On the threshold of grown-up politics: Tony Blair's accession as Labour leader has thrown the Lib Dems off course, says Donald Macintyre

PADDY ASHDOWN's conference speech at Brighton next month is probably the most testing he has faced since winning the leadership in 1988. It is not simply that he is no longer the new kid on the block, or that the Liberal Democrats have slipped three points to 18 per cent in one month according to the latest polling evidence. It is also that Mr Ashdown's party seems to have fumbled its response to Tony Blair's assumption of the Labour leadership.

The party has certainly had some bad luck. Labour somehow managed to obscure the importance of the Liberal Democrats' third successive by-election victory merely by coming second. A bogus ticket on the ballot paper in Torbay and East Devon deprived the party of a third Euro-seat. And to cap it all, two days before these results, a maverick East London councillor defected in a blaze of publicity to the new Labour Party.

But these unforeseeable setbacks do not alter the fact that Mr Blair's triumph in the Labour leadership campaign became the catalyst for a destabilising chemical reaction in the Liberal Democrats. First, Mr Ashdown reacts a little testily to endless questions about Mr Blair's leadership. An important but rather hasty reshuffle is complicated by the party's presidential election. Then, in what would normally be a summer of quiet reflection, the 'gang of three', Lords Rodgers and Jenkins and Baroness Williams, come out with fulsome praise for Mr Blair. As a result, Mr Ashdown feels even more pressure to distance himself from the praise for Mr Blair than he did in the first place.

Finally, last week, the party goes public with an economic policy document that mixes respect for the free market with prescriptions which appear to make it more unashamedly in favour of tax and spending and fiscally redistributive than anyone currently expects Labour to be. The natural conclusion - that this was a carefully judged 'response to Tony Blair' - was almost certainly wrong; the Liberal Democrats are victims of the timetables imposed by their internal democracy. The conference demanded a policy document to discuss next month; a document was duly furnished. The plus is that the party made headlines and reinforced its reputation for dealing openly with the voters. The minus is a confusing economic message which Malcolm Bruce, the new Treasury spokesman, now has to clarify.

But it is easy to exaggerate the party's problems. It has almost 5,000 council - and two Euro-parliament - seats for the first time. Most pollsters have yet to be convinced that Labour's Euro-election successes in the South will necessarily translate into general election gains. In other words there are still significant parts of the country, not just in the South-west, where only Mr Ashdown can reach the floating Tory voter. Some Liberal Democrats even talk of a 'golden scenario' unfolding as the result of Mr Blair's leadership. Tories are more likely to vote Liberal Democrat if they fear a Labour or coalition government less; conversely, the argument runs, all those who want to dislodge the Tories, including sensible Labour politicians, have an interest in seeing them do so.

One of several reasons why there are unlikely to be many more defections to Labour this side of the election, even among the most wistful of those who came to the party via the SDP, is that the electoral damage done to the Lib Dems might help the Tories rather than Labour. The 'gang of three' are already said to be limbering up for resounding declarations of loyalty to Mr Ashdown and his party on the eve of the Brighton conference.

In these circumstances it makes sense for the party to hold its nerve. An important change in the reshuffle was the promotion of Menzies Campbell, who resisted Mr Ashdown's attempts to give him the Treasury portfolio, and gets foreign affairs instead. Last weekend Mr Campbell took steps to cheer his party up by pointing out that it was scarcely a cause for anxiety that Labour appeared to be shifting towards Lib Dem ground: 'Why fight for an artificial Liberal Democrat like Tony Blair when you can vote for a real one?' Mr Ashdown's own inclinations, meanwhile, will be to reassert his party's separate identity and innovativeness while welcoming Labour's moderniser. In a pamphlet before the conference he will argue that his party is a guarantee against too much unpopular change. And he is being advised in some quarters to make a sharply free market conference speech, addressing hitherto taboo topics such as the black economy and the potential of private provision to improve public services.

Defining the party's identity, however, is one thing; the deep reflection below the surface about its long-term future, another. There are no certainties; but the earth does seem to have moved. First, Mr Blair's accession has surely postponed, perhaps indefinitely, the dream on which Mr Ashdown's own leadership campaign was based - that the Liberal Democrats could replace Labour as the main anti-Conservative force in Britain. Second, it no longer looks impossible that Labour can win an overall majority rather than the hung parliament that was its best realistic hope in 1992.

Against this background the question of when or whether Mr Ashdown ends the 'equidistance' between the two main parties becomes all the more critical. And there are differing views within the party about this. A robust view is that it is now up to Mr Blair to be nice to the Liberal Democrats first. At the other end of the spectrum, Simon Hughes, as long ago as last October, broke ranks by calling on the party to say it would never form a coalition with the Tories. And in between is an influential scenario which goes like this: at some point, perhaps not finally until the election campaign itself, Mr Ashdown makes clear that if there is a hung parliament his first preference would be to form a government with Labour. There are even one or two Liberal Democrat MPs who think that their party might even end up sitting on the government side of the house if Labour wins outright. No one, but no one, dares to breathe the word merger, but goodness knows what might be the - very long-term - possibilities opened up by that.

All that is way down the track. Now, after a period of almost magical growth since the post-election nadir of 1987, the party has entered a difficult period of the sort wearily familiar to the other two main parties. In politics, that is part of growing up.