The involvement of the Liberal Democrats in deciding the huge public spending cuts deepened yesterday when Chris Huhne, the Energy and Climate Change Secretary, was appointed to the Government's "star chamber".
After he reached outline agreement with the Treasury on cutting his department's budgets for the next four years, Mr Huhne was rewarded by the Chancellor George Osborne with a seat on the Cabinet's Public Expenditure Committee.
The Tories regard Mr Huhne, an economist who started a successful City business before entering politics, as a "big beast" and are delighted he has joined the "star chamber". The Liberal Democrats hope he will steer the Cabinet group to what they have called "fair" cuts which protect the most vulnerable. Labour accuses the Liberal Democrats of providing cover for "Tory cuts" driven by ideology. Danny Alexander, the Liberal Democrat Chief Treasury Secretary, already sits on the committee.
Mr Huhne faced Treasury demands for cuts of between 25 and 40 per cent at the Department of Energy and Climate Change. He won a special exemption for the huge bill for nuclear decommissioning and "legacy costs" in the coal industry.
Eric Pickles, the Communities Secretary, and Caroline Spelman, the Environment Secretary, have already settled in principle and have won seats on the group. Although their departmental budgets are relatively small, Treasury sources insist good progress is being made on finalising the spending review that Mr Osborne will unveil on 20 October.
The last time the Tories were in power, public spending talks were sometimes held in hotel bedrooms during the party's annual conference. The two Coalition parties may be political bedfellows but they are not sharing hotel rooms yet. So there will be a brief pause in the fraught negotiations because Liberal Democrat ministers will not be in town when the Tories meet in Birmingham next week.
The three ministers whose talks with the Treasury are likely to go "to the wire" are Liam Fox, the Defence Secretary; Iain Duncan Smith, the Work and Pensions Secretary, and Vince Cable, the Liberal Democrat Business Secretary.
Yesterday David Cameron insisted that Mr Fox's fears about proposed defence cuts, exposed in a leaked letter to the Prime Minister this week, were not justified. In a slapdown to the Defence Secretary, Mr Cameron insisted he was totally committed to Britain's defences but said they must be restructured for the post-Cold War world. "I am passionately in favour of strong defence in our country of supporting our armed forces," Mr Cameron told ITV1's This Morning programme. "His [Mr Fox's] fears are unfounded because we are not going to take bad decisions."
Mr Cameron added: "We have thought very carefully about how to fund our armed forces properly and above all how we structure them for the future. We need to fit them for the dangerous world we live in where you need greater flexibility and a different structure of your armed forces. That is what we are going to get right.
"Of course there are difficult decisions and of course there will be intense conversations between the Treasury on the one hand and the Ministry of Defence on the other. But as the Prime Minister, I can absolutely guarantee you we will have well-funded strong armed forces to defend our country."
Mr Cable is fighting Treasury calls for a 40 per cent cut in skills and training, warning that this could jeopardise economic growth.
Mr Duncan Smith is involved in hard bargaining with Mr Osborne because he wants to streamline the benefits system to "make work pay" for people who take jobs. In the short term, that costs money and the Chancellor is demanding extra savings to cover the costs.