Leading article: A party that must show it still stands for liberal values

This is an important opportunity for the Lib Dem Party to show it is not composed of crypto-Conservatives

The choice of Sheffield to host the Liberal Democrat spring conference, which opens today, is a bold (some would say masochistic) choice. The city is home to a large student population and also Forgemasters, the engineering firm whose £80m state loan was cancelled by the Coalition last June. There are many people in the city who feel betrayed by the Liberal Democrats.

Sheffield is also of huge political importance for the party. Nick Clegg's constituency is Sheffield Hallam. It could perhaps be here that the ultimate verdict on the Liberal Democrat leader's decision last May to go into full coalition with the Conservatives is delivered at the next election in four years' time.

Over the coming days, protests are expected both outside Sheffield City Hall and within. Delegates are likely to vote against the Government's moves on tuition fees and NHS reform. And the leadership will have little choice but to soak up the anger. They cannot distance themselves from the Coalition's record now. The strategy of Mr Clegg these past 10 months has been to hug the Tories close in order to prove that coalition does not mean weak government.

He has succeeded in that narrow goal – but at a considerable cost. Support for the party in the opinion polls has halved. Mr Clegg has become the public face of the trebling of tuition fees. And the outrage over the Government's wider cuts has eclipsed Liberal Democrat policy successes such as the Freedom Bill, a delay on Trident, the pupil premium, a rise of the income tax threshold for low earners and greater powers for local councils. Delegates in Sheffield will be given an "achievements card" to broadcast these victories. But the very fact that they need to be reminded of what their party has got out of the Coalition is an indication of the difficulties Mr Clegg faces.

There has been personnel damage too since last May. David Laws was forced to resign from the Cabinet for being less than transparent in his expenses claims (although he is believed to be on the verge of a return). Vince Cable has been marginalised since making injudicious comments in a constituency meeting before Christmas.

The party saved face in the Oldham East by-election in January, managing to come second behind Labour. But there was total disaster in the Barnsley by-election last week, where it plummeted to sixth place. And Barnsley could foreshadow a Liberal Democrat meltdown in May's local elections. The Alternative Vote referendum, which will be held on the same day, will be a moment of truth. Mr Clegg is staying away from the Yes campaign for fear of contaminating it with his unpopularity. But the Liberal Democrat leader desperately needs a positive result.

Electoral reform is what has bound Mr Clegg's party together over the past year. If the referendum is lost, Mr Clegg could be in fatal trouble. Part of the rationale for hugging the Tories was to smooth the way for electoral reform. The nightmare scenario for the Liberal Democrats is that they end up with the hug, but not the reform.

The danger of a negative result in the referendum explains why the Liberal Democrat leadership is now attempting to highlight differences with the Tories. Last month Mr Clegg made a speech in favour of AV on the same day that David Cameron made a speech against. The Liberal Democrat leader also recently publicly contradicted Mr Cameron on the subject of state multiculturalism.

The change in strategy is sensible. This is an opportunity for the Liberal Democrats to show that they are not crypto-Conservatives, motivated only by the trappings of power, but that they stand for genuine liberal values. Actually, the stakes are higher than that. Greater Liberal Democrat definition has become a basic matter of survival.