Leading article: Mr Clegg should act in the national interest

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The votes are counted and the parliamentarians returned. But still the political complexion of the next government is not clear. Welcome to coalition politics. The negotiations between the Liberal Democrats and the Conservatives are continuing. Meanwhile, the Labour Party waits in the wings, ready to do their own deal should those talks break down.

There is nothing unseemly about this process. In stable political systems across the world, parties fight robustly on distinctive policy platforms in election campaigns in order to win as many votes as possible. And then, when the campaign is over, they look for areas of compromise between them. This is what the public expects in those countries with proportional voting systems. It is what the public expects here in Britain now.

There are areas of agreement between the Liberal Democrats and the Conservatives, from reforming the banking sector, taking the lower paid out of the tax net, and giving schools with a less well-off intake more money. There are also areas of profound disagreement. David Cameron laid out his party's red lines in his speech last week, citing immigration, defence and Europe. But the Liberal Democrats will have their own red lines. They will doubtless be demanding a constructive approach to relations with our continental partners. On immigration, the price of the scrapping of the Liberal Democrats' amnesty on migrant workers could be an end to the Tory proposal for an annual cap on migrant numbers from outside the European Union. This would represent a fair compromise.

There is also scope for agreement on economic policy. The two parties should split the difference between them on reducing the deficit in 2010/11. Public spending cuts of £3bn by next March ought to be just about bearable for the economy, although the Liberal Democrats should press for a contingency plan if Britain slips into a double-dip recession. Meanwhile, the Tory policy to raise the inheritance tax threshold should be postponed.

Such a deal would be contentious within both parties. Tory backbenchers will meet today and David Cameron is likely to come in for some severe criticism for failing to win an outright victory. This anger could easily spill over into hostility to an accommodation with the Liberal Democrats. The right-wing Tory defence spokesman, Liam Fox, has already broken the spirit of consensus between the two front benches by arguing that the Conservatives will not be "held to ransom" by the Liberal Democrats.

Mr Clegg too is going to face internal dissent if he does a formal deal with the Tories, with many of his MPs and party members more instinctively comfortable with a partnership with Labour. But if an agreement could be reached between the Tory and Lib Dem leaderships on the economy, Europe, education and taxation, that would surely be welcomed by the wider country.

Yet there is one issue that ought to be a deal-breaker for the Liberal Democrats: electoral reform. Those who dismiss this as an arcane irrelevance at a time of terrifying economic storms are profoundly wrong. Britain needs this reform to unlock a fairer, more fully democratic system of politics. Such a system would make Britain better prepared to withstand and respond to economic shocks. Moreover, the latest opinion polls suggest that the public is in favour.

Those with a vested interest in the old system must not be allowed to slam the door on this golden opportunity for change. And Mr Clegg must not allow himself to be bounced into accepting a poor deal by scare stories about what the financial markets will do if he refuses to fall into line promptly. The Liberal Democrats should walk away from any agreement with the Conservatives that does not include a cast-iron commitment to comprehensive voting reform. The national interest demands nothing less.

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