The initiative, which is part of a wide-ranging package of constitutional proposals, will put the seal on six months of tough negotiations between the two parties.
The careful preparations were given an unexpected jolt yesterday when Lord Jenkins of Hillhead, Liberal Democrat leader in the House of Lords, raised the possibility of a merger between his party and Labour.
Telling a conference at the London School of Economics that he would not consider rejoining Labour, he added: "That, however, does not preclude a merger where it's a marriage of true and settled minds, as in the 1988 SDP/Liberal merger."
Lord Jenkins's comments, regarded as a slip by Liberal Democrat colleagues sensitive about their links with Labour, underline the growing closeness between the two parties.
Under the new constitutional plans the parties will agree on proposals for the devolution of Scotland, despite key differences of emphasis. The Scottish Liberal Democrats object in principle to Labour's insistence on a two-question referendum before a Scottish parliament is set up.
However, the party will argue that if Labour insists on the requirement, it will co-operate, in the interests of getting the Scottish Parliament established as quickly as possible.
Liberal Democrats are pleased at the advances on the issue of the Westminster Parliament, where the two parties also take different positions.
Here the Liberal Democrats believe in proportional representation, but Labour is committed only to a referendum on the issue - and not to backing any change in the voting system.
Under the new plans - expected to be finalised this week - a commission will report within a year and make a recommendation to the government ahead of the referendum.
A Labour prime minister would not, however, be bound by the commission's recommendation, nor will Labour go into the next election committed to backing any change to the voting system.
The talks are designed to ensure that, if Labour is elected, it will have as broad a support as possible in the Commons for complex and highly controversial constitutional legislation.
Other items already agreed include the incorporation of the European Convention on Human Rights into British law, the passing of a freedom of information act, the reform of the House of Lords, starting with the scrapping of hereditary peers' voting rights, and changes to Westminster's procedures.
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- Freedom Of Information Act
- Liberal Democrat Party
- Norman Baker
- Proportional Representation