From Martin Kettle in The Guardian 9 Feb 2012
It is old hat to pretend that there’s nothing new to say about the Liberal Democrats. Stereotypes about Nick Clegg and his party put down deep roots early in the coalition’s life. Trying to do the right thing in tough times for the country, the Lib Dems assured themselves. Selling out their principles for a taste of office, thundered Labour. A distasteful but temporary necessity, sneered the Conservatives. Meanwhile, the Lib Dems’ ratings and electoral support all plummeted.

Some of that remains, of course. But time has nevertheless moved on since 2010. So has politics. And so, insufficiently noted by those who prefer their politics set in aspic, have the Liberal Democrats. The plummeting has stopped. The party is less traumatised than it was a year ago. There are signs of greater assertiveness and perhaps, viewed through some rose-tinted glasses, of politics beginning to move in their direction. Even the numbers are getting a little better, just about.

The challenge in talking about all politics, and about the Lib Dems in particular, is always to get the balance and the words right. Rule one is not to exaggerate either the setbacks or the advances, as so many do. All honest Lib Dems have to accept they have taken a massive, potentially disastrous hit since May 2010. The parliamentary byelection record, once glorious, is abject. In local government the Lib Dems lose one in every two seats they defend, far worse than Labour or the Tories. The AV referendum was a humiliation.

But the polling has levelled out and may even be inching very slowly up. In local government byelections the Lib Dems are running at a 17% average, nicely ahead of the 11% average in the national polls. Last week they took a seat from Labour in Newcastle-under-Lyme and one from the Tories in Amersham. Hardly the sunlit uplands. But at least the party now has room to breathe again.

Indisputably the party is also less apologetic now. The shock of the new experience of being in government has worn off a bit. Insiders at last week’s Eastbourne awayday say the mood is amazingly chipper. But the Lib Dems are still in a far worse position, and are facing much tougher problems, than they expected. Mood and predicament are out of sync. We’re like a galleon that has lost a lot of rigging and masts in a tremendous storm, says one, before adding that the vessel is still afloat and immensely seaworthy.

One small thing is clear, though. Chris Huhne’s cabinet resignation last week, widely regretted even by those who disliked him, does not inflict wider damage on the party. That’s not to say Edward Davey is a heavyweight in the way that Huhne almost was. Nor to say that Vince Cable is not now a little more isolated on the Lib Dem left in the cabinet. What it is to say, however, is that the Lib Dems, both in government and more widely, are a more resilient and coherent party than their critics generally allow. The Lib Dems are indisputably in a difficult place, but the party exists for reasons that still make sense. It’s a more politically self-confident party than outsiders understand. Don’t write them off.

Instead consider three things that make the Lib Dems freshly interesting. The first is that it is increasingly public that the Lib Dems stand – albeit still within the agreed parameters of the coalition agreement – for priorities that are distinctly different from those of their Conservative partners. Different parts of the party highlight different things. The official line emphasises the recalibration of the economy away from financial services, the emphasis on early-years spending and, a little nervously, Europe. Others put the spotlight on banking reform, the rearguard action on the green economy, perhaps even on an alternative to Trident. A frequently heard line is that this is a party that can look at itself in the mirror.

Clegg’s speech setting out the party’s budget priorities was an important public sign of the new willingness to differentiate at the top. So, against the odds, is his possibly futile persistence with House of Lords reform. So, more furtively, was the failure of the education minister Sarah Teather to vote for the coalition’s welfare reforms last week. “When you strip it all away, the Tories are just nasty,” says another minister. Never forget that most Lib Dem MPs have to defeat Conservative challengers in 2015, not Labour ones. That’s not going to change. So the differentiation matters.

The second is the renewed evidence, clear from recent polling as the economy increasingly stagnates, that public opinion may be converging around a fusion of economic competence and social justice – in Lib Dem eyes, their natural territory. The current Lib Dem positioning of themselves as more economically competent than Labour but more socially just than the Tories is classic centre-ground politics. It is a sea change from the understandable but short-lived rose garden naivete of 2010. There’s little trace there of the 2010 conceit that the coalition represented a liberal convergence against statist Labourism.

Instead, a version of equidistance is back in vogue. Clegg said at Eastbourne that he wants the Lib Dems in the sweet spot of British politics. This positioning may not be as progressive as the new Liberal Left grouping would like, but the direction is savvy and clear. The Lib Dems are moving towards the social liberal tradition, not away from it. And that means towards Labour, just as Labour finally seems to be moving slowly towards the centre. These days, unlike a year ago, you can find Lib Dem ministers who speak well of Ed Miliband.

This is where the third reason for thinking about the Liberal Democrats more seriously comes in. You can say what you like about Clegg and the journey on which he has taken his party. But the fact is that he is in the middle of proving that coalition governments can work. This is a big deal, not least because much current polling suggests the 2015 general election may produce another hung parliament. The latest seat projections from the current polls show Labour needing Lib Dem support to form a government.

The Lib Dem experience of government is undoubtedly traumatic. But it is a widely underestimated achievement, especially in such tough times. The result is that the Lib Dems are not just battle scarred but battle hardened. They have been through the fire – and survived. Now they are beginning to think about how to give themselves a chance to govern again. It would be rash indeed to assume they will not do so.