Clegg is urged to abandon deal as Tories rule out vote reform

Leading Conservatives react with horror to a day of shuttle diplomacy between Lib Dem leader and David Cameron as thousands demonstrate in favour of PR, joining voices calling for the creation of 'traffic light' coalition of the left

Nick Clegg was urged by senior figures in his party last night to back a "traffic light coalition" with Labour, Green and smaller parties amid signs that David Cameron's proposed deal to the Liberal Democrats has triggered an angry backlash among Tory and Lib Dem MPs.

The Lib Dem and Conservative leaders met last night for "constructive" face-to-face talks to try to reach a deal before markets open tomorrow morning. Earier, after a crucial meeting with his party in Westminster to gauge reaction to a Lib-Con coalition, Mr Clegg addressed a 1,000-strong crowd protesting in favour of electoral reform to insist that proportional representation was still key to the talks.

Senior Lib Dem figures were pressing Mr Clegg to shun Mr Cameron's overtures because the Tories would never deliver on PR. And in a major blow to the Lib Dem leader, senior Tory sources made clear there would be no further concessions on electoral reform – presenting Mr Clegg with a hardball "take it or leave it" deal – and that Mr Cameron would press ahead with a minority government if coalition talks collapsed. Talks between Lib Dems and Tory negotiating teams will resume at 11am today.

At a key point in a fast-moving day in Westminster yesterday, demonstrators armed with a petition of 30,000 signatures calling for proportional representation chanted "no more wasted votes" and "we want Nick" outside a meeting of the Lib Dems' 57 MPs at Local Government House in Smith Square. The signatures were collected in the 24 hours since the general election resulted in a hung parliament, demanding that whatever form the new government takes it must scrap the first-past-the-post system and introduce democratic reform.

To cheers from the crowd, Mr Clegg told protesters: "Take it from me, reforming politics is one of the reasons I went into politics. I campaigned for a better, more open, more transparent new politics every single day of this general election campaign. I genuinely believe it is in the national interest, it is in the interests of everybody in Great Britain for us to use this opportunity to usher in a new politics after the discredited politics of the past."

Yet the lively scenes were overshadowed by a furious reaction from grandees in the Conservative and Liberal Democrat parties to the prospect of a pact between the two. The Independent on Sunday understands that some of the most senior figures in the Lib Dems are urging Mr Clegg to go for a Lib-Lab coalition – despite the Tories winning the most seats.

The "traffic light coalition" would bring together the red of Labour, yellow of the Lib Dems and the one Green MP alongside three from the SDLP, one Alliance member and the independent Lady Sylvia Hermon, without the need to rely on the SNP, Plaid Cymru, the DUP or Ulster Unionists. They would total 321 MPs – although this would still fall short of the 326 needed for a majority.

One senior Lib Dem said: "It is a historic moment. We have to explore what the Tories are offering, but Cameron's position looks too weak with his own party for him to be able to offer a bankable deal on a voting reform referendum. There is still a good chance that a red-yellow-green traffic light coalition and the moderate bloc from Northern Ireland could be built. We don't need to do a deal by Monday. The last thing you do when negotiating is to set yourself artificial deadlines and put yourself under pressure."

Mr Clegg would be more likely to do a deal with Labour if Gordon Brown stood down. Yet the prospect of another unelected prime minister would cause alarm among voters.

Earlier, the three leaders broke off from trying to end the deadlock caused by Thursday's election to attend a ceremony marking the 65th anniversary of VE Day at the Cenotaph. The Prime Minister and two opposition leaders stood side by side, heads bowed, to commemorate those who had died.

But besides the interlude, the fallout from the first hung parliament for nearly 40 years continued. Mr Brown, who has the constitutional right to remain Prime Minister despite his party having the second highest number of MPs, spent the morning in Downing Street with advisers discussing the terms of a Lib-Lab deal in case Mr Clegg's talks with Mr Cameron broke down. But there were ominous signs for the PM that time was running out.

The formerly loyal Labour backbencher John Mann became the first sitting MP to call on Mr Brown to stand down. The Bassetlaw MP said: "On the doorstep, throughout the election campaign, I found that there was a lot of support for Labour's approach on the economy, health and education, but there was little support for Gordon Brown to be Prime Minister. Gordon Brown has had a good run and while he was an excellent Chancellor, he has been seen as a poor Prime Minister who is out of touch and aloof. Labour lost votes because of this. Whatever happens in the next few days, Gordon Brown should not lead Labour into any future election and he should stand down before the next Labour Party conference.

"Gordon Brown's continuation as the party's leader rules out the credibility of a Lib/Lab pact that has to prioritise the modernisation and reform of the antiquated UK political systems and the continued stabilisation of the economy in partnership with the need to protect frontline public sector jobs and services."

Mr Cameron will address a meeting of the Tory backbench 1922 committee tomorrow. The Tory leader has some support from the right-wing Cornerstone Group of MPs, but other MPs and peers are alarmed at the prospect of a Lib-Con pact.

Tim Montgomerie, editor of grassroots website Conservativehome, said Mr Cameron needed to build a "stronger internal coalition" as well

as looking for a deal with the Lib Dems. He wrote: "If Mr Clegg is consulting far and wide at this stage, I hope Mr Cameron is doing the same. He certainly needs to be aware that the party is psychologically in a weak place. Most Tory members expected to win the election outright. There is a looming post mortem on the failure of the Tory campaign to achieve that. Conservative MPs and candidates are ready to move on but they want a more collegiate leadership in future. They want to be more involved in decisions about party strategy. They certainly want better internal communication."

Following the Tories' failure to win a majority, Mr Cameron addressed party workers at Millbank HQ on Friday to tell them there were 16 target seats that should have been won but for a number of reasons were missed.

There are already rumblings from senior Tories that too many candidates, such as Joanne Cash and Mark Clarke, had courted the national media instead of focusing on their seats.

Key negotiators from both Tory and Lib Dem teams will meet at 11am today, when it is believed the core detail of a deal will be thrashed out. But a deal is not expected until at least Monday, if at all. A Tory source said: "David knows he has to take the party with him. But he is in the strongest position this weekend, not Nick Clegg. We can still go ahead with a minority government."

It is understood that the Tory offer on PR – to hold an inquiry on electoral reform – is the "final offer" and there will be no promise of a referendum.

The Lib Dem Treasury spokesman Lord Oakeshott said: "Our stock market held up better than France and Germany's on Friday, so this talk of it being so damaging is wide of the mark. What the country needs is a stable, long-term plan for addressing the deficit. Anyone who thinks that the markets would prefer George Osborne on work experience as chancellor to Vince Cable just doesn't understand markets."

The developments came after ministers had been told to clear their desks by tomorrow morning in a clear sign that the Government and senior civil servants were expecting wholesale change at the top. "I was told to wait for news on Friday afternoon," a minister said last night. "Then a few hours later I got a call saying they wanted all desks and offices to be cleared. My civil servants are already speculating about who'll be their next minister."

Mr Clegg and Mr Cameron held "constructive" talks by telephone on Friday evening. There was then a call between Mr Brown and Mr Clegg, which was reported to be "bad tempered", although this was denied by both sides. After talking to his MPs yesterday, the Lib Dem leader held a meeting with his national executive, which is understood to be behind him.

Following Mr Clegg's meeting with MPs, senior Lib Dem MP David Laws, one of the party's negotiating team, said: "We have had a very positive discussion. The parliamentary party and shadow cabinet have fully endorsed the position set out by Nick Clegg.

"We have heard what the Labour Party and Gordon Brown are saying, but in line with the position Nick Clegg outlined yesterday we are continuing discussions with the Conservative Party as the party with the most seats and votes."

Additional reporting by Matt Kendall

The courtship of Nick Clegg

Friday, 7 May 9.05am – Hung parliament is confirmed.

10.44am Clegg says party with most seats should seek to form government.

12.30pm Cameron's chief of staff makes first contact with Lib Dems.

4pm Clegg and Cameron speak by telephone.

1.43pm Brown offers talks with Clegg.

2.37pm Cameron to make a "big, open and comprehensive offer" to Clegg.

5pm First Lib/Con talks.

10pm Brown rings Clegg. Aides deny call was "angry".

Saturday, 8 May 11am Three leaders at the Cenotaph.

3.10pm John Mann calls on Brown to step down.

7pm Cameron and Clegg meet alone for 70 minutes at Admiralty House.

Sunday, 9 May 11am The two parties to have second meeting.

What the papers say

The Sunday Telegraph Cameron's tax and schools sweetener for Clegg – "Cameron to give ground in key policy areas to speed up coalition talks."

Comment "For the sake of the nation, a deal should be struck, and quickly."

The Observer Secret hardline memo on Europe threatens Tory-Lib Dem coalition – "Hopes of coalition undermined by secret letter outlining Eurosceptic stance Cameron and William Hague plan to adopt in government."

Comment "To seize this historic moment, the Lib Dems must turn to Labour."

The Sunday Times Voters tell Brown to quit as Cameron races to secure deal – "David Cameron was last night preparing to raise his offer to the Liberal Democrats on voting reform in an attempt to secure a swift coalition deal and create a stable government."

Comment "A Tory-Lib Dem pact is best for Britain."

The Mail on Sunday A diatribe laced with threats – "Gordon Brown exploded with rage at Nick Clegg after the Liberal Democrat leader suggested that the Prime Minister had no right to cling on to power after losing the election.

Comment "Brown has lost. So has Clegg. We need a new prime minister. By tonight."

LIB DEMS SPEAK OUT...

Katharine Hamnett

Designer

"We're a long way from a real democracy – a government elected by the people, for the people – but this is the moment of a lifetime for the liberals. David Cameron seems very charming, but what about the people behind him?"

Patrick Boyle

Earl of Glasgow

"Electoral reform is very important – we're only asking at the moment for a referendum on electoral reform. I think it's very difficult for Nick Clegg to make an agreement with the Conservatives unless the referendum is established."

Lembit Opik

Former Montgomeryshire MP

"Electoral reform is a deal-breaker. It's preposterous that the country could be run by a Government which people have voted against. There's an ideological gulf between the Conservatives and Lib Dems."

Lord Mackie

Spokesman on Scotland

"I can see enormous difficulties but the Lib Dems are in a very strong position and with a little reason there might be some possibility of a deal. Electoral reform is a necessary precondition."

Paul Holmes

Former Chesterfield MP

"The Conservatives are utterly unenthusiastic about electoral reform and are making empty promises – just like Tony Blair did in 1997. Cameron could just cut and run in the autumn."

Baroness Nicholson

South-east England MEP

"We were specifically asked not to comment, but electoral reform is absolutely fundamental to the Lib Dems – more important than anything else. The question is how far the other two parties are prepared to play ball."

Lord Taverne

Lib Dem peer

"I don't see any prospect for coalition anywhere. There have been offers of an electoral reform commission before. That's nothing. I'm very depressed about the whole election, it's very depressing."

Mike Hancock

Portsmouth South MP

"I don't want any short-term deals. Much as I'd love to build a coalition with Labour, the public won't accept it, and the casualties will be the Lib Dems."

Lord Redesdale

Lib Dem peer

"I think we can come up with a working arrangement with the Tories. We've done it before in the House of Lords... I think the game has only just started."

Graham Watson

MEP for South-west England and Gibraltar

"I think it's the view of many Lib Dems, and certainly mine, that the most important thing for the country at the moment is a change in the electoral system, and this election has demonstrated it."

Lord Maclennan

Cabinet Office spokesman

"We have to put the interests of the country first, and a government of all the talents of the three major parties would make a lot of sense in these circumstances, where we have our backs to the wall economically."

Paul Rowen

Former Rochdale MP

"Our priority is stable government. The financial consequences if we don't have that are dire. I don't think we'll get electoral reform with the Tories, but dealing with the deficit is more important."

Andrew Duff

East of England MEP

"I don't think the Tories are going to be able to facilitate such profound constitutional change. I would like to see us in a formal agreement with Mr Brown or his successor."

John Hemming

Birmingham Yardley MP

"We need to do what's in the national interest, rather than the interest of the party. There are four main issues we campaigned for, and nobody has said we're not sticking to them."

Lord Lester

Lords women spokesman

"What was suggested yesterday by Mr Cameron is presumably their opening bid – a derisory one, as he must know, but whether he has the capacity to carry his party to something stronger and better than that I simply don't know."

Bill Newton Dunn

East Midlands MEP

"The huge amount of feedback I am getting is saying stand firm on PR, absolutely adamant. They are not interested in which posts the Lib Dems should try to get in a cabinet."

Lord Greaves

Environment spokesman

"Are we going to get electoral reform? No, and we have to accept that. It's a great disappointment, but we have to make best of the hand we've been dealt."

Lord Fearn

Lib Dem peer

"A deal must be laid on the table for us to consult and see and it must be widely known throughout the party, not only in the Commons but also in the Lords, where we are quite powerful."

Professor Richard Dawkins

Scientist

"Nothing is more important than getting rid of the first-past-the-post system. Nick Clegg mustn't be fooled by Cameron's offer of a committee, which is an obvious attempt to bury reform."

Liz Lynne

West Midlands MEP

"He [David Cameron] hasn't gone far enough in looking at electoral reform yet. Also, going along with that, I think he needs to move forward in terms of getting consensus on the economy."