High Peak Liberal Democrats

Lib Dems rule out coalition government

Nick Clegg, right, may be kingmaker in a Brown-Cameron battle.

Nick Clegg says party would seek support for policies rather than cabinet posts

The Liberal Democrats are planning to rule out forming a coalition government with either the Conservatives or Labour if Nick Clegg holds the balance of power in a hung parliament after the general election.

As Whitehall's most senior civil servants and Buckingham Palace make detailed preparations to clarify the Queen's role in the event of a hung parliament, senior Lib Dems are making clear that Clegg has no interest in taking cabinet posts and would focus instead on winning support for four key Lib Dem demands.

Clegg would be prepared to throw a lifeline to the Conservatives or Labour by allowing either party to pass a Queen's speech if the aspiring government makes concessions in the four areas, described as the Lib Dem "shopping list":

• Investing extra funds in education through a pupil premium for disadvantaged children.

• Tax reform, taking 4 million out of tax and raising taxes on the rich by requiring capital gains and income to be taxed at the same rate.

• Rebalancing of the economy to put less emphasis on centralised banking and more on a new greener economy.

• Political reforms, including changes to the voting system and a democratically elected Lords, that go further than proposed by Labour.

Clegg would give the minority government a chance to deliver and would not expect his demands to be met in full by the time of the Queen's speech, the first major parliamentary test of a new administration. "People expect stable government," one aide said. "It is right to assume that if one party has a mandate it should have a crack at governing. If no party has a majority, then people will need to talk to each other."

An ally says of the "shopping list": "You can wield influence without being in government. You could even negotiate a programme for government through a Queen's speech with 40 to 50% of your ideas taken up, or negotiate on individual bills." Clegg is opposed to forming a coalition because aides and senior MPs argue it would be highly dangerous for the Liberal Democrats to become minority partners in a coalition government on the grounds that the majority party could manipulate the timing of the next election to suit it. The Lib Dems have long campaigned for fixed terms at Westminster to deprive the prime minister of the initiative on election timing.

The preparations for a hung parliament, in which no party secures an overall majority over all the others, have intensified as some opinion polls show a narrowing of the Tory lead. The Guardian reveals today that Sir Gus O'Donnell, the cabinet secretary, is distributing 1974 memos written by a predecessor, Lord Armstrong of Ilminster, which sets out the rules for how Downing Street and Buckingham Palace would handle a hung parliament. This could allow for what some No 10 officials are dubbing the "Miliband option", in which the Queen asks the foreign secretary to form a government if he is more acceptable as Labour leader to the Lib Dems. This is, however, seen as highly unlikely.

The Tories are making plans for two elections this year amid fears in their ranks that David Cameron may fail to secure a majority first time. Senior Conservatives are so convinced they may face a hung parliament that they are looking carefully at the experience of the Scottish National party, which governs in Scotland as a minority government. The Tories, who have won pro-business concessions by supporting every SNP budget, are increasingly optimistic that they would be able to come to an arrangement with the Liberal Democrats over a summer emergency budget, especially since it now seems unlikely it will contain big spending cuts to be implemented in 2010-11.

Private discussions have also been held between senior Labour and Liberal Democrat figures. It is understood Labour accepts that Clegg will not sanction any discussions in advance of the election on the basis that this would only drive some potential Liberal Democrat support to the Tories.

Clegg believes the Conservatives would adopt a cautious approach in any opening Queen's speech if they did not have a clear majority. He expects them to focus on schools reform, an issue on which the Tories and the Liberal Democrats have much in common.

The Liberal Democrats are determined to ensure their election campaign is not dominated by talk of coalitions and a hung parliament. Clegg's four-point plan, which will form the basis of his election campaign, will be used to deflect the inevitable questions about what the Lib Dems would do in a hung parliament. The party will just say it will press for its four points to be implemented.

Clegg believes the economy is a crucial element. Vince Cable, the Lib Dem Treasury spokesman, has set five tests to judge when Britain should cut the deficit. Unlike the Conservatives, he would not start cutting the deficit in 2010-11, but he would try to reduce it more quickly than Labour would.

Clegg's instinct appears to be that Labour needs a period in opposition, and he would be reluctant to keep a Gordon Brown-led Labour party in government. One MP said: "We don't want to be tied to a rotting corpse."