The suggestion resurfaced last weekend and has not been denied all week. Mr Blair said at one election press conference that while he believed in co-operation between parties, there was no question of pacts or deals. But his answer fell well short of a watertight denial.
When The Independent asked a leadership source yesterday whether there could be Liberal Democrat ministers in a Labour government, there was no attempt at denial or repudiation.
The appointment of Liberal Democrats to ministerial posts - presumably to the rank of minister of state - would be regarded by all Labour ministers and MPs as a signal of the influence of Peter Mandelson on Mr Blair.
Mr Mandelson said in an early synopsis of a book he wrote in 1996 with a founder of the Social Democrat Party, Roger Liddle, The Blair Revolution, that coalition with the Liberal Democrats might be necessary to enable Labour to stay in office for more than one term.
The draft said: "To see through the whole programme of renewal to completion will take more than one five-year Parliament and the Government will be facing re-election by a possibly sceptical or hostile public ... there is a strong argument for working out in advance what understanding Labour should forge with the Liberal Democrats."
The draft also said: "No doubt some in both parties would explode at the prospect of doing a deal. But the majority would prefer to see a longer- term, stable, left-of-centre government than a risky, short-term, go- it-alone attitude prevailing.
"The worst scenario would be to dismiss any idea of a pact, only to be forced to confront it later."
Lord Jenkins, the former Labour deputy leader and one of the Gang of Four SDP founders, was yesterday asked at the Liberal Democrat election press conference whether he had been involved in talks with Mr Blair over the future role of Liberal Democrats in a Labour government.
Lord Jenkins, who is known to be close to Mr Blair, said: "I have had no contact with him at all since what now seems like 18 months since the campaign began, and no discussions with him on this issue."
However, if it did happen on the back of a significant Labour majority many Labour MPs would be distressed by the construction of unnecessary coalition - not least because it would suggest a further erosion of the traditional Labour Party, and because it would mean fewer government places for Labour MPs.Reuse content