Gordon Brown made an unprecedented overture to the Liberal Democrats yesterday amid growing expectation that Nick Clegg's party could hold the balance of power after the general election.
As Mr Brown hinted he would go to the country on 6 May, Labour and the Conservatives clashed on the best route out of the recession, the issue bound to dominate the campaign.
The Prime Minister was accused of dishonesty after he refused to say where public spending would have to be cut to tackle the nation's debts.
The parties begin to set out their election stalls this week, with Labour promising to improve literacy in primary schools and the Conservatives pledging to raise hospital standards.
A slight fall in the Tory opinion poll lead in recent months has made the election the most unpredictable since 1992. Asked about the possibility of a coalition with the Liberal Democrats in the event of a hung parliament, Mr Brown struck an uncharacteristically emollient note towards the party.
"There is an agreement of ideas and of course the Liberals, I think, are closer to us on tax and public services," he told BBC1's The Andrew Marr Show.
Labour would fight "every inch of the way" at the election, he said. But Labour commitments on electoral reform, overhauling the House of Lords and recalling MPs who committed fraud, as well as its approach to the environment and civil liberties, showed his party had "not dissimilar" policies from the Liberal Democrats.
Lord Adonis, the Transport Secretary, said: "Nick Clegg is a capable leader and ideologically I am on broadly the same page as him, as I believe is Gordon Brown."
The apparent olive branches came after Mr Cameron also tried to woo the Lib Dems by insisting there was "a lot less disagreement than there used to be" between their party and the Tories.
The Prime Minister said yesterday he "believed" he would hold a budget in the spring, which would rule out an election in March and suggests he is planning for 6 May. Labour's campaign will seek to paint the party as presenting an optimistic vision of Britain's prospects, contrasting that with Conservative warnings of austerity ahead.
Mr Brown gave a fresh sign of a planned "Labour investment versus Tory cuts" election message as he refused to say where spending would be slashed under his plans.
He insisted there was enough money to invest in health and schools and said national insurance rises, the abolition of pension tax relief and lower unemployment would cut the deficit.
George Osborne, the shadow Chancellor, retorted: "Gordon Brown ... has slipped back into repeating his dishonest nonsense that Labour will go on spending, when his own Treasury figures reveal Labour cuts."
Shadow Cabinet ministers will fan out across the country today to campaign in marginal seats, while the Tory leadership will focus on its health plans.
Mr Cameron, who is trying to echo Barack Obama by calling for 2010 to be the "year of change", will set out plans to divert billions of pounds of NHS spending to poorer areas.
Andrew Lansley, the shadow Health Secretary, will promise to improve services to pregnant women by offering more specialist help in maternity units.
Mr Brown and Ed Balls, the Schools Secretary, will today announce a guarantee that six and seven-year-olds who struggle with literacy and numeracy will receive intensive help.