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Cable talks down Lib-Lab pact after election

The Liberal Democrats warned today that the whole political system would be “utterly discredited” and require “fundamental reform” if Labour ended up as the biggest party in the Commons without winning the popular vote on May 6.

The warning came from Vince Cable, the party’s deputy leader and the man long considered to be the Lib Dems’ biggest political asset until Nick Clegg caught the national mood in last week’s televised campaign debate.

With polls increasingly pointing to a hung Parliament, Mr Cable was asked whether the Lib Dems would be able to work with Labour if it won only a third of the popular vote but still remained the largest party.

He replied: “The whole system would be completely and utterly discredited if such an absurd outcome were to happen. It would make the whole of this political system, which has increasingly been creaking and groaning and the public no longer accepts, illegitimate. There would then have to be fundamental reform of the political system... if that very perverse outcome happened.”

Mr Cable declined to choose between Labour or the Tories in terms of which party the Lib Dems might support, insisting the election was now “wide open”.

He said: “We have absolutely fundamental disagreements with the Labour Party. We disagree with their over-centralised way of running public services and we disagree with their contemptuous attitude towards civil liberties.

“There is an element of a ’plague on both your houses’. But it isn’t negative. We have a positive and optimistic message to give.”

Mr Cable’s comments came after Lord Mandelson offered the clearest hint that Gordon Brown could offer the Lib Dems electoral reform as a sweetener in the event of a hung Parliament.

With opinion polls showing a ten-point boost for the Lib Dems since last Thursday’s debate Labour’s campaign strategist said that he had never experienced such volatility since he entered full-time politics in the 1980s.

“I think Nick Clegg does have to be taken seriously because he has entered the fray and appealed to a lot of people who feel Labour has had a good innings, that it’s time for it’s someone else’s turn, but who have looked at David Cameron’s Tories and balked at them becoming the government,” he said.

Lord Mandelson said the challenge for Mr Brown was to demonstrate that he and his Government had learnt lessons from the global economic crisis and the political crisis in Westminster: about the need for economic reform and reform of public services.

“I also think that people are coming to the view that if they really want change in politics they’ve got to change the electoral system as well,” he said.

The vagaries of the first-past-the-post system means that Labour could well come third in the popular vote on May 6 but still win the most seats. That would give Mr Brown first stab at forming a government in a hung Parliament, but he would need Lib Dem support to survive.

Labour insiders have already hinted at the possibility of moving towards an AV-plus system of voting, which would effectively give each voter two votes: one to use in an “alternative vote” system at a constituency level and the second for a member drawn from a regional list. Any such reform would give the Lib Dems much greater representation than they currently enjoy.

With the second of the three TV debates only two days away, Mr Clegg today portrayed himself and his party as the only agent of “real change” in the election and made fun of Mr Cameron’s decision to hastily record a new election broadcast to warn that only the Tories could deliver reforms.

“Over the last few weeks, he has changed his policies, he has changed his ad agency and last night he changed his election broadcast, but that doesn’t mean he can change Britain,” he said.

“The only party that now stands up for real change in the old economic and political order of this country are the Liberal Democrats.”

Mr Clegg used a press conference in London to set out his party’s plans to reform the banks by splitting retail activities from risky “casino” banking.

Accusing Labour of being “asleep at the wheel” as the banking crisis developed, Mr Clegg called for Goldman Sachs to be suspended as an adviser to the Government until a US investigation into its sub-prime mortgage deals is completed.

He also launched a fierce attack on “reckless and greedy” bankers and said a Lib Dem government would look at remutualising Northern Rock, creating a Post Office bank and supporting credit unions, regional stock exchanges and local enterprise funds.

Recent polls showing Mr Clegg’s party pushing Labour into third place - and in two cases seizing the top slot from the Conservatives - have intensified interest in the Lib Dems’ programme and their approach if they hold the balance of power at Westminster.

Mr Clegg refused to say who he might co-operate with in a hung Parliament or discuss tactical voting, urging the electorate to “vote with your hearts”.

“This election is now wide open,” he said. “All bets are off. What we have learnt from the last few days is that anything is possible and that a growing number of people are starting to believe that we can do things differently.”

Four polls released today put the Lib Dems in second place, with backing between 28 per cent and 31 per cent, against Conservatives scoring 32-33 per cent and Labour 26-28 per cent, in what now appears to be a true three-horse race.

Strategists for both of the major parties will be watching closely over the coming days for any signs that support for the Lib Dems has reached a high-water mark and is beginning to recede.

Mr Cameron was seeking to regain the initiative today by highlighting Conservative plans to cut the benefits of claimants who refuse work.

He promised to implement Tory plans to cut the benefits of claimants who refuse reasonable offers of jobs or a place on a new “work programme” within six months of a Conservative government taking office.

Under the Tory proposals, long-term benefit claimants who failed to find work would be required to “work for the dole” on community work programmes while incapacity benefits claimants will be reassessed to see if they are fit for work.

Meanwhile, Mr Brown set out his plans to create the conditions for economic growth if Labour is re-elected for a fourth term.

“Our plan for growth sets out how we will back businesses and private sector investment as the main drivers of future prosperity,” he said. “We know that wealth is created by the people who invest, manage and work in businesses across the country. But we also know that government must create the conditions within which firms prosper.

“The Conservatives believe that growth can happen by itself so long as government gets out of the way. But growth doesn’t happen by chance. That is the economics of yesterday. Government is needed to pull away the barriers and obstacles that hold business back.”