Government sources told The Independent that Labour was now unlikely to enter a coalition deal with the Liberal Democrats in the Welsh Assembly. Labour is proposing a "three-way partnership", with Plaid Cymru and the Liberal Democrats winning key jobs in return for an agreement not to outvote Labour. The nationalists came a strong second in last week's elections, winning 17 seats to Labour's 28.
In Scotland, Liberal Democrat demands that Labour should scrap student tuition fees remained a stumbling block. Leaders are confident of finding a compromise, but the lack of an agreement could delay plans to install Donald Dewar as First Minister in the new Parliament on Thursday.
"We have waited 300 years to get this democratic Scottish Parliament," said Michael Moore, the Liberal Democrat campaign manager. "We can afford to get it right."
Mr Dewar, under pressure from cabinet colleagues to avoid retreat, is determined to cling on to the principle of the pounds 1,000-a-year fee. One option would be to raise the threshold on household income from pounds 16,000 to pounds 18,000, increasing the number of students exempt from fees to 50 per cent.
Mr Dewar's hand was strengthened yesterday when the Committee of Scottish Higher Education Principals wrote to the two parties expressing "grave concern" about the Liberal Democrats' demand and warning that scrapping fees would hit university funding.
In Wales, the Assembly's prospective leader, Alun Michael, is still negotiating on a possible coalition. The Liberal Democrats want a written agreement on the policies to be adopted during the four-year term of the Cardiff Assembly. Plaid Cymru sources said the party was ready to co-operate with Labour, and there were many areas of common ground in their respective manifestos.
The nationalists, who oppose full independence for Wales, are ready to back Mr Michael as First Secretary of the Assembly and Labour will install Lord Elis-Thomas, the Plaid Cymru peer, as Presiding Officer (Speaker),
The Liberal Democrats will be offered the post of Deputy Presiding Officer and at least one committee chairmanship. Leading article, Review page 3Reuse content