Andrew Grice: Now Mr Cameron's 'liberal conservative' credentials can be tested

Inside Politics

Soon after he won a second term in 2001, Tony Blair told an old colleague who was urging him to abandon New Labour and revert to the party's traditional policies: "It's worse than you think. I really do believe in it." All the signs are that David Cameron would give a similarly dismissive reply to Tory MPs who can't believe that he really believes in his new coalition with the Liberal Democrats.

It is already clear that this is much more than a "marriage of convenience". In fact, it was a marriage waiting to happen in our discredited first-past-the-post system. The combined share of the vote won by Labour and the Tories fell from 97 per cent in 1951 to 76 per cent in 1997 and 65 per cent this year.

The mistake made by most politicians and commentators (including me) was to think that the realignment would involve the Liberal Democrats and Labour. It would have done if there had been a different result nine days ago. It would have happened in 1997 if Mr Blair had not won a landslide.

We assumed that the Liberal Democrats were a centre-left party and forgot that they are two parties who merged in 1988 – the left-leaning Liberals whose conferences voted to ban the bomb and the centre-right Social Democratic Party (SDP) who walked out on Labour when it veered left. We forgot that some former SDP members who refused to join the Liberal Democrats later moved to the Tories when the party was over for David Owen's SDP. They included Andrew Lansley, the new Health Secretary, and incoming ministers Greg Clark and Chris Grayling. All parties are coalitions in themselves and so it's no surprise that we have ended up with one between two of them.

Nick Clegg, a member of his party's "Orange Book" brigade who advocated the market-based public service reforms also favoured by the SDP, found in his post-election discussions with Mr Cameron that they had more in common than they had realised – not least the pragmatism of a new, 40-somethings generation not stuck in the old party tramlines.

Team Cameron saw the advantages of a full-blown coalition but doubted that the prominent members on the left of the Liberal Democrats like Simon Hughes would buy it. The Cameroons were braced for getting only the support of Mr Clegg's party in key Commons votes and were pleasantly surprised when the mood of his MPs became "in for a penny, in for a pound" and a coalition was within sights. The brief, last-minute flirtation with Labour was mainly an attempt by Mr Clegg to reassure those on his party's left that the Tories were really the only show in town.

Mr Cameron would have preferred to win an overall majority but the prize could still be great: the completion, thanks to a lucky hand dealt by the voters, of his project to modernise his party. The most potent Labour attack line in the election was that his party was still "the same old Tories". Memories of the "nasty party," the Thatcher government and the looming cuts all made it hard for Mr Cameron to win outright. The "liberal Conservative" and "progressive" credentials he has always claimed will be put to the test: his close allies are happy that the voters will now be able to judge him by his actions rather than his words. And he has a firm anchor in the centre ground thanks to his surprise new partner.

Labour's mood is not as downbeat as you might expect. There is relief in some quarters that it is not trying to make a "rainbow alliance" with the Liberal Democrats and small parties work because the Commons numbers didn't really add up. Many Labour figures think Mr Clegg has made an historic mistake. Some recall christening the Blair moves to cuddle up to Paddy Ashdown "Operation Hoover" and think the Tories aim to gobble up their junior partner.

Labour is already repositioning itself as "the only progressive party" and can't wait to start attacking the savage cuts by the "Con-Dem Government". It believes it will hoover up Liberal Democrat supporters at the next election. But it shouldn't get ahead of itself. Other scenarios are already in the minds of some Cameroons and Liberal Democrats: that the coalition may be a success, the public quite like it and the two parties either merge or form an alliance which could see tactical voting by their supporters against Labour, especially if it vacates the centre ground.

Of course, it is going to be hard pounding. There will be real differences between the Tories and Liberal Democrats; they will try to be "grown-up" about them but I doubt that our 24/7 media will. The Liberal Democrat MPs I have spoken to this week are enjoying the scent of power and may prove more reliable partners than some Tories reckon.

Yet the mood on the Tory back benches is surprisingly black. There is already wild talk of 100 of them opposing the coalition. The Eurosceptics have finally pushed open their coffins and are threatening to go on the rampage. They do not understand how their party could end up in bed with the federalist Liberal Democrats.

So here is a prediction: the greatest threat to the coalition will come from Europe, the issue which divided and destabilised the Tories during their last spell in government. Plus ça change...