Leader: The Lib Dems need to show distinction to avoid extinction

As the Liberal Democrats gather in Liverpool for the first party conference since the general election in May, there are many reasons for their supporters to feel pride: Liberal politicians hold high office for the first time since 1945 and their leader, Nick Clegg, the Deputy Prime Minister, has answered for the coalition government at the Commons despatch box, the first Liberal to do so since David Lloyd George in 1922. The very idea of the third party being ordered to "prepare for government" - as David Steel urged his fellow Liberals to do at the 1981 conference - is no longer a matter for ridicule. With skill and ruthlessness, Mr Clegg succeeded in extracting power and significant influence from an election result that brought his party five fewer seats than in 2005.

Therein lies the paradox: what future electoral price will the Liberal Democrats pay for power today? It is true that some genuinely liberal measures are being implemented by the coalition, from civil-liberty reforms to income-tax cuts for the lowest-paid. But, as we report (on page 26), many Lib Dem MPs concede privately that the party is suffering from an "identity crisis".

Before the general election, we were attracted by the idea of a "progressive alliance" between Labour and the Liberal Democrats. With Labour badly beaten under Gordon Brown, however, Mr Clegg opted for coalition with a Conservative Party that is ideologically committed to rolling back the enabling state. The Lib Dems' national poll ratings have fallen from 23 per cent on election day to just over half that - 12 per cent - according to a YouGov poll published on 15 September. One in five people who voted Lib Dem in May say that they will vote Labour next time, according to another recent poll.

The third party's fortunes have long depended on a sense of distinctiveness - what Mr Clegg, before the general election, called its "equidistance" from Labour and the Conservatives. The challenge for the Lib Dem leader is how to make coalition politics work and ensure that this parliament lasts the full five years, while at the same time demonstrating that his party remains an independent force. He will be well aware that the Liberals failed to do so in previous coalitions and were instead subsumed, on more than one occasion, by their Tory partners.

The danger is that the Lib Dems are being used to provide "cover" for the more doctrinaire measures introduced by Mr Cameron and George Osborne. The Business Secretary, Vince Cable, looked a haunted man when sent out to defend the Chancellor's austerity Budget on BBC Question Time in June. In recent weeks, Mr Cable has expressed concern at the Tories' policy of a cap on non-European immigration and the businessman Philip Green's appointment as "cuts tsar".

For Liberal Democrats on the social-democratic left of the party, there is worse to come: Mr Osborne dismisses the "lifestyle choices" of those on benefits as he pledges to cut the welfare bill further, while the Tory right is determined to ensure that next year's electoral reform referendum is postponed. The Conservatives also seem intent on pressing ahead with a hike in tuition fees, against the wishes of the Lib Dems, who have long campaigned for alternatives.

However, Mr Clegg can rest assured that, minor skirmishes aside, this year's party conference is not likely to be the occasion for a full-scale revolt against his leadership or against the coalition - not least because the party continues to enjoy its new-found position of power. But when the cuts set in after the Comprehensive Spending Review in October - and with the party expected to be humiliated at the local elections next May - Lib Dem ministers will need to redouble their efforts to assert themselves in Whitehall. If they cannot, then next year's conference promises to be the real reckoning.

This article first appeared in the 20 September 2010 issue of the New Statesman, Catholicism in crisis