some of my colleagues find the pictures a bit sugary, but I found it sweet and touching. The children looked delightful.

Brown and his wife Sarah then got into one car to go to the Palace. The children left Downing Street in another car.

7.25pm: Sky is saying that Nick Clegg will be deputy prime minister.

7.33pm: Danny Alexander and the Lib Dem team have just come out of the Cabinet Office. He said there was a "good atmosphere" in the talks and that they had to report back to their colleagues.

7.37pm: William Hague has come out of the Cabinet Office. He said that he had some recommendations that he would take back to his colleagues. Asked if there was a coalition, he said we would find out soon enough. As he was speaking, some "troops out" protesters were shouting: "Tory scum."

7.43pm: My colleague Hélène Mulholland has just seen Chris Huhne, David Laws and Danny Alexander (three members of the Lib Dem negotiating team) walk into the Norman Shaw building, an office building for MPs. She says they did not look particularly happy. Protesters were shouting at them: "Don't do it."

7.46pm: William Hague and his team were booed by a crowd of protesters as they walked down Whitehall.

7.49pm: Gordon Brown has finished his audience with the Queen. He is now heading to Labour HQ.

Sky says George Osborne will definitely be chancellor in a coalition government. (So the Ken Clarke rumour – see 7.17pm – wasn't true.)

7.53pm: Brown has arrived at the Labour HQ on Victoria Street. Ed Miliband looked morose, Yvette Cooper gave Brown a warm hug, Douglas Alexander looked glum. Brown shook hands with and greeted a crowd of party workers. Then he went inside.

7.56pm: Here is Brown's resignation speech:

As you know, the general election left no party able to command a majority in the House of Commons.

I said I would do all that I could to ensure a strong, stable and principled government was formed, able to tackle Britain's economic and political challenges effectively.

My constitutional duty is to make sure that a government can be formed following last Thursday's general election.

I have informed the Queen's private secretary that it's my intention to tender my resignation to the Queen. In the event that the Queen accepts, I shall advise her to invite the leader of the opposition to form a government. I wish the next prime minister well as he makes the important choices for the future.

Only those who have held the office of prime minister can understand the full weight of its responsibilities and its great capacity for good. I have been privileged to learn much about the very best in human nature, and a fair amount too about its frailties, including my own. Above all, it was a privilege to serve. And, yes, I loved the job, not for its prestige, its title and its ceremony, which I do not love at all. No, I loved this job for its potential, to make this country I love fairer, more tolerant, more green, more democratic, more prosperous and more just – truly a greater Britain.

In the face of many challenges in a few short years, challenges up to and including the global financial meltdown, I have always strived to serve, to do my best in the interests of Britain, its values and its people. And let me add one thing also. I will always admire the courage I have seen in our armed forces. And now that the political season is over, let me stress that having shaken their hands and looked into their eyes, our troops represent all that is best in our country and I will never forget all those who have died in honour and whose families today live in grief.

My resignation as leader of the Labour party will take effect immediately. In this hour I want to thank all my colleagues, ministers, members of parliament. And I want to thank above all my staff who have been friends as well as brilliant servants of the country. Above all, I want to thank Sarah for her unwavering support, as well as her love, and for her own service to our country. I thank my sons John and Fraser for the love and joy they bring to our lives. And as I leave the second most important job I could ever hold I cherish even more the first, as a husband and father. Thank you and goodbye.

The Queen greets Gordon Brown at Buckingham Palace for an audience at which he tended his resignation as prime minister today. Photograph: John Stillwell/PA

8.05pm: You can watch a video of Brown's resignation statement here.

8.06pm: David Cameron is in the car on his way to the Palace now. But he seems to have to got stuck in traffic. He'll have to take it up with Boris.

8.11pm: David Cameron just arrived at Buckingham Palace with his wife Samantha. They've gone in to the building.

8.17pm: When Tony Blair became prime minister, he gave a speech announcing his victory as dawn broke over London. Cameron seems to have had equal luck with the elements. Apparently there is a rainbow over Buckingham Palace.

8.25pm: Brown is in Labour HQ delivering a speech to party workers. He quotes the section from the new clause four about the people achieving more through the strength of their common endeavour.

Photograph: BBC News

He thanks Harriet Harman, "one of the best people you could ever meet," Douglas Alexander, and Lord Mandelson, one of the architects of New Labour. He says Labour is very fortunate to have Ray Collins as general secretary and Ann Black as chair of the NEC.

He says he takes responsibility for the fact that Labour did not do better. He says:

One thing will not change. I am Labour and Labour I will always be.

He thanks the Labour candidates who never gave up. Labour went into the election outspent, and with "a difficult media environment". But it managed to deny the Tories the victory they had taken for granted. The campaign showed that committed people count for more than cash.

He recalls meeting a child during the campaign who was exactly the same age as the Labour government. She grew up in a country where opportunity was taken for granted, he says.

We can be proud that there are people alive in Africa ... because of what we have done for people living thousands of miles away.



He says New Labour's achievement do not belong to him or Tony Blair. They belong to the Labour party.

He says the Labour is "and will always be the greatest fighting force for fairness this country has ever seen".

Labour is "irrepressible", he says. "We fight for fairness. Tomorrow we fight on."

It was an uplifting speech, without a trace of self-pity or rancour: Brown at his best.

8.29pm: David Cameron is prime minister, Sky tells us. In the old days these things used to appear in the London Gazette. Nowdays it's a newsflash on Sky.

Simon Lewis, Brown's press spokesman, is leaving Downing Street, Sky reports. He will be replaced by a career civil servant from the Treasury.

8.30pm: Severin Carrell has sent me more from Scotland. The Press Association has been running a story suggesting that Brown will stand down as an MP. But Sev has double-checked; it's definitely not true.

Alex Rowley, Brown's election agent and leader of Fife council's Labour group, said the BBC and PA reports quoting Brown's friends that he would resign as an MP are "Absolutely untrue. I'm his election agent and I'm saying absolutely not. He's staying as an MP. I saw it running as a strap line on the BBC there as well. I have been assured late this evening absolutely not; he's staying as an MP. "Nobody is saying he's going to stay on as an MP forever more but this line that they're putting out, he's going to stand down as an MP is simply not the case. He's resigned as prime minister and leader of the Labour party but he's staying as an MP."

8.36pm: Here's a good fact: at aged 43, seven months and 2 days, Cameron becomes youngest prime minister since Lord Liverpool in 1812.

Alex Salmond, Scotland's first minister, has paid tribute to Brown:

For 30 years, Gordon Brown has been at the very forefront of first Scottish and then UK politics. No one could doubt his powerful intellectual capacity, his commitment, and the strength with which he pursued his objectives. In his departure, the Labour party have lost not just a leader, but almost a force of nature. I wish Gordon and his family well for whatever the future holds.

8.41pm: David Cameron is leaving Buckingham Palace.

Lord Mandelson has suggested that the Lib Dems were never serious about a pact with Labour. He said this to the BBC.

In the final analysis, I'm wondering though whether that's what they actually intended. When I think about it, I think they were creating so many different barriers and obstacles that perhaps their instincts and perhaps they thought their interests lay on the Tory side, on the Conservative side, rather than on the progressive side.



Vincent Cable has said he would be "very surprised" if the agreement between the Tories and the Lib Dems is unveiled tonight.

Nothing has been formally agreed. There has been a lot of progress. The details are currently in the process of being sorted.

The Queen greets David Cameron at Buckingham Palace in an audience to invite him to be the next prime minister today. Photograph: John Stillwell/PA

8.42pm: Here's some constitutional nonsense. When new prime ministers kiss hands, they don't actually kiss the Queen's hand. But in the past they used to. Lord Heseltine has just told the BBC that he once kissed hands (when he joined the privy counsel.)

8.44pm: Cameron is arriving in Downing Street, with his wife Samantha.

He says the Queen has asked him to form a government and he has accepted.

8.45pm: He says he and Nick Clegg are forming a joint government. They are both leaders who want to put aside party interest and work in the national interest.

8.47pm: Cameron says he believes Britain's best days lie ahead and that he believes in public service. He will take difficult decisions, so that together "we can reach better times ahead".

He wants to restore trust in politics, and ensure that politicians are always the servants of the people, not their masters. But real change will only take place when people accept responsibility. He wants to try to build a more responsible society.

8.48pm: He says his government will protect the vulnerable. It will be build on values of fairness. It will be hard and difficult work. It will through up all sorts of challenges.

8.50pm: Cameron kisses his wife on the doorstep and heads inside.

8.51pm: I though Cameron's speech was a bit lacklustre. It was very short of memorable phrases. But I suppose Cameron has had other things to worry about.

8.57pm: Barack Obama will be on the phone to Cameron in 10 minutes' time, Sky reports.

9.01pm: This is what David Cameron said about Brown and Labour's record in his speech on the steps of Downing Street:

Her Majesty the Queen has asked me to form a new government and I have accepted. Before I talk about that new government, let me say something about the one that has just passed. Compared to a decade ago, this country is is more open at home and more compassionate abroad and that is something we should all be grateful for. And on behalf of the whole country, I would like to pay tribute to the outgoing prime minister for his long record of dedicated public service.

Tony Blair has paid tribute to Brown. He has issued this statement:

I spoke to Gordon Brown tonight in a warm conversation that reflected a friendship of almost 30 years' duration. I pay tribute to the dignity, courage and leadership he has shown in these last few days and to the quite extraordinary service he has given to our country in 13 years of government as chancellor and prime minister and to the cause of social justice at home and abroad.

9.10pm: The Downing Street website has been updated. But the Meet the PM page needs a bit of work.

9.12pm: Simon Hughes has just told Sky that the coalition agreement covers a full four years.

9.21pm: I've already posted a short extract from Cameron's speech outside Downing Street (see 9.01pm). Here's the rest of it. It's quite long, but I'll post it in full because I can't find it anywhere else on the web at the moment.

In terms of the future, our country where no party has an overall majority and we have some deep and pressing problems - a huge deficit, deep social problems, a political system in need of reform. For those reasons, I aim to form a proper and full coalition between the Conservatives and the Liberal Democrats. I believe that is the right way to provide this country with the strong, the stable, the good and decent government that I think we need so badly. Nick Clegg and I are both political leaders who want to put aside party differences and work hard for the common good and for the national interest. I believe that is the best way to get the strong government that we need, decisive Government that we need today. I came into politics because I love this country, I think its best days still lie ahead and I believe deeply in public service, and I think the service our country needs right now is to face up to our really big challenges, to confront our problems, to take difficult decisions, to lead people through those difficult decisions so that together we can reach better times ahead.

One of the tasks that we clearly have is to rebuild trust in our political system. Yes, that's about cleaning up expenses, yes, that's about reforming parliament, and yes, it's about making sure people are in control and that the politicians are always their servants and never their masters. But I believe it's also something else - it's about being honest about what government can achieve. Real change is not what government can do on its own, real change is when everyone pulls together, comes together, works together, when we all exercise our responsibilities to ourselves, our families, to our communities and to others. And I want to help try and build a more responsible society here in Britain, one where we don't just ask what are my entitlements but what are my responsibilities, one where we don't ask what am I just owed but more what can I give, and a guide for that society that those that can should and those who can't we will always help. I want to make sure that my Government always looks after the elderly, the frail, the poorest in our country. We must take everyone through us on some of the difficult decisions that we have ahead. Above all it will be a Government that is built on some clear values, values of freedom, values of fairness and values of responsibility. I want us to build an economy that rewards work, I want us to build a society with stronger families and stronger communities and I want a political system that people can trust and look up to once again. This is going to be hard and difficult work. The coalition will throw up all sorts of challenges, but I believe together we can provide that strong and stable government that our country needs, based on those values, rebuilding family, rebuilding community, above all, rebuilding responsibility in our country. Those are the things I care about, those are the things that this Government will now start work on doing. Thank you very much.

9.23pm: Some of the cabinet appointments are starting to leak. According to Sky, Vincent Cable will be chief secretary to the Treasury, David Laws will be education secretary, Andrew Lansley will be health secretary and William Hague will be foreign secretary.

9.25pm: I missed this quote earlier, from Lord Mandelson. He was talking about Brown.



He has shown giant dignity, and like all of us he may not be faultless but he's certainly fearless.

9.27pm: David Cameron is still in Downing Street, but he is due to address a meeting of Tory MPs in the Commons at 10pm.

9.30pm: My colleague Nick Watt has got some information about the appointments to the new government. He's sent me this.

The Lib Dems will be given up to five cabinet posts by David Cameron as he delivers on his pledge last night to have a full and proper coalition government with the Lib Dems. In an echo of the German grand coalition, Nick Clegg is expected to be appointed deputy prime minister. Vince Cable, the party's deputy leader, is being lined up to serve as George Osborne's deputy as chief secretary to the Treasury. It is understood that the Lib Dems, who have 11 MPs in Scotland, will be given the Scottish secretary portfolio. The other Lib Dems in line for Cabinet posts are: Chris Huhne, who ran Nick Clegg a close second in the leadership contest, David Laws, the education spokesman, and Danny Alexander, Clegg's chief of staff. It is also understood that the Lib Dems have been given an undertaking that they will have 'sleepers' at middle and junior ministerial rank in most other departments. Members of the Lib Dem frontbench being lined up for these jobs include Ed Davey, the foreign affairs spokesman, and Norman Lamb, the

health spokesman.

9.34pm: Sky is suggesting that Lord Ashdown will become defence secretary. Sky's Jon Craig asked Liam Fox about about this, but Fox refused to comment.

9.40pm: Amidst the excitement of the appointment of a new prime minister, a rather bitter war of words has broken out between Labour and the Liberal Democrats. They are both blaming each other for their failure to create a "progressive" coalition.

Earlier Lord Mandelson said the Lib Dems were never serious about striking a deal with Labour. Mandelson suggested they did not have progressive instincts. (See 8.41pm).

Now the Lib Dems have hit back. A party spokesman has issued this statement.

It is clear that the Labour Party never took seriously the prospects of forming a progressive, reforming government with the Liberal Democrats. Key members of Labour's negotiating team gave every impression of wanting the process to fail and Labour made no attempt at all to agree a common approach with the Liberal Democrats on issues such as fairer schools funding for the most deprived pupils and taking those on low incomes out of tax. It became clear to the Liberal Democrats that certain key Labour cabinet ministers were determined to undermine any agreement by holding out on policy issues and suggesting that Labour would not deliver on proportional representation and might not marshal the votes to secure even the most modest form of electoral reform. It is clear that some people in the Labour Party see opposition as a more attractive alternative to the challenges of creating a progressive, reforming government, not least in the context of a Labour leadership election campaign.

Ed Balls and Ed Miliband - two candidates for the Labour leadership - were on the Labour negotiating team. Balls is thought to be particulary sceptical about electoral reform. The Lib Dems seem to be blaming him for the failure of the coalition talks.

9.56pm: My colleague Jill Treanor tells me the gossip in City circles is that Vincent Cable could be given responsibility for the banks and business at the Treasury. "If that's true, that will unsettle the banks as the Lib Dems want to split up the banks' "casino" arms from the high st businesses, which will hurt Barclays, HSBC and the state-controlled RBS," she tells me.

10.03pm: My colleague Matt Wells has been reading Alex Salmond's tribute to Brown (see 8.36pm) and is impressed.

To this former Scotsman reporter who spent quite some time watching the nats and Labour tear lumps out of each other north of the Border, that statement from Alex Salmond is remarkable. You can't overstate the enmity between the two parties, and Gordon Brown has personally devoted much of his political career trying to beat the nationalists into the ground. In that context, it's an extremely gracious statement, and makes the Plaid Cymru remarks seem all the more poorly judged.

Plaid issued a press notice today accusing Labour of "throwing away the opportunity to create an alternative government based on co-operation and consensus, and ... allowing the Tories to threaten Welsh communities with savage cuts." It did contain a line praising Brown for the dignity with which he handled his final days in office and wishing him well for the future, but mostly it was a press release attacking Labour.

10.13pm: My colleague Haroon Siddique says Cameron will be the 19th Old Etonian to become prime minister. That's 19th out of 53 including, if you go back to Walpole.

10.18pm: The Downing Street press office has been in action already. It has sent out a note about Cameron's telephone conversation with Obama.

The prime minister, David Cameron, took a call from President Obama shortly after arriving in Downing Street. The US President offered his congratulations to Mr Cameron on his appointment as prime minister. He also invited the prime minister to visit the United States in July and said he was looking forward to seeing him in June at G8 and G20 meetings. They also discussed Afghanistan, the Middle East Peace Process and Iran. The prime minister also received a call from Chancellor Merkel of Germany who offered her congratulations and invited him to visit Berlin at the earliest opportunity. They briefly discussed the world economy and the common European agenda.

10.23pm: At the moment, Cameron is addressing Tory MPs in the Commons. Clegg is addressing a joint meeting of Lib Dem MPs and the Lib Dem federal executive. Cameron has already been appointed prime minister and the new government is starting to tick into action. As far as we can tell, Tory and Lib Dem MPs seem delighted. But we still don't know the details of the agreement and backbench MPs are only now finding out. Effectively, they signed up to the deal before they had read the small print.

That's partly because Cameron and Clegg have been under pressure to agree a coalition quickly. As I pointed out earlier (see 12.19pm) in other countries it normally takes much longer. After I posted that I received an email from an old colleague, John Morrison, who said that as a young Reuters correspondent in the Netherlands in the mid 1970s he reported on Dutch coalition negotiations that went on for six months.

10.35pm: The old joke about Sky is "never wrong for long". Sky is now saying that Liam Fox will be defence secretary. The Lord Ashdown speculation (see 9.34pm) has been quietly forgotten.

10.42pm: Nick Clegg refused to comment when asked earlier if he was going to be deputy prime minister. But the BBC is now saying Clegg is definitely going to get that title.

10.49pm: Jackie Ashley, Julian Glover and Martin Kettle have all delivered their verdicts on the coalition government at Cif at the polls.

Jackie says Clegg has come out on top.

One can only marvel at the chutzpah of the small yellow party, which came a very poor third in last week's election. They appear to have made some very serious dents in the Tory juggernaut. What their achievement may cost them at the next election is another matter. But for now, Nick Clegg has proved himself a smarter politician than many had anticipated.

Julian says the Tory modernisers have achived an extraordinary coup.

When parliament returns next week, we will see a different party in the Commons, younger, more diverse and more loyal – at least, for the moment – to Cameron. That does not mean it will be more liberal: there are many Eurosceptics, tax cutters and climate change doubters. But they will not be in control. The Tory modernisers have pulled off the most extraordinary coup.

Martin says many Labour MPs did not want a deal with the Lib Dems.

Either they just hate the Lib Dems, or they hate the party grandees who were negotiating with the Lib Dems, or they simply prefer to be opposition. For these people, the fact that the arithmetic was a stretch was an excuse, not the deeper reason for opposing the deal.

11.06pm: Downing Street has confirmed that Nick Clegg has been appointed deputy prime minister.

11.12pm: The Tories have been briefing on details of the coalition. One of the most remarkable is that there will be a commitment to hold the next election on the first Thursday in May 2015 (that's May 7). But it is not clear how this will work in practice. What if the government loses a confidence vote before then? Conventionally, the defeat of a government in a confidence vote is supposed to trigger an election.

11.18pm: It is not entirely clear yet how collective responsibility will be enforced under the new arrangements. There is at least one area where Lib Dems do not have to support government policy. According to briefing from the Tories, under the deal Lib Dem MPs will be allowed to abstain on votes introducing a tax break for married couples.

11.22pm: Under the deal, the Tories have agreed to accept the Lib Dem plan to lift the income tax threshold to £10,000. This would cost £16bn, and details of how the coalition would achieve this seem a bit hazy. There is no timetable for when this would be achieved, suggesting it won't be a priority.

Another pet tax plan may also take a while to come into force. The Tories have not entirely dropped their plan to raise the inhertance tax threshold to exempt all estates worth less than £1m. But the Tories now accept that this is unlikely to be achieved in one parliament.

11.31pm: Poor Danny Alexander. It looks as if he has been lined up to become Scottish Secretary. That means he will spend his life defending a (largely) Tory administration to a Scottish audience. That's not a route to popularity.

The BBC is also suggesting that Chris Huhne could be home secretary. But that's not confirmed.

11.40pm: Vincent Cable has not had much luck with his mansion tax. When he announced his plans for a new tax on property worth more than £1m at the Lib Dem conference last year, there was an angry backlash from Lib Dem MPs. Cable had to revise the tax a few weeks later, and declare that it would only cover homes worth more than £2m. Now the idea has been dropped altogether.

11.45pm: What are Labour figures saying about the Tory/Lib Dem coalition on Twitter. Here's a sample.

From Tom Watson:

I guess we'll never really know why Deputy Prime Minister Clegg chose to do a deal with David Cameron.

From Denis MacShane:

Bumped into 2 shad cab Tories in Indian rest. Miserable as they feared Dave had dumped them 4 LibDems. Diddums



From Alastair Campbell:

Met Ben Bradshaw at Newsnight. Loads of Liberals defecting to us since Clegg put Cameron in power.

11.59pm: On Europe, the Lib Dems have agreed to support the Tory plan to introduce legislation saying that any future transfers of power to the EU would have to be approved by the people in a referendum.

The coalition has also agreed not to join the euro.

12.04am: There don't seem to be any women at the top of the Tory/Lib Dem coalition yet. On the basis of the reports we've had so far, the new cabinet will include David Cameron (PM), Nick Clegg (deputy PM), George Osborne (Chancellor), Vince Cable (chief secretary to the Treasury), Andrew Lansley (health), Liam Fox (defence), David Laws (education), Danny Alexander (Scotland) and Philip Hammond (work and pensions). There must be some jobs going to women, but we haven't heard of them yet.

12.13am: The Lib Dems have just come out of their meeting. The coalition agreement has been approved overwhelmingly by Lib Dem MPs and by the federal executive.

Asked for a comment, Lord Ashdown said: "Hooray."

12.16am: My colleague Hélène Mulholland has been compiled an analysis of the policies agreed by the coalition. This is a long post, but it is effectively the manifesto for the coalition government, the agenda for the next five years, and so it is worth posting in full.

Economic measures for an agreement which has deficit reduction "at its heart"

• £6b in year cuts in non frontline services subject to the advice from the treasury and the bank of england (Tory)

• Scrapping of national insurance rises (Tory)

• A substantial increase in the personal tax allowance from April 2011 with a focus on low and middle income earners, with a "long term goal" of a £10,000 personal tax allowance. There is no a timetable for this, but there is a promise to make further real term steps each year towards this objective. This is described as a "funded increase". It will be funded by taking the money the Tories had planned to use to increase the employee threshold for national insurance, and by an increase in capital gains tax for non business assets to bring it closer to the level of income tax.

• Marriage tax allowance. The liberal democrats have agreed to abstain on this, which gives the Tories a "real chance" of getting that through.

Lib Dem pledges that have been dropped

• Tax relief for higher rate pensioners will not be pursued

• Mansion tax

Tory pledges that have been dropped

• Raising the threshold on inheritance tax which is described as "unlikely to be achieved in this parliament".



Lib Dems priorities that have been secured

• Referendum to bring in some form of alternative vote system. Coalition members will be subject to three-line whip to force the legislation for a referendum through, but they will be free to campaign against the reforms before referendum.

• New pupil premium to be introduced, steering more funding to schools for every child they take from poor homes. Both parties back this policy, but the Lib Dem version attaches more money to it.

• Reducing the tax burden on low earners. This could go some way towards the Lib Dem aim of lifting tax threshold to £10,000.

• A wholly or mainly elected house of Lords.

• More equal constituency sizes

• Fixed term parliaments, including this one. The next general election will be held on the first Thursday of May 2015. Legislation will mean such agreements can only be broken by an enhanced majority of the House of Commons.



Tory priorities that have been secured

• A cap on immigration and an end to child detention immigration controls (the latter was a Lib Dem proposal).

• Welfare reform programme to be implemented in full.

• School reform programme providing all schools are held accountable.

• A commitment to maintaining Britain's nuclear deterrent. Renewal of Trident will be scrutinised to ensure value for money. Liberal Democrats will be free to continue the case for alternatives.

• The government will make no proposals to join the euro.

• No proposals to transfer new powers to the European Union.

• A referendum lock will ensure that any proposal to transfer new powers must by law be put to a referendum.

Areas that were already in agreement will see a major programme of civil liberties

• A great repeal or freedom bill to scrap the ID card scheme and the national identity register and the next generation of biometric passports

• Extending the scope of the Freedom of Information bill to provide greater transparency

* Adopt protections of the Scottish model for the DNA database

• Protecting trial by jury

• Reviewing libel laws to protect freedom of speech

• Further regulation of CCTV and other items

• Measures to boost economy in key areas such as low-carbon industries and investment in infrastructure. A green investment bank, a smart grid, retention of energy performance certificates while scrapping home information packs.

Areas of opt outs for either party

• Lib Dems will be free to maintain their opposition to nuclear power while permitting the government to put forward the national planning statement for ratification by parliament so that new nuclear construction becomes possible.

Banking reform

• A banking levy will be introduced.

• Bonuses will be tackled.

• A "more competitive banking industry".

• More credit to flow to businesses. The proposals of the respective parties will be looked at before deciding which is the better one.

• An independent commission will be set up to consider Lib Dem proposals to separate retail and investment banking and the Tories' proposals for a quasi separation. An interim report will be published within a year.

• The Bank of England could be given control of macro prudential regulation and oversight of micro prudential regulation under proposals to be put forward.

12.38am: Nick Clegg is giving a press conference now. He starts with a tribute to Gordon Brown. And he says he wants to produce not just a new government, but a new kind of government.

12.51am: David Cameron has just arrived home. At his West London home, not the new one.

12.56am: Here is the full text of Clegg's speech.

Tonight the Liberal Democrat parliamentary party and the federal executive of Liberal Democrat party have overwhelmingly accepted my recommendation that we should now enter into a coalition government with the Conservative party. Before I say anything more about that coalition government I would like to express my thanks and admiration for Gordon Brown. He has been a towering figure for more than a decade in British politics and the manner in which he has acted over the last few days has displayed immense dignity, grace and a profound sense of public duty. We are now going to form a new government, more importantly we are going to form a new kind of government. I hope this is the start of the new politics I have always believed in: diverse, plural, when politicians of different persuasions come together to overcome their differences in order to deliver a good government for the sake of the whole country. That was what we were asked to do by the people of Britain at the general election last week, and that is now what we will seek to deliver. I would like to thank David Cameron for the very positive, constructive and workman like way in which we have been able to reach a basic agreement on how we can come together in this new coalition government over the last few days. We are politicians, clearly of different political parties, but I believe we are now united in wishing to tackle the challenges this country faces and to deliver a fairer better Britain, and I look forward to working with him to do just that. There will of course be glitches. But I will always do my best to prove that new politcs isn't just possible, it's also better. I would like to say something directly to the nearly 7 million people who supported the Liberal Democrats in the general electoin last week. I am acutely aware that I carry your hopes, your aspirations with me into this coaltion. I can imagine this evening that you will be having many questions, many many doubts about this new government. But I want to assure you that I would not have entered into this agreement if I had not been genuinely convinced that it offers a unique opportunity to deliver the kind of change which you and I would like to see: fairer taxes; a fair start in life for every child in this country; a new start for our discredited banking system and the prospect of new, sustainable growth in our economy; and a new hopeful politics that you can trust once again. So I hope you will keep faith with us, I hope you will let us prove to you that we can serve you and this country with humility, with fairness at heart of everthing we do, and with total dedication to the interests and livelihoods of everyone in Great Britain. Thank you.

1.00am: That's it. Britain has got its first coalition government for more than 60 years. And Nick Clegg will be sitting in cabinet alongside Liam Fox and William Hague. Will it work? Who knows. But it is a bold project, and it will be certainly be interesting. We'll get our first good look at it tomorrow (rather, later today) when the Cameron cabinet is expected to meet for the first time. And we've also got a new (interim) Labour leader. And the Labour leadership contest will soon begin in earnest.

Time for bed. Thanks for the comments.