Steve Richards: After Charles Kennedy has gone, his party will still have to find a reason to exist

The rise of New Labour presented the third party with a challenge it has never properly addressed

The crisis that erupted around Charles Kennedy this week will sweep him away before very long. When several senior MPs fail to declare their unequivocal public support, a leader is doomed. Like Margaret Thatcher in more dramatic circumstances, Mr Kennedy vows to fight on. He cannot do so when he is destined to fight a significant section of his parliamentary party.

The statement issued yesterday by Sir Menzies Campbell, Mr Kennedy's deputy, is almost Shakespearean in its ambiguous endorsement. Sir Menzies declares that "As long as Charles Kennedy remains leader of the Liberal Democrats he has my full support." What is left unsaid is that, in Sir Menzies' view, Mr Kennedy should not lead his party into the next election. For the Liberal Democrats the withdrawal of support from Sir Menzies is the equivalent of John Prescott telling Tony Blair that his time is up.

What is happening at the top of the Liberal Democrats is brutally clear. By making his position almost untenable, some senior MPs hope Mr Kennedy will stand down of his own volition. Even those who publicly and sincerely enthuse do so in the most patronising terms. In effect they state that Mr Kennedy has their support as long as he changes his style in the new year. They place before him an unfair hurdle. Do they expect him to become a hyperactive, dazzling showman in command of every detailed policy? They want him to become what he is not.

The more serious dissenters do not express such patience. To revive a phrase that is currently popular in the Labour Party, they seek a smooth transition. They pull the rug from underneath Mr Kennedy and encourage him to state that after much consideration he has decided to fall to the ground. The conspirators' plans failed this week, partly by an excess of briefings that prompted a rally of support for the leader. Also, I am told that at least one senior MP backed both the conspiracy and Mr Kennedy. Even such erratic behaviour reflects the unease. The dissenters have spoken. What is done cannot be undone.

Mr Kennedy's probable demise is a symptom of a much wider identity crisis in the Liberal Democrats. The leadership furore has been linked to the rise of David Cameron, but the causes go much further back, to the changes brought about in the Labour Party during the 1980s and 1990s.

While Labour was dominated by the trade unions, retained at least a theoretical attachment to more extensive public ownership, and opposed Britain's membership of the European Union, the Liberals could claim a distinctive pitch. The rise of New Labour with its dual espousal of social justice and economic efficiency presented the third party with a challenge it has never properly addressed.

Kennedy's predecessor, Paddy Ashdown, dealt with the dramatically changed political circumstances by working with Mr Blair. Astutely, at a time when the Liberal Democrats risked total irrelevance, he made them seem much more significant than they were.

The scale of Labour's 1997 landslide wrecked Lord Ashdown's strategy. After his departure, Mr Kennedy played with considerable skill the card of being a decent and principled chap. During an era when the media became obsessed by "spin", Mr Kennedy had a unique appeal. He made it easier for those disillusioned with the two bigger parties to register a protest vote.

But a party of protest faces an unavoidable crisis when the followers of the two main parties have less to protest about. Some Labour supporters fume about Mr Blair's public service reforms and will never forgive the war against Iraq, but they agonise in a peculiar context. They know that the Prime Minister will not be around for much longer. The attentions of the centre-left focus on the post-Blair Labour Party. Meanwhile the Conservatives are enjoying themselves for now with a leader who at least shows signs of mastering some of the arts of opposition. During his honeymoon, and perhaps for longer, it is Mr Cameron who is playing the nice bloke card.

At the same time, it is evident that Mr Brown plans to project himself in his early phase as a pluralist Prime Minister initiating a series of radical reforms aimed at restoring trust in politics in general and the Labour government in particular. The Liberal Democrats, the most persistent advocates of constitutional reform, will feel more of their distinctive terrain being taken from them.

As part of this overcrowded landscape the Liberal Democrats retain an important advantage. They are the only party with a title that hints at a political philosophy. On some issues this gives them instant definition. They are united in their support for civil liberties. On immigration they are robustly and courageously tolerant.

In a way that deserves immense praise, Mr Kennedy won by-elections in Conservative seats while explicitly opposing the Tories' populism in relation to immigration. He and his party have also been boldly robust on social issues, from drugs to gay rights. Their respect for international law guided them towards opposition to the war against Iraq. They remain a distinctly pro-European force.

But the term "liberal" is explosively imprecise in relation to the pivotal issues of economic policy, the role of the state and the provision of public services. At least two traditions collide in ways that are not easily reconciled. Right-wing laissez-faire liberals are suspicious of the state and hail markets as the solution to virtually every challenge. On the other side there is a powerful social democratic tradition running through the Liberal Democrats, so powerful that a symbolic proposal to back the privatisation of the Post Office was defeated heavily at the conference in September. The social democratic wing has a greater faith in public spending, was enthusiastic about the party's proposal at the last election for a top rate of tax on high earners, and is wary of the private sector playing a greater role in public services.

Mr Kennedy has papered over the cracks by changing policies deftly, almost without anyone noticing. He takes the approach adopted by Harold Wilson in his final years as leader of the Labour Party. Wilson used to say that he was a midfielder, allowing other cabinet ministers to score the goals. In midfield he manoeuvred to keep his team united. Mr Kennedy does the same. His problem is that on a much smaller canvas some in his team want the leader to score the goals and believe that he has missed some open ones.

Mr Kennedy survives for now, but he will be gone by the time of the next election. A new leader will preside over a divided party made less relevant by the positioning of the two main parties. For those who seek the crown, the removal of Mr Kennedy will be the easy bit.

s.richards@independent.co.uk