Ed Miliband has urged Labour councillors to forge coalitions with the Liberal Democrats to run local authorities despite his party's hostility to Nick Clegg for joining forces with David Cameron.
A Labour circular leaked to The Independent tells the party's councillors: "If Liberal Democrat groups/ councillors, who are committed to standing up to the unfair policies imposed by the Government, wish to join Labour in running the council then we should look to form locally progressive coalitions."
The move will be seen as Mr Miliband's latest attempt to build links with the Liberal Democrats which could pave the way for a Lib-Lab coalition after the next general election. Although some Labour figures believe the party may struggle to win a majority under its own steam, Mr Miliband insists his strategy is to go all out for a Labour victory.
This month's local elections in England, in which the Liberal Democrats lost 700 seats and Labour gained 800, left many councils without an overall majority. There are signs that, despite the tensions between the national leaders, Labour and Liberal Democrats are joining forces in town halls. They have formed a joint administration in Broxtowe, Nottinghamshire, and are in talks in Bath and North East Somerset.
In Wirral, Merseyside, Liberal Democrat councillor Steve Niblock has defected to Labour, boosting its number of councillors to 30 to the Tories' 27. Labour has offered the nine remaining Liberal Democrats a coalition deal. Until the elections they ran the council jointly with the Tories.
Councillor Niblock, who urged other Liberal Democrats to jump ship, said he was unhappy when his former party went into coalition with the Tories nationally and decided to "give it a year". His fears had now been realised and he felt that "enough was enough".
One Labour official said: "There are places where the Liberal Democrats believe their party made a terrible mistake by going into coalition with the Conservatives. After the local elections, others realise their party is in bed with natural born killers; they know how this movie is going to end. If they share Labour's principles, particularly on spending cuts, Labour will consider working with them locally."
The circular sent out by Labour headquarters says councillors can also join forces with the Green Party but local coalitions with the Conservatives and the British National Party are banned. They tell Labour council groups that all power-sharing deals must be approved by the party's ruling national executive committee.
Some shadow ministers and Labour backbenchers have expressed concern that Mr Miliband is "obsessed" with wooing the Liberal Democrats and needs to do more to target Conservative supporters. One said: "The Lib Dems are coming over to us in droves of their own volition. That is welcome, and we need them, but we need to put more emphasis on broadening our appeal to Tory voters, particularly in the south." In private meetings with his Shadow Cabinet and MPs, the Labour leader has dismissed the criticism, saying it is based on a "false choice".
One close ally said: "It is nonsense to suggest you are either after Liberal Democrat or Conservative supporters. The truth is that we want both groups; we cannot win an election with just one of them." Liberal Democrat sources said the party leadership is relaxed about local deals with Labour where councillors agree.
They hope such arrangements will help their party's drive to reassert its separate identity from the Tories, following personal attacks on Mr Clegg by the Conservative-led No campaign in the AV referendum.